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B.Com II Accounting 2010DECEMBER 4, 2010 NO COMMENT

B.Com I Accounting 2010

Q.1. INSTALLMENT SALES

Amir and Co. use Perpetual Inventory System for recording merchandise and Installment method for recognizing profit their

transactions for the year ended June 30, 2007 were as under

Sales on Installment basis Rs. 4,50,000

Cost of Inst. Sales . Rs. 3,15,000

Purchase Merchandise on Account . Rs. 5,00,000

Collection of inst Rs. 1,50,000

Payment of Accounts Payable . Rs. 2,00,000

Expense Paid .. Rs. 4,000

Inst Accounts Cancelled .. Rs. 25,000

Repossessed Merchandise Rs. 16,000

Required: Record the above transaction in General Journal with adjustment and closing entries. Show necessary Computation

Q.2. FINANCIAL RATIO

Following are the selected data taken from ABC and Co at the year ended 2008.

Cash Rs. 22,400, Mark. Securities Rs. 7,700, Inventory Beginning Rs. 29,600, Inventory End Rs. 25,800, Prepaid Expense Rs.

19,200, Accounts Receivable Beginning Rs. 59,700, Accounts Receivable End Rs. 49,400, Accounts Payable Rs. 36,600, Notes

Payable Rs. 21,400, Purchase Rs. 2,46,200, Sales Discount Rs. 14,000, Operating Expenses Rs. 80,000, Non Operating Expense

Rs. 4,000.

Required: Compute the following

a. Equity Ratio

b. Current Ratio

c. Rate of Gross Profit on Sales

d. Quick Ratioe. Rate of net income on sales

f. Return on Assets

g. Return on Equity

h. Total days of Operating Cycle

i. Inventory Turn Over

j. Accounts Receivable turn over.

Q.3. COMPANY ACCOUNT

On Jan 01, 2009 Balance Sheet Data of KKK Limited are as follows

KKK Limited NNN Limited

Cash Rs. 7,000 .. Rs. 41,000Accounts Receivable . Rs. 1,04,000 Rs. 97,000

Merchandise Inventory .. Rs. 85,000 .. Rs. 1,00,000

Land .. Rs. 60,000 . Rs. 45,000

Building Rs. 1,25,000 . Rs. 1,40,000

Goodwill Rs. 20,000 -

Retained Earning .. -

Rs. 4,01,000 Rs. 4,33,000

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Allowance for Bad Debts .. Rs. 4,000 Rs. 3,000

Allowance for Depreciation . Rs. 25,000 . Rs. 30,000

Account Payable .. Rs. 47,000 . Rs. 50,000

Share Capital .. Rs. 3,00,000 Rs. 3,50,000

Reserve for Contingencies . Rs. 5,000 . -

Retained Earning . Rs. 20,000 -

.. Rs. 4,01,000 . Rs. 4,33,000

Both the companies have agreed to amalgamate on Jan 01, 2009. For this purpose a new company KNKNKN Co. limited has been

formed with an authorized Capital of Rs. 10,00,000 dividing into Ordinary Shares of Rs. 10 each. The new company issued shares

equal to the value of their net assets in payment of purchase consideration to each of the old company and also paid Rs. 15,000

each liquidating company for their liquidation expenses and paid preliminary expenses Rs. 25,000.

Required:

i. Amount of purchase consideration of each company and the number of shares to be issued.

ii. Entries in General Journal of KNKNKN Company Limited.

iii. Initial Balance Sheet of KNKNKN Co. Limited.

Q.4. CASH FLOW AND FUND FLOW

Nokia Diti Net Companys comparative balance sheet and income statement for the year 2010 follows

Comparative Balance Sheet

. 2010 . 2009

Assets .Rs. Rs.

Cash 1,40,000 .. 1,00,000

Account Receivable . 2,10,000 .. 1,50,000

Inventory .. 5,00,000 .. 4,30,000

Prepaid Expense 20,000 .. 60,000

Plant and Equipment . 19,00,000 . 14,00,000

Less: Accumulated Depreciation . 6,50,000 5,40,000

Long term investment 7,00,000 9,00,000

Total 28,20,000 .. 22,50,000

Liabilities and Equities

Account Payable 2,60,000 . 2,50,000

Accrued Payable 1,00,000 . 1,20,000

Taxes Payable 4,90,000 . 4,90,000

Debenture Payable 5,00,000 . 5,00,000

Ordinary Share Capital . 8,00,000 . 7,00,000

Retained Earning 6,70,000 . 5,40,000

Total . 28,20,000 25,00,000

Income Statement

Sales .. Rs. 23,00,000

Less: Cost of good sold .. Rs. 12,00,000

Gross Margin . Rs. 11,00,000

Less: Operating Expenses .. Rs. 7,00,000

Net Operating Income . Rs. 4,00,000

Gain on sales of long term investment . Rs. 50,000

Income before taxes Rs. 4,50,000

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Less: Income Taxes . Rs. 1,40,000

Net Income Rs. 3,10,000

Additional Information

Dividends of Rs. 1,80,000 were declared and paid during the year. The gain on sale of long-term investments was from the sale of

investments for Rs. 2,50,000 in cash. The investments had an original cost of Rs. 2,00,000. There was no retirement or disposal of

plant and equipment during the year.

Required: Prepare cash flow statement using indirect method showing the following clearly

i. Cash flow from operating activities

ii. Cash flow from investing activities

iii. Cash flow from financing activities

Q.5. RECONSTRUCTION

The Balance sheet of Zeeshan Ltd as on Dec 31, 2009 is as follows

Assets Equities

Cash .. Rs. 15,000 | Account Payable Rs. 75,000

A/C Receivable . Rs. 2,50,000 | Allow. for Dep .

Mds. Inventory Rs. 50,000 | Plant Assets . Rs. 1,50,000

Investment .. Rs. 1,00,000 | Authorized Capital Rs. 2,50,000

Preliminary Exp. .. Rs. 25,000 | Ordinary Shares of Rs. 10 each

Goodwill Rs. 35,000 | Rs. 25,00,000

Profit & Loss Rs. 1,50,000 | Paid Up Capital . Rs. 1,00,000

Plant Assets Rs. 6,50,000 | Ord. shares of Rs.10 each 10,00,000

.. | Share Premium . Rs. 50,000

TOTAL . Rs. 12,75,000 | .. Rs. 12,75,000

The following scheme of reconstruction was agreed and implemented on July 31, 2010.

i. Ordinary Shares of Rs. 10 each be reduced to an equal number of fully paid shares of Rs. 5 each.

ii. Share premium was utilized.

iii. Investment was sold for Rs. 90,000.

iv. The amount thus available be utilized to write off preliminary expenses, profit and loss and goodwill completely.

v. Accounts receivable are estimated to realize Rs. 2,00,000 inventory is valued at Rs. 40,000 and plant assets are assigned a book

value of Rs. 3,00,000.

Required: Prepare General Journal entries to give effect to the above scheme. And also prepare revised Balance Sheet of Zeeshan

Ltd.

Q.6. BRANCH ACCOUNTING

The following are some of the selected balances taken out from the trail balance of Head Office and Branch on Dec 31, 1992

. Head Office Branch

Merchandise Inventory (op) .. Rs. 29,000 . Rs. 25,000

Sales Revenue Rs. 3,00,000 . Rs. 1,50,000

Purchases Rs. 3,00,000

Purchase Discount .. Rs. 5,000

Goods Sent to Branch .. Rs. 64,000

Goods received from head office . 80,000

Allowance for Over Valuation . Rs. 18,000 -

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Salaries Expense .. Rs. 20,000 Rs. 5,000

Miscellaneous Expense Rs. 5,000 .. Rs. 1,000

Adjustment Data

Merchandise Inventory (end) .. Rs. 40,000 . Rs. 20,000

Accrued Salaries . .. Rs. 1,000

Prepaid Salaries . Rs. 2,000

Depreciation on Equipment .. Rs. 3,000 .. Rs. 500

Required:

i. Income Statement

ii. Consolidate Income Statement of Head Office and Branch

iii. Entries in the book of Head Office to incorporate Branch net income and adjustment of income resulting from over valuation of

merchandise.

Q.7. PROCESS COSTING

The information below relates to a production operated by Mehran Corporation during the month of October 2009.

Unit in Process Oct 01, 2009, 3,000 Units

(90% completed as to Material and 70% completed as conversion cost)

Cost of Units in Process Oct 2009 .. Rs. 25,000

Unit placed in production during Oct 2009 . 20,000 Units

Cost of Material placed in production . Rs. 97,000

Direct Labour cost incurred . Rs. 57,900

Factory overhead incurred on account . Rs. 70,000

Units in process Oct 31, 2009 (80% completed as to Material and 60% as to conversion cost) . 4,000

Units

Required:

i. Compute Equivalent full units completed of Material and conversion costs.

ii. Compute unit cost of Material, Labour and factory overhead.

iii. Determine cost of transferred unit on finished goods inventory (use FIFO method)

Q.8. JOB ORDER

The following transaction relate to DACCAN Corporation for the month of June 2009

i. Material Purchase on account . Rs. 1,70,000

ii. Material and labour used on jobs were as under

. Direct Material .. Direct Labour

Job 1 . Rs. 11,400 .. Rs. 14,000

Job 2 .. Rs. 5,000 Rs. 7,000

Job 3 . Rs. 17,200 .. Rs. 18,400

Indirect Material Rs. 3,800; Indirect Labour

iii. Other FOH cost incurred .. Rs. 6,850

iv. Depreciation on Machinery .. Rs. 3,000

v. FOH is applied at 80% of direct labour.

vi. Jobs No. 1 and 2 were completed and customers were billed with Rs. 50,000 and Rs. 26,000 respectively.

Required: Prepare necessary General Journal Entries of the above transactions.

Q.9. MANUFACTURING CONCERN

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Fauji Fertilizer Company produces various types of fertilizer. No Beginning units in process or finished units were on hand on Jan 1,

2010; 30,000 finished units were on hand on Dec 31, 2010 and 95,000 units were sold during the year. There were no units in work

in process inventory on Dec 31, 2010.

The material put into production cost Rs. 3,00,000, 75% were direct materials. There was no beginning or ending material inventory.

Labour cost were Rs. 3,50,000, 40% was for indirect labour. FOH costs, other than indirect material and indirect labours were the

following.

Heat, light and power . Rs. 1,15,000

Depreciation . Rs. 78,000

Factory Taxes . Rs. 65,000

Repairs and Maintenance .. Rs. 42,000

Selling expense was Rs. 8,000 General and administrative expenses were Rs. 50,000.

Required: Compute the following

i. Cost of good manufactured

ii. Total Cost

iii. Unit Cost

iv. Prime Cost

v. Conversion Cost

Q.10. Standard Cost

The standard and actual cost data of Mahran ltd are as follows.

Standard . Actual

Direct Materials . 5000 kg @ Rs. 10 6000 kg @ Rs. 12

Direct labour . 2000 hrs @ Rs. 5.50 1800 hrs @ Rs. 6

FOH . Rs. 50,000 .. Rs. 50,000

Required: Compute

i. Material Price and Quantity Variance

ii. Labour Rate and Labour Time Variance

iii. Overhead Variance