ADVANCED AND COST ACCOUNTING 2009 Time: 3 Hours (REGULAR) Max Marks: 100 Instructions: Attempt FIVE questions, THREE from Section-A and TWO from Section-B. SECTION “A” (Advanced Accounting) Q.1 ACCOUNTING FOR COMPANIES-ABSORPTION The following balances relate to the-business of Ashar Company Ltd. as-on-June.30,2009. Cash Rs.9:50,000-Other assets Rs.3,15,000°and Accounts Payables Rs.30,000 which is 1/3 of long term liabilities, Ordinary share capital (Par value Rs.10 per share) Rs.5,00,000, Retained earning Rs.45,000. Ashar Company: was absorbed by. Absar Company Limited under the following terms and conditions: (i) Absar Company Ltd. to take overall the business assets except cash and to assume accounts payable at book value. (ii) The Share holders of Ashar Company Ltd. to receive 5 shares in Absar Company Ltd. against 4 shares of Rs.10 per share. (iii) Long term liabilities- of ‘Ashar Company Ltd. settled by issuing 9500 Ordinary shares.in Absar Company Ltd. of Rs.10. (iv) Absar Company Ltd. to pay liquidation expenses of Rs.18,000 cash to Ashar Company Ltd. REQUIRED: (a) Compute the amount of Purchase Consideration (b) Prepare Journal entries in the books of liquidating Company. ee CASH FLOW STATEMENT: The accounting staff-of NASR & Company has presents the following information: 31.12.08 | 34.12. | 0 Cash - yee ee 42,000| 50,20 Accounts Receivables | 50,000 62,000 | ‘Office Supplies _ | 25,000| 16,000 Accrued Income =~ ___| 42,000 | - 0,000 | ‘Plant & Equipment | 3,00,000 | 2,60,000 “Accumulated Depreciation (Plant & Eq) (38,000) (26, 000) | Land & Building __|_2,00,000| _2,63,000 =. "ment in Bonds _ ; “| 3,70,000 | _3,40,000 9 Paya __ | 18,000 23,000. F Accrued Utilities 24,000 20,000 Long term loans —__|_1,70,0 42,200 Share Capital ee 50,06 E Retained Earning s 29,000} 2.0 — Saggy REQUIRED: (a) | Compute the Net Income from operation (b) | Cash generated from operation. (c) Prepare Cash Flow Statement. 3 FINANCIAL RATIO ANALYSIS: Following comparative data has been taken from the records of NUZHAT & COMPANY. NUZAT & COMPANY Comparative Income Statement .For the year ended December 31, 2007 and 2008. Company declared Cash Dividend _ 2008 2007 Net sales _ 12,00,000 8,50,000 Cost of sales 7 (6,90,000) | (5,10,000) Gross profit -~ __5,10,000 3,40,000 OPERATING EXPENSES: a _ Selling expense (1,20,000) (95,000) | General & Administrative overheads (1,60,000) | _ (1,30,000) | ncome before interest & taxes (IBIT) 2,30,000 1,15,000 Financial Charges (32,000) (24,000) Income before tax 1,98,000 91,000 Income Tax (29,700) | (13,650) Net Income 1,68,300 77,350 ASSETS: NON-CURRENT ASSETS: sai _— Property, Plant and Equipment 1,790,000 Intangible assets 1,20,000 CURRENT ASSETS: ede Inventories 70,000 Prepaid expenses . | ma 3 30,000 | Accrued financial income ell 70,000 60,000 Accounts Receivables __._ | 1,90,000 1,160,000 Marketable Securities 1,80,000 1,70,000 | Cash and Bank ___|__1,20,000 1,986,000 AUTHORIZED CAPITAL: 50,000 Ordinary shares @Rs.10 5,00,000 5,00,000 | SHARE CAPITAL: Ordinary Share Capital @ Rs.10 4,50,000 4,10,000 Retained Earning 3,68,300 2,00,000 LONG TERM LIABILITIES: _ _ Bond Payable __|_ 1,35,000| _1,25,000 Deferred Income | 20,000] =~ CURRENT LIABILITIES: | . . Accounts Payable _|__2,00,000 | 1,23,000 | | Accrued Expenses __ | _ 75,000 | 70,000 Current maturity of deferred income _ [ 4,000 | a REQUIRED: Compute the following ratios: (i) Current ratio for 2007 (ii) Quick ratio for 2008 (ili) | Earning per share for 2007 (iv) Book value per share for 2008 (v) — Inventory Turnover for 2007 and 2008. (vi) Receivable Turnover for 2007 and 2008. (vil) Return on Assets for 2007 and 2008. 4. INSTALLMENT SALES: Mifta Installment Company purchased 15 Computers from Alam & Bilal Traders @ Rs.33,600 each on credit. The Company sold 7 Computers on installment @ Rs.42,000 each on September 1, 2008. The terms of installment sales were to pay 25% on each computer as a down payment and the remaining amount is to be collected in 15 monthly installments starting from October 1, 2008. All installments collected on First day of each month. Three of the computer holders defaulted to pay the installments after the payment of 5” installment and Company repossessed the computers which have the fair market value of Rs.17,000 each computer. Mifta installment Company closes its accounting year on June 30 each year, REQUIRED: Compute the following: (i) Amount of installment sales. (ii) Amount of down payment receive: a.com (iii) | Monthly installment ame asic he (iv) Unrealized @ fi te (v) Rate heel eferred) Gross Profit. (vi): anions unt of installment account receivable cancelled. (vii) ook Value of repossessed merchandise. (viii) | Gain or loss on repossession. (ix). Total amount collected during the period. (x) Amount of Realized Gross Profit HEAD OFFICE AND BRANGH ACCOUNTING: Following are seme of the items extracted from the books of Khursheed & Hassan Company Karachi and its Lahore Branch: puter. _ Head Office Branch Cash 40,000 18,000 Inventory (Opening) oe 15,000 20,000 Purchases = 6,000 | Sales Revenue _ 30,000 | Goods sent to Branch L esc | Goods received from Head Office | 7,500 | Salaries Expense 1,000 | Prepaid Rent B00 Allowance for Overvaluation 72,000 [eee On December 31, 2008 data for adjustment: : Head Office: Inventory valued Rs.3,000, Prepaid salaries Rs.1,200 and Prepaid rent Rs.800. Branch: Inventory with respect of Head Office Rs.1,500 and of local purchases Rs.1,200. Accrued salaries Rs.1,500 and rent expired during the period Rs.200. REQUIRED: (i) Allowance for overvaluation in opening inventory. (ii) Rate of Allowance for overvaluation. (iii) Adjusting entry of Allowance for overvaluation. (iv) Prepare Consolidated Income Statement for the year ended December 31, 2008. SECTION “B” (Cost Accountingy 6. ACCOUNTING FOR MANUFACTURING: : The following extract of costing information rélates to commodity ‘A’ manufactured by RIBBI ENGINEERING COMPANY for the half year ending 31% December 2008. Purchase of Raw material ee es | 250,000 Sales (all on account) 300,000 [Factory overhead (20 gut she Carriage on Purchase: aur STOCK (July 1, 2008 [ Raw Material Finished Goods (1200 units) Work in Process STOCK (December 31, 2008 otal Raw Material I 47,000. Finished Goods (1000 units) ie “4 2 Work in Process 91 500. Selling and disiribution overheads are Rea per unit sold. During the period 29800 units were produced. REQUIRED: (i) Compute cost of material used. (ii) Calculates the amount of direct labour used. (iii) Prepare statement of cost of goods manufactured. (iv) | Prepare statement of cost of goods sold G JOB ORDER COST SYSTEM: On March 1, 2009 Azfar Engineering Works had ‘two jobs in process as follows: Job No. 18 Job No. 19] Direct Material | 50,000 | 18,000 Direct Labour _ 36,600] "12,000 Direct Labour hours 10,000 8,000 | Direct Machine hours _ | 3,000 2,500 ‘Applied Factory Overhead: Rs.3 per direct r direct | weet machine, RIPPER: hour | During March Job No.420) ged 3 were started. Direct materials of Rs irect labour of 1800 hours at an sere, ate BR per hour used during the month. Pre determin: H applied rate is Rs.10 per direct labour hour on all jobs starting in March. Job No. 23 was the only incomplete job at the end of March. Direct material of Rs.15,000 and direct labour of Rs.9,000 were charged to job. At the end of month job No.22 was the only finished job on hand. It has accumulated total cost of Rs.27,250. There was no beginning inventory in finished goods. Jobs completed were sold on account at a profit of 20% on cost. REQUIRED: 0) Prepare following T-account. (a) Workinprocess (b) — Finished goods (c) Cost of goods sold. (it) Prepare Journal entries to record: (a) Cost incurred on jobs started in the month of March, (b) Cost of goods manufactured (c) Sales (d) Cost of Sales. 8. PROCESS COSTING: IYRA PHARMA COMPANY processes a product through three distinct stages. The product of one process is being passed on to the next process and so on to the finished product intact. Details of the cost incurred in process No.1 is given below for the month of November 2009. Cost of units in process on November 1,2009 1,80,000 Cost of material placed in production 41,20,000 | Direct labour used (125% of Factory overhead) 2,00,000 | Factory overhead applied ? The data extracted from the production report relating to oe above processes are as follows: a Units in process on November 71,2009 15000 units (60% completed as to material & 80% as to conversion cost) Units placed in production Units in process on November 30,2009 (40% completed as to material & 50% as to conversion cost) REQUIRED: (i) Equivalent production units (ii) Per unit cost (iii) Total cost of units completed and transferred to next process (Process No.2) (iv) Total cost of units in process on November 30, 2009. 40000 units 10000 unitsADVANCED AND COST ACCOUNTING 2009 Time: 3 Hours (PRIVATE) Max Marks: 100 Instructions: Attempt FIVE questions, THREE from Section-A and TWO from Section-B. SECTION “A” (Advanced Accounting) 1. RE-CONSTRUCTION OF COMPANY: The balance sheet of Al-Raza Ltd. as on June 30, 2009 is as follows: CREDIT BALANCES: Authorized Capital: 100,000 Ordinary share of Rs.20, _ 20,00,000 PAID UP CAPITAL 45,000 Ordinary share of Rs.20 each 9,00,000 7% Bond Payable 2,00,000 Accounts Payable 75,000 Allowance for depreciation — Plant Assets 4,50,000 ya: C Y G32 000 DEBIT BALANCES: a Plant Assets \idU 6,00,000 Accounts Re 2,40,000 Mercha HN 2,60,000 Cash 20,000 Preliminary expenses 45,000 Profit / Loss 1,60,000 13,25,000 The following Scheme of Reconstruction was agreed and implemented on the same date: 1. The amount of authorized capital to remain unchanged but the par value of each share is now to be Rs.10 as per companies. 2. The shareholders were issued 50000 shares at Rs.10 each against their holdings. 3. Bonds payable were settled by issuing 21000 shares at par. 4, Preliminary expenses and profit or loss accounts were completely written off, merchandise was valued at Rs.270,000, Account Receivable were estimated to realize to the extent of 90%. The balance of reduced capital’s amount was utilized to reduce the value of plant assets. REQUIRED: (a) Entries in the books of Al-Raza Ltd. to give effects of the above scheme. (b) Revised Balance Sheet as on June 30, 2009, 2. BRANCH ACCOUNTING: - Mehdi Corporation bills merchandise to it's E-Branch at cost and maintains complete accounting records under perpetual inventory system. Equipment and other fixed assets used at the branch are carried in Home Office books. Transactions during December 2009, the first month of E-Branch operations are summarized below. 1. Cash Rs.1,000 was fonvarded to E-Branch. 2. Merchandise costing Rs.60,000 was shipped by Head Office to E-Branch. 3. Equipment was acquired by E-Branch for Rs.1,500 cash. 4 Credit sales by Branch amounted to Rs,80,000 casting Rs.45,000. 5. Collection of Accounts Receivable by E-Branch Rs.62,000. 6. Payment of operating expenses by E-Branch totaled Rs.20,000. & Cash Rs.37,500 remitted by E-Branch to Head Office. 8 Operating expenses paid by Head Office and charged to E- Branch amounted to Rs.3,000. REQUIRED: General journal entries in the books of: (i) E-Branch and = (il) Head Office 3. INSTALLMENT SALES: Sarwar Associates sell merchandise on Installment basis. The transactions for the year ended Dec. 31, 2009 are as under, with merchandise inventory on Jan. 1, 2009 Rs.1,10,000. ly Purchases of goods on Rs.7,50,000 of which 2,25,000 was for cash. 2; Collections of installment accounts receivable were as under 2007 Rs. 70,000 2008 4,20,000 2009 3,00,000 Total sales on installment basis for the years Rs.6,50,000. Accounts Payable of Rs.4,00,000 were settled through bank. Installment Accounts Receivable of 2007 were cancelled amounted to Rs.20,000 and the repossessed merchandise was assigned a resale value of Rs.14,700 6. Expenses totaled Rs.40,000 of which expenses amounting to Rs.25,000 were paid Ending inventory of merchandise was valued Rs.3,40,000, Gross profit rate in 2007 was 30% and in 2008 25%. REQUIRED: Record all above transactions including adjusting and closing entries under perpetual system. 4. ANALYSIS OF FINANCIAL STATEMENTS: The following terms are taken from CO Aman Company. All sales are made on a ac Sales (on account yidun 18,00,000 Plant and Eq ah 24,00,000 jolders Equity 38,00,000 ig term iabilties 9,00,000 ake Average Accounts Receivable 3,75,000 Average Merchandise Inventory 2,55,000 Gross Profit 5,25,000 REQUIRED: Compute the following: (i) Accounts Receivable turnover (ii) Merchandise Inventory turnover (iii) Ratio of plant and equipment to Long term liabilities. (iv) Rate of return on shareholders equity. (v) Gross profit percentage. 5. FUND FLOW / CASH FLOW ANALYSIS: The following are the comparative Balance Sheets of Nadeem Ltd. DEBIT BALANCES ___ [31.42.2008 [31.12.2009 | Cash 90,000 | _1,26,000 Accounts Receivable (Net) 1,50,000 2,48,000 Merchandise Inventory 2,28.000 1,84,000 | Machinery 5,10,000 | —_3,90,000 | Land 2,40,000 3,90,000 Patents 1,20,000 1,02,000 TOTAL 13,38,000 | 14,40,000 CREDIT BALANCES Accounts Payable — 1,80,000 1,45,000 Unpaid Expenses 1,44,000 1,91,000 Debentures Payable 2,40,000 1,20,000 | Ordinary Share Capital 7 4,80,000 | _6,00,000 Share Premium 1,20,000| _1,50,000 Retained Earnings _ 1,74,000 2,34,000 TOTAL 13,38,000 | 14,40,000 | At the end of 2009, declared cash dividend Rs.90,000 and Stock Dividend Rs.1,50,000. REQUIRED: (a) A Statement showing changes in Working Capital. (b) = Cash Flow Statement. SECTION “B” (Cost Accounting) 6. ACCOUNTING FOR MANUFACTURING: Following information was taken from the accounting record of Al-Rehman Industries: “| 44.2009 [34.12.2009 | Finished Goods are 25,000| 29,000 | Work in process __40,000 48,000 | Material 2,000 | 30,000 During _the year the following | transaction were performed neces oy meee ball Material purchases { ae | -3,50,000 Direct Labour Cost FI 1,20,000 Indirect Factory Labour Cost 60,000. Depreciation — Factory | Building 20,000 Depreciation — Salesroom & Office (Share_| Equally) 15,000 Utilities (60% to Factory, 20% to Office & 20% to Salesroom) 50,000 Other Indirect Manufacturing Cost fdas canteens 40,000 | | Sales Person's Salaries __ 40,000 | | Office Salaries | Ett ae Bay 000! | Sales ¢ 1 account ok ___|__7,30,000 | “REQUIRED: (a) Statement of Cost of | Goods Manufactured. (b) Income Statement. Bi JOB ORDER COSTING: The following information relates to Sakina Industries for the month of Dec: 2009 4 Purchased Materials on account Rs.90,000. 2 Issued Materials of Rs.80,000 which included indirect é materials of Rs.10,000 S. Lobour Costs accrued: Direct Rs.45,000 and = Indirect Rs. 15, ae Indirect manufacturing costs other th esha and indirect labour incurred a ye ton «Factory Overt Freube I% of direct labour cost Goods C mpyenee ens: completed (Finished) 1 RINNE completed goods were sold at 20% above Lot pe 2 Prepare journal entries for the above information including all adjusting and closing entries. 8. STANDARD COST: Sachal Products uses standard cost system. Following data extracted from their records a ND STANDARD Raw Material Costing Rs.100,000 (for 20,000 Bags) of one KG each Direct Labour 20000 Hours @ Rs.7 per hour F, Overhead 120% of Direct Labour Cost ACTUAL Raw Material 20,500 Bags of one KG @ 5.10 each KG. Direct Labour 19700 Hours @ Rs.7.50 per hour F. Overhead Rs.1,60,000 REQUIRED: (a) Calculate: (i) Material Price Variance (ii) Material Quantity Variance (ii) Labour Rate Variance (iv) Labour Efficiency Variancy (v) FOH Variance (vi) Overall Variance ‘b) Record entries of the above Variances and one entry to close all variancesADVANCED AND COST ACCOUNTING 2008 Time: 3 Hours (REGULAR) Max Marks: 100 Instructions: Attempt FIVE questions, THREE from Section-I and TWO from Section-ll. z SECTION “A” (Advanced Accounting) 60 Marks Q.1 ACCOUNTING FOR COMPANIES The following are the Balance Sheet accounts of Rasheed Co. Ltd. As on 30th June 2007. Debit Credit Cash 21,000 | Accounts Payable 40,000 Alc. Receivable 73,000 | Bank Overdraft 52,000 Merchandise Inven. 61,000 | Share Capital: Plant & Machinery 84,000 | 25000 Ordin Shares ny 10) 50,000 Preliminary Exp. Retained — Earning Kau (Deficit) NA r\ Vat Patentay \N 16,000 342,000 342,000 The company proved unsuccessful and resolutions were passed to carry out the following scheme of reconstruction by reduction of Capital: (1) That the Ordinary Shares be reduced to an equal number of fully paid shares of Rs.5 each, (2) That the amount so available be utilized for wiping out losses and reduction of assets as follows: Preliminary expenses and Retained Earnings Accounts (Dr Balance) to be written off entirely. The Plant & Machinery be reduced by Rs,8000. The Merchandise Inventory be written down by Rs,6000. Make provision for Bad Debts Rs.8000. The patent to be completely written off. REQUIRED: (i) Make necessary journal entries in the books of the company to implement the above scheme of reconstruction (ii) Prepare the Balance Sheet (revised) Q.2, ACCOUNTING FOR INSTALLMENT SALES The following balances are taken from the pre-closing Trial Balance of Hassan Co. as of Dec 31,2007. (i Installment A/c. Receivable — 2006 Rs. 80,000 (ii) Installment A/c. Receivable — 2007 120,000 (ii) Installment Sales 200,000 (iv) Cost of Installment Sales 140,000 (v) Unrealized Gross Profit-2006 80,000 REQUIRED: (1) Prepare all entries for the year ended Dec. 31, 2007 adjusting and closing as well, assuming that Rate of Gross Profit on Installment Sales of 2006 was 25%, Show all computations. (2) On Jan 10, 2008 a customer defaulted on his payment. Give Journal entries for repossession with the help of the following information. (i) Original Sale on Installment Rs.2,000 (ii) Date of Sale 12 Aug 2006 (iii) Collection up to date Rs.1,500 (iv) | Estimated market value of repossessed merchandise Rs. 600 Q.3 ACCOUNTING FOR BRANCH Asad Ltd. Sent merchandise costing Rs.60,000 which was bitted at 20% above cost to its Lahore Branch and paid transportation cost of Rs.7,800. On request of the Faisalabad Branch, Asad Ltd. Advised Lahore Branch to transfer the same shipment to Faisalabad Branch. Lahore Branch sent the same to Faisalabad Branch and paid transportation charges Rs.2,200 REQUIRED: Pass Journal entries in the books of (1) Asad Ltd. (2) Lahore Branch (3) Faisalabad Branch NOTE: If the merchandise had been supplied directly by the Head Office (Asad Ltd.) to Faisalabad Branch the transportation charges would have been Rs.8,000. Q.4 CASH FLOW STATEMENT On December 31, 2006 and 2007 Balance Sheet of NIZAM _LTD, Shows the following: ASSETS 2006 Cash 4,800 Account Receivable 9,500 Merchandise inventory _ 33,200 |Equipment - 24,000 | Jota 71,500 | EQUITIES 2 2006 | Accumulated depreciation-equipment 6,100 4,800 Accounts Payable ie a0e}T (Vs 400 Mortgage Payable oa 10,000 | Share Capital — Rs. 10 Per gaun 0,000} 25,000 Share Premium 2,500 = Retained Earni 16,700 12,300 _ 78,100 71,500 Additional information: 1 (1) A fully depreciated equipment that costs: of Rs.800 was discarded and related accounts were closed, (2) Cash dividend of Rs.4,000 were declared and paid. REQUIRED: Prepare a CASH FLOW STATEMENT. Showing OPERATING INVESTING, FINANGING activities. Q.5 ANALYSIS OF FINANCIAL STATEMENTS The following data have been obtained from the, Financial Statements of Mujahid & Co. for the year ended Dec 31, 2006 and 2007 ee —_ a3 Po ___ |. 2007 2006 | Cash - oe 28,750] 20,000. AIC, Receivable 8 39,000]; 46,000 | Merchandise Inventory : 23,000 | 15,000 Prepaid Expenses _ — ‘5,200! 7,500 | AIC. Payable oe | 14,000 16,000 Notes Payable - __| 30,000) 35.000 | Accrued Expenses _ age [8,700 | | Net Sales - oe _ | 205,000] 240,000 Cost of Goods Sold | : . 000 | 125,00 000} REQUIRED: Compute the following for 2006 and 2007 (1) Amount of Working Capital (2) Current Ratio (3) Acid Test Ratio (4) Inventory Turn Over (5) Receivable Turn Over (8) Gross Profit Rate SECTION “B” (Cost Accounting) 40 MARKS Q.6 ACCOUNTING FOR MANUFACTURING CONCERN The following data relate to Waseem Co, for the year.2007. 1, Purchases of Direct Material Rs 88,000 2 Direct Material Used 90,000 3: Direct Labour Paid 65,000 4, Direct Labour assigned to production 70,000 5 Factory Overhead Cost incurred 80,000 During the year 24,400 units were manufactured and 25,000 units were sold. Selected information concerning inventories during the year is as follows: Jan 1,2007 Dec 31, 2007 1. Material Rs. 10,000 © 2. Work in process Rs. 18,000 Rs 14000 3. Finished Goods 3000 unitsRs 27,000 ?. REQUIRED: (1) Cost of Goods manufactured during 2007. (2) Average unit cost produced during 2007. (3) Cost of Good Sold assuming FIFO basis (4) Cost of Ending inventories of (i) Materials (ii) Finished Goods, Also pass the necessary entries. Q.7(a) STANDARD COST & VARIANCES The Standard and Actual Cost data of Asif Co. are as follows: [ Standard Actual Direct Material 3000 units @ R: 29000 =units =@ per unit _Rs.4.50 per unit Direct Labour 12000 hours @/13000 hours @ Rs.10 per hour Rs.10.60 per hour REQUIRED: (1) Material Price Variance (2) ~— Material Quantity Variance (3) Labour Rate Variance (4) Labour Time Variance (5) Pass Journal entries for recording of Variances with Actual and Standard Costs. Q.7(b) | Standard | Factory Over- head Cost Variane Factory Overhead _[ Rs.1,20,000 Rs.10,00! cfsharae REQUIRED: (1) Determine the Actual etoly cc (2) Records the F; head Cost and its Variance. TING G8 PROgRBS BUSTING owing PROCESS COSTING pertains to the goods in Process No.3 for the month of December 2007. The Company applies FIFO method for inventory valuation: Good in Process Inventory December 1, 2007, 40000 units 75% complete, cost of Rs.3,87,000. Cost 140000 units transferred in from Process No. 2, during December Rs.8,40,000. Cost added in Process No. 3 during December, Direct Material Rs.2,75,000, Direct Labour Rs.82,500 and Factory Overhead Rs.1,37,500 On December 31, 50000 units are still in Process No.3 which are 75% complete as to materials and 20% complete as to conversion cost. ue ' 1 . REQUIRED: Compute: (1) Number of units completed (2) Equivalent units of production. (3) Cost per unit. (4) Cost of units transferred to finished goods warehouse.