| Q.1 |
Following are some transactions of a proprietorship
firm. Please indicate how increase and decrease in each transaction
will affect the “assets” and “liabilities”
of the firm. (05) |
i |
The proprietor invests Rs 8,000,000 cash in
the business. |
ii |
He purchases land for Rs 3,000,000 and pays
in cash. |
iii |
He purchases a building for Rs 4,500,000 and
pays Rs 2,000,000 in cash and the balance Rs 2,500,000 after two
months. |
iv |
Sold a portion of land for Rs 900,000 (at its
cost) on credit. |
v |
Rs 2,500,000 was paid in full settlement of
building cost in cash. |
| Q.2 |
Zeeshan Ltd. is calculating its ratios relating
to debt paying ability for the year ending 31st December 2006. Following
is the relevant information: (10) |
|
| Income Statement |
Rs |
| Sales (60% cash sales) |
8,000,000 |
| Cost of goods sold expenses |
5,600,000 |
| Interest Expenses |
1,500,000 |
| Balance Sheet |
| |
1st
January 2006 (Rs) |
31st
December 2006 (Rs) |
| Cash |
900,000 |
1,200,000 |
| Accounting Receivable |
1,400,000 |
2,000,000 |
| Inventory |
1,700,000 |
2,800,000 |
| Plant and Equipment |
4,000,000 |
4,500,000 |
| (net of accumulated depreciation) |
|
|
| Accounts Payable |
2,250,000 |
2,500,000 |
| Taxes Payable |
1,180,000 |
1,000,000 |
|
i |
Working capital |
ii |
Current ratio |
iii |
Acid-test ratio |
iv |
Difference between current and acid test ratio? |
v |
Accounts receivable turnover. |
vi |
Average collection period for Accounts Receivable. |
vii |
Reasons for relatively slow collection period in (vi) |
viii |
Inventory Turnover |
ix |
Average selling period for inventory. |
x |
Should Zeeshan Ltd., be concerned about its average selling period
for inventory. |
| Q.3 |
Q.3 The following figures have been taken from
the books of Standard Commercial Bank Ltd. (20) |
|
Authorized capital
2,000,000. ordinary shares of Rs. 100. each |
200,000,000 |
Issued, subscribed and paid-up capital.
2,000,000 ordinary shares of Rs.100. each, Rs. 50. called
and paid
|
100,000,000 |
| Reserve Fund |
70,000,000 |
| Acceptances and endorsements on behalf of customers |
40,000,000 |
| Bills for collection |
28,000,000 |
| Sundry creditors |
6,000,000 |
| Unclaimed Dividends |
6,000,000 |
| Loans, overdrafts and cash credits |
1,400,000,000 |
| Bills Payable-In Pakistan |
160,000,000 |
| Bills, discounted and purchased |
100,000,000 |
| Interest and discount |
130,000,000 |
| Borrowed from banks |
140,000,000 |
| Cash with other banks |
260,000,000 |
| Cash with SBP |
300,000,000 |
| Cash in hand |
12,000,000 |
| Premises (after depreciation upto 31.12.2005) |
240,000,000 |
| Dividend for 2005 |
10,000,000 |
| Profit and Loss (cr) on 1.1.2006 |
42,000,000 |
| General Expenses (including stationery 1,000,000 and director’s
Fees 400,000) |
2,000,000 |
| Rent |
4,000,000 |
| Salaries (including salary to General Manager 4,800,000
and Director’s Fees 1,000,000). |
16,000,000 |
| Interest accrued and paid. |
40,000,000 |
| Investments (at cost) |
600,000,000 |
| Money at call and short notice |
60,000,000 |
| Current Accounts. |
1,600,000,000 |
| Savings Bank Deposit |
600,000,000 |
| Fixed Deposit |
190,000,000 |
|
| |
Additional Information: |
a |
Assume “Investment” mentioned above is at below market
value. |
b |
The prescribed break down of “advances” may be ignored.
|
c |
Rebate on bills discounted and purchased for unexpired terms amounted
to Rs 1,000,000. |
d |
Charge depreciation @5% on premises on original cost (260,000,000) |
e |
Provision for doubtful debts amounting to Rs 6,000,000. is to be
made. The bank has no business outside Pakistan. |
| |
Required: Profit & Loss Account
and Balance Sheet for the year ended 31st December 2006 as near
to the prescribed SBP format as possible. |
| Q.4 |
Q.4 Following is the “Statement
of cash flows” for a company for the year ended 31st December
2006. (15) |
|
| Cash flows from operating activities: |
(Rs) |
| Net Income |
250,000 |
| Annual depreciation |
140,000 |
| Increase in accounts receivable |
(30,000) |
| Decrease in inventory |
20,000 |
| Decrease in accounts payable |
(100,000) |
| Increase in faxes payable |
70,000 |
| Total cash flows from operating |
350,000 |
| Cash flows from investing activities: |
(Rs) |
| Sale of equipment |
80,000 |
| Plant and equipment purchase |
(170,000) |
| Total cash flows from investing activities |
(30,000) |
| Cash flows from financing activities: |
(Rs) |
| Payment of note payable |
(140,000) |
| Increase in bonds payable |
340,000 |
| Payment of dividends |
(140,000) |
| Total cash flows from financing activities |
60,000 |
| Increase in cash |
320,000 |
|
| |
The company sold equipment costing Rs 140,000
during 2006. The equipment was sold for its net book value. |
| |
Required:
Fill in the amounts in the balance sheet for 2006 by using the information
from the “statement of cash flows”. Provide computations. |
| |
Balance Sheet
31st December 2006 and 2005 |
| |
2006 |
2005 |
| Assets: |
|
|
| Cash |
|
420,000 |
| Account receivable |
|
570,000 |
| Inventory |
|
720,000 |
| Total Current Assets |
|
1,710,000 |
| Plant & equipment (cost) |
|
1,100,000 |
| Less accumulated depreciation |
|
(250,000) |
| Total Assets |
|
2,560,000 |
| Capital and liabilities: |
|
|
| Accounts payable |
|
510,000 |
| Taxes payable |
|
420,000 |
| Total current liabilities |
|
930,000 |
| Long-term notes payable |
|
500,000 |
| Bonds payable |
|
400,000 |
| Share holder’s Equity: |
|
|
| Paid-up capital |
|
300,000 |
| Retained earnings |
|
430,000 |
| Total share holder’s equity |
|
730,000 |
| Total liabilities & share holder’s equity |
|
2,560,000 |
|
| Q.5 |
Computational Questions: (05) |
i |
Calculate a trader’s drawings from the
following information:
Opening capital 200,000
Closing Capital 230,000
Net profit 50,000 |
ii |
A company incurred a loss of Rs.20,000 on trade-
in of a machine which was originally purchased at a cost of Rs.100,000.
The machine has been traded-in with a new machine having a list
price of Rs.120,000. Cash payment to vendor amounted to Rs.85,000.
Calculate the book value of old machine. |
iii |
A trader starts a business with Rs. 10,000
cash and a van worth Rs.5,000. At the end of his first year he has
Rs.2,000 in the bank, stock worth Rs.5,000, debtors valued at Rs.2,000
and the van which is now worth Rs. 4,000. If he has withdrawn Rs.2,000
from the business during the year for his personal use, what is
the amount of profit/loss for the year? |
iv |
From the following data of ABC Bank calculate
the capital adequacy ratio as required by SBP:
Capital held 2,500
Risk-weighted assets (total)
38,500 |
v |
From the data in 4 above calculate the amount
of total capital required and shortfall in capital, if any? |
| Q.6 |
Based on historical data of XYZ Co., it has
been observed that the accounts receivables are recovered 50% in the
month of transaction, 30% in the next month, 15% in the 3rd month
and 5% in the 4th month. (15) |
| |
Following information is available for the company:
| Month of Transaction
|
Credit Sales in Rs. |
| April |
200,000 |
| May |
150,000 |
| June |
180,000 |
| July |
160,000 |
| August |
120,000 |
| September |
100,000 |
| October |
80,000 |
| November |
90,000 |
| December |
60,000 |
|
| |
Required: Calculate the month-wise amount expected to be
received during July to December. |
Q.7 |
PPI Ltd. Acquired a food
processing machine for Rs.75,000 on February 15, 2005. The company’s
policy is to record full year’s depreciation if the asset
is purchased during the first half of the year. The machine is estimated
to have a residual value of Rs.30,000 at the end of its service
life which is expected to be 6 years. The machine’s working
hours are estimated at 25,000. Its production is estimated at 40,000
units. During 2005, the machine was operated for 4,200 hours and
produced 8,000 units. |
i |
Required:
Compute the depreciation charge for 2005 by using: (10)
a) Straight line method
b) Service hours method
c) Productive output method
d) Sum of the year’s digits method
e) Declining balance method, using an
annual rate of 35% |
ii |
Journal-entry to record the depreciation under the straight-line
method. (3) |
iii |
Show presentation on Balance Sheet as at December 31, 2005 based
on the straight-line method. (2) |
| Q.8 |
You are provided with the following information
at the end of June 30 (05) |
a |
Unpaid wages Rs.3000 |
b |
Unexpired insurance Rs.2000 |
c |
Unearned income Rs.1000 |
d |
Interest payable on loan Rs.6000 |
e |
Interest receivable on investments Rs.4000 |
| |
Required: Make adjusting entries to incorporate the above
information in the accounts. |
| Q.9 |
M has a beginning inventory of Rs.50,000 on
January 1. During the month of January, net purchases amount to Rs.20,000
and net sales total Rs.30,000. Assume that M’s normal gross
profit rate is 40% of net sales. Using these facts, calculate the
cost of inventory on January 31: (05) |
| Q.10 |
Balance Sheet of AA & Co. showed the following
information as at December 31, 2005. |
| |
| Account Receivables |
225,300 |
| Allowance for Doubtful Accounts |
6,759 |
|
| |
Following transactions took place during the year ended December
31, 2006.
| Credit sales |
1,245,500 |
| Cash Sales |
230,600 |
| Cash collected |
1,386,200 |
| Doubtful accounts written off |
2,300 |
|
| |
Company has a policy of providing for 3% of outstanding Receivables
as Allowance for doubtful accounts. |
| |
Required:
(a) Prepare the following accounts
for the year as they would appear in the books of AA & Co. (Journal
entries
are not required) :
i)
Accounts Receivable Account. (02)
ii)
Allowance for Doubtful Accounts. (02)
(b) Compute the amount of allowance
for doubtful accounts required at the end of the year. (01)
|
|