ADVANCED ACCOUNTING 2002 (Regular/ Private)
Time : 3 Hours Max. Marks:100
Instructions: Attempt any FIVE questions.
Q1. FINANCIAL STATEMENTS:
Pak Company Ltd. Was registered with an authorized Capital of Rs.50,00,000 divided into 5,00,000 ordinary shares of Rs.10 each. The Company’s books showed the following balances on June 30, 2002:
|Title of Accounts||Debit||Credit|
|Cash in bank||63,000|
|Allowance for bad debts||3,000|
|Merchandise Inventory 1.7.01||1,50,000|
|Machinery — cost||12,00,000|
|Allowance for Depreciation- Machinery||1,20,000|
|10% Bond Payable||2,00,000|
|Paid up Capital||8,00,000|
|Sales Return & Allowance||20,000|
|Transportation – in||40,000|
|Sales Return & Allowance||20,000|
|Transportation – in||40,000|
|Purchases Returns & Allowances||30,000|
|Income Tax Expenses||10,000|
Data for adjustments on June30, 2002:
(a) Rent expenses for the year amounted to Rs.30,000
(b) Merchandise Inventory was valued on June 30, 2002 at Rs.1 ,60,000.
(c) Provide allowances for depreciation on machinery for the year Rs.80000
(d) Allowance for bad debts Rs.5,000 for the year
(e) Appropriate Rs.50.000 for Plant extension and Rs.40,000 for contingencies.
(f) Declared Cash dividend 10% on Capital.
(a) Prepare a classified Income Statement for the year ended June 30, 02 and also a statement of Retained Earnings
(b) Prepare a Balance Sheet as of June 30, 2002 in classified form.
2.(a) ANALYSIS OF FINANCIAL STATEMENTS:
The following items are taken from the financial statements of SHALIMAR COMPANY LTD. at June 30, 2002.
Marketable Securities 30,000
Notes Receivable (due in six months) 20,000
Prepaid Expenses 20,000
Account Receivable-net 3,00,000
Merchandise Inventory 2,00,000
Machinery — Net 6,00,000
Accounts payable 2,50,000
Notes Payable (due in Three months) 50,000
10% debenture payable 2,60,000
Share Capital (Rs.10 per share) 6,00,000
Retained Earnings 1,40,000
Reserve for plant extention. 1,00,000
Sales (including Cash Sales 2,00,000 20,00,000
Gross Profit on Sales 30%
Advances from customers 5,000
Operating Expenses 2,40,000
Market Price per share is Rs.151=
Compute the following:
(i) Working Capital. (ii) Current Ration.
(iii) Acid Test Ratio. (iv) Earning per share.
(v) Earning Ratio. (vi) Inventory Turn over.
(vii) Receivable Turn over
(viii) Rate of Net Income on sales.
2.(b) The following data are taken from the FAST Company:
Compute trend percentages for sales and net Income.
3. FUNDFLOW ANALYSIS – CASH AND WORKING CAPITAL CONCEPTS:
The comparative balance sheet of FAISAL CORPORATION at June 30, 2001 and 2002 are as follows:
|Allowance for Depreciation Machine||30,000||22,000|
|10% Bonds Payable||40,000||50,000|
The following additional data are given:
(a) Land Costing Rs.10000 was sold for Rs.20,000.
(b) Machinery costing Rs.20,000 was sold for Rs.9,000 At the time of sale the book value of Machinery was Rs.12000.
(c) Cash dividend of Rs.20 000 was paid during the year.
(a) Compute the working capital provided by operating activities.
(b) Compute net cash flow from operating activities.
(c) Prepare a statement of sources and Application of fund for the year ended June 30. 2002.
(d) Assuming net sales for the year 2002 to be Rs.250000, calculate the cash collection from customers during 02.
Q4. ACCOUNTING FOR BRANCH:
The trial balance of pindi branch of ASHRAF COMPANY on December 31, 2001 is given below. The Head Office bills the branch for merchandise at cost plus 25%.
|Titles of Account||Debit||Credit|
|Merchandise Inventory January 1||16,000|
|Allowance for Depreciation Equip||500|
|Sales returns & allowances||3,000|
|Transportation — in||400|
|Purchases returns & allowances||600|
|Merchandise received from Head Office||50,000|
|Merchandise returned to H.O||2,000|
Additional information on December 31. 2001
(a) Office supplies used Rs.500.
(b) Prepaid selling expenses. Rs,700
(c) Accrued general expenses Rs.800
(d) Depreciation on office equipment Rs.500.
(e) Merchandise Inventories: 1.1.2001 31 .12.2001
|Received from Head office at Bill Price Rs.||12000||15000|
|Purchase from outsiders at cost.||4000||3800|
(a) Prepare adjusting and closing entries in the books of Pindi branch.
(b) Prepare entries in the Journal of Head Office to incorporate Pindi branch profit or loss and to adjust the allowance for over-valuation account and also close out the Pindi branch profit & loss account.
Q5. ACCOUNTING FOR INSTALLMENT SALES:
UMAIR & COMPANY sells merchandise on installment basis. The transactions for the year ended December 31, 2001 are as under:
1. Merchandise inventory Jan.1, 2001 1,50,000
2. Purchased merchandise on account 4,00,000
3. Purchased merchandise for cash. 2,00,000
4. Sold merchandise on Installment basis 8,00,000
5. Collection of installment AIR of 2001 3,00,000
6. Collection of installment AIR 1999 50,000
7. Collection of installment accounts receivable of 2000 1,00,000
8. Payments made to creditors 2,50,000
9. Installment accounts receivable of 1999 in the amount of Rs8000 was cancelled because of default but the merchandise could not be repossessed.
10. Expenses paid 25,000
11. Merchandise inventory Dec. 31, 2001 2,70,000
Note: Gross profit rate 1999 — 42% , 2000 — 44%
Record the above transactions in the general journal and also give adjusting and closing entries at December 31, 2001 assuming the company follows the PERPETUAL INVENTORY system.
06. COMPANY ACCOUNTING – ABSORPTION:
The balance sheet of BILAL COMPANY Ltd. On June 30, 2002 was as under-
Merchandise inventory 55000
Accounts Receivable 75000
Plant Assets 300000
Retain Earning 100000
Total = 645000
Account payable 45,000
Allowance for Depreciation- plant 60,000
5% Debenture payable 1,00,000
Share capital (44000 share @ 10 each) 4,40,000
Total = 6,45,000
The above company is absorbed by OWAIS COMPANY Ltd. On the following terms:
1. All assets and liabilities to be taken at book value.
2. For new shares of Rs.10 each for every five shares held were issued to the shareholders of the oldCo.
3. The debenture holders of the old company are issued new 10% debenture at a premium of 5%.
4. The realization expenses of old company Rs.3000 to be paid by the new company.
a. Compute the amount of purchase.
b. Entries in the books of Bilal Company Ltd.
c. Entries in the books of Owais Company Ltd.
Q7. BRANCH ACCOUNTING
During April the following reciprocal transactions were performed by the Head Office and itsQuettabranch.
April 6 Head Office supplied merchandise to the branch at a cost Rs. 10,000 which was billed at 25% above cost.
April 10 cash remitted to the Head Office by theQuettabranch Rs.8000.
April 17 Merchandise returned by theQuettabranch to the Head Office at billed price Rs.1,000.
April 20 branch expenses paid by the Head Office Rs.2000
April 26 The Head Office supplied furniture to theQuettabranch costing Rs.4000.
April 27 The Head Office paid theQuettabranch accounts payable of Rs.8000 after discount deduction of Rs.200.
April 28 The Quetta branch collected the Head Office accounts receivable of Rs.6000 after discount deduction of 150.
April 30 The Quetta branch reported a net profit accounts on the books Rs.5000.
Record the above transactions in the books of Quetta Branch and the Head Office.
7. ACCOUNTING FOR INCOMPLETE RECORDS:
NOT INCLUDED IN THE NEW COURSE