ADVANCED ACCOUNTING 2003 (Regular/ Private)
Time : 3 Hours Max. Marks:100
Instructions: Attempt any FIVE questions.
1. Company Accounting — Absorption:
The following balances appeared in the Balance Sheet of YQUSUF LTD. As on June. 30. 2003
|A/c Receivable||60,000||Bonds Payable||100,000|
|Merchandise Inv.||160,000||Share Capital (ord. share of Rs. 10each)||600,000|
|Land and Building||240,000||General Reserve||160,000|
|Plant & Machinery||400,000||Retained Earnings||120,000|
The above absorbed by Ghani the following terms
(i) All the Assets (with exception of cash) to be taken over at book values.
(ii) Accounts Payable to be paid by YQUSUF LTD.
(iii) Purchase consideration was as follows:
(a) A cash payment of Rs.4 for every share of Yousuf Ltd.
(b) The issue of one share of Rs.10/= each (Market value Rs.12.50) in Ghani Ltd. for every share in yousuf Ltd.
(c) The issue of 1100 Bonds of Rs.100/= each in Ghani Ltd. to enable Yousuf Ltd. To discharge its Bonds at a premium of 10%
(i) Compute the purchase consideration.
(ii) Give the necessary journal entries in the books of both the companies.
2. Company Accounting Reconstruction:
The Balance sheet of ZESHAN LTD. As on Dec. 31, 2002 is as follows:
|Cash in hand||15,000||Accounts payable||75,000|
|A/c. Receivable||250,000||Allow, for Depreciation Plant assets||150,000|
|Merchandise Inv.||50,000||250,000 Ord. Shares of|
Rs.10 each Rs.250,000 Investment100,000Paid up Capital 100,000 Preliminary exp.25,000Ord. Shares of Rs.101000000Goodwill35,000Share Premium50,000Profit & Loss150,000 Total1275,000Total1275,000
The following scheme of reconstruction was agreed upon and implemented on July 31, 2003;
(i) Ordinary share 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 & loss and good will completely.
(v) Accounts receivable are estimated to realize Rs.200,000 inventory is valued at Rs.40,000 and Plant assets are assigned a book value of Rs.300,000.
(a) Entries in the General Journal to give effect to the above scheme.
(b) Revised Balance Sheet of Zee Shari Ltd.
3. Financial Statements:
(a) (i) Name any two toots of analysis (Analytical
(ii) Give the significance of current ration.
(iii) State the change in quick ratio when merchandise is purchased on account.
(b) Mehran Company was registered with an authorized capital of Rs.60,00,000 divided into 6,00,000 ordinary shares of Rs.10 each. The company’s books showed the following balances on December 31, 2002, the end of the accounting year before the closing process.
Cash Rs.40,000 Accounts Receivable Rs.65,000 Merchandise inventory (1.1.2OO2) Rs.25,000, Machinery – Cost Rs.15,00,000, Purchase Rs.480,000, Transportation in Rs.20,000, Salaries Expense Rs.58,000, Unexpired insurance Rs.8,000, Rent Expense Rs.48,000, Auditor’s fee expense Rs.20,000, Director’s Fee Expense Rs.18,000 (total Rs.22,82,000)
Accounts payable Rs.45,000, Accumulated Depreciation — Machinery Rs.140,000, Allowance for Bad Debts Rs.8,000, 10% Bonds Payable Rs.2801000, paid up Capital
Rs.10,00,000, Sales Revenue Rs.750,000, Retained Earnings Rs.59,000.
Data for adjustments on December 31, 2002
(i) Merchandise Inventory at Dec. 31, 2002 was valued at Rs.180,000,
(ii) Allowance for Bad Debts to be increased by Rs.2000.
(iii) Insurance expired Rs.3000.
(iv) Machinery be depreciated by 20% Diminishing balance method.
(v) Salaries prepaid Rs.8000.
(vi) Rent Payable Rs.12,000.
(vii) Provide Rs.20,000 for income Tax:
(viii) Appropriate Rs. 10,000 for contingencies.
(a) Prepare INCOME STATEMENT for the year ended December 31, 2002 and STATEMENT OF RETAINED EARNING on the same date.
(b) Prepare Balance Sheet as of December 31, 2002 in classified form.
4. Financial Statements Analysis:
(a) At the end of year the following information was obtained from the accounting records of ADNAN LTD.
Sales (all on account) 400,000
Cost of Goods Sold 240,000
Average inventory 60,000
Average Accounts Receivable 40,000
Interest Expenses 3,000
Income Taxes 4,000
Net Income for the year 18,000
Average investment in assets 250,000
Average Stock holders Equity 200,000
On the basis of above information compute the following for the year.
(1) Inventory turnover (2) Accounts receivable turnover
(3) Total operating expenses (4) Gross profit percentage
(5) Return on average stockholder’s equity.
(6) Return on average assets.
4.(b) Compute trend percentages for the following items taken from financial statements of MODERN FIXTURES over a five year period. Treat 1998 as the base year. State whether the trends are favorable or unfavorable.
|Cost of G.S.||58,500||46,600||40,500||36,000||30,000|
5. Cash & Fund flow Analysis:
The accounting record of KASHIF LTD. Showed the following balances at the end of year 2001 and 2002.
|Allowance for Bed Debts||8,000||10,000|
|Share Capital (Paid up)||290,000||240,000|
(i) Fully depreciated equipment that cost s.101000 was discarded and the related accounts closed.
(ii) Cash dividends of Rs.40,000 were declared and paid.
(a) Compute the amount of Cash generated by the operational activities of the company.
(b) Prepare Cash flow statement for the year ended December 311 2002
(c) Assuming net purchases for the year 2002 to be Rs.175,000 compute the amount of cash payments to supplier.
6.(a) Accounting For Vat:
NOT INCLUDED IN THE NEW COURSE
Ideal Sales Company sells goods on installment basis. Its balances on Dec.31, 2001 were:
Installment Accounts Receivable Rs.14,000
Unrealized Gross Profit Rs. 4,000
Summary of the transactions for the year 2002 is as follows:
(a) Installment Sales Rs. 49,000.
(b) Collection of installment of current year Rs.12,000.
(c) Collection of installment of 2001 Rs.5,600.
(d) Cancellation of Installment contract 2001 Rs.2,100.
(e) Repossessed goods valued at Rs.1,350.
In both the years the goods have been sold at 40% above cost.
(i) Entries to record the transactions for 2002
(ii) Adjusting and closing entries for 2002
(iii) Show how the relevant accounts will be reported in Balance sheet on Dec.31, 2002.
7. Branch Accounting:
The NISHAT CORPORATION ofKarachisends merchandise to its branch atLahoreat 140% of cost. The Income Statement data of the branch is as follows:
Merchandise inventory (Jan. 1.2002) Rs.16,800
Shipment from Head Office Rs.196,000
Merchandise Returned to Head office Rs.11,200 Sales (Including cash sales of Rs.100,000 remitted to Head office) Rs.230000
Salaries Expenses (Paid by Head Office) Rs.18,000
Rent Expenses Rs.2,000
Merchandise inventory Dec.31 .2002 Rs.22,400
(i) Branch income statement for the year ended Dec.31 02
(ii) Give all the reciprocal entries in the Head Office books including adjusting entry to record Profit from allowance for over valuation for 2002 and also pass necessary closing entry
(a) Distinguish between Sales and Consignment.
(b) NOT INCLUDED IN THE NEW COURSE
9. Accounting for Incomplete Records:
NOT INCLUDED IN THE NEW COURSE