ADVANCED ACCOUNTING 2004 (Regular)

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ADVANCED ACCOUNTING 2004 (Regular)

 

Time : 3 Hours                Max. Marks:100

 

Instructions: Attempt any FIVE questions.

 

1. Financial Statements:

Prooj Ltd. was registered with an authorized capital if Rs.35,00,000 divided into Rs.10 shares. The Company’s Books showed the following balances as on 30th June, 2004.

 

Debit Balance: (in Rs.)

Plant Assets: 37,50,000, Cash: 1,00,000, Accounts receivables: 1,62,500, Merchandise Inventory (1st July, 2003) 62,500, Sales Return 7,000, Purchases: 12,45,000, Transportation in: 20,000, Salaries Expenses: 1,45,000, Prepaid Advertising; 20,000, Director’s fee: 2,15,000 (Total Rs.57,27,000)

 

Credit Balance: (in Rs)

Sales Revenue: 18,75000, Commission Income: 20,000, Accumulated Depreciation: Rs. 3,50,000, Retained Earnings: 3,67,500, Paid up Capital: 25,00,000: 10% Debentures Payable: 5,00,000, Accounts Payable: 1,12,500, Purchases Return: 2,000 (Total Rs.57,27,000)

 

Data for Adjustment on 30th June, 2004:

(i) Merchandise Inventory valued Rs. 45,000

(ii) Advertising expired Rs.1 5.000.

(iii) Director’s Fee Commission payable Rs.30,000.

(iv) Prepaid Salaries Rs.25,000.

(v) Provide Depreciation on plant Assets at 5%

(vi) Commission earned but not received Rs.5,000.

(vii) The Board of Directors resolved:

(a) To declare cash dividend 5% on paid up Capital

(b) To appropriate for plant Expansion Rs.62,500, and for Contingency Rs.50.000.

 

REQUIRED:

(i) Income Statement

(ii) Statement of Retained Earnings.

(iii) Balance Sheet in Classified form.

 

2. Financial Statements Analysis:

Following are the selected data taken from Books of NISA Ltd. at the end of year 2003.

 

Cost of Goods Sold —— Rs. 5,40,000

Accounts Payable  ——  2,00,000

Merchandise Inventory (Opening) —— 1,20,000

Bills Payable  —— 50,000

Accounts Receivable (Opening) —— 3,80,000

Marketable Securities  —— 1,42,000

Cash  —— 1,08,000

Accounts Receivable (Ending) —— 3,50,000

Merchandise Inventory (Ending) —— 1,50,000

Credit Sales (Net) —— 18,25,000

Total Operating Expenses ——  6,00,000

 

REQUIRED:

On the basis of above information, find out:

(i) Working Capital (ii) Inventory Turnover

(iii) Current Ratio (iv) Accounts Receivable Turnover.

(v) Acid Test Ratio (vi) Gross Profit Percentage.

(vii) Net Profit percentage (viii) Operating Expenses Rate.

 

Note: Computation without use of relevant formula will not be accepted.

3. Fund Flow Analysis:

The Comparative Balance Sheet of AAMNA Ltd. for the two years are produced below:

 

Debit balance (In Rs) Dec.31. 03 Dec,31, 02
Cash 87,500 1,05,000
Merchandise Inventory 1,62,500 1,75,000
Prepaid Rent 40,000 45,000
Accounts Receivable 1,75,000 1,60,000
Plant Assets 4,40,000 4,15,000
Total Rs. 9,05,000 9,00,000
Credit balance (In Rs) Dec.31, 03 Dec,31, 02
Ordinary Share Capital 6,05,000 5,70,000
Accounts Payable 90,000 1,00,000
Salaries Payable 15,000 15,000
Unearned Rent 15,000 10,000
Debentures Payable 60,000 1,00,000
Retained Earning 1,20,000 1,05,000
Total Rs. 9,05,000 9,00,000

 

Additional Data:

(1) Net Income for the year 2003, Rs.90,000.

(2) Cash Dividend declared Rs. 75,000.

 

REQUIRED:

(a) Working Capital for both the year.

(b) Statement Showing Changes in Working Capital.

(c) Statement of Sources and application of fund.

 

4. Accounting for Branch:

Bilal Corporation atKarachinewly established its Branch at Sukkur. The Head Office supplies goods to the Branch at 125% of Cost. Summarized data of the Branch’s transactions for the year 2003, are as under:

 

1.Goods received from Head Office at billed Price Rs.4,80,000

2. Local Purchases on account Rs.1,20,000.

3. Credit Sales to Customers Rs.300000 and Sales for Cash Rs.1,84,000

4. Cash collected from Customers Rs.2,50,000.

5. Paid to suppliers Rs.70,000.

6. Returned goods to Head Office Rs.6,000.

7. Remitted Cash to Head Office Rs.1 ,80,000.

8. Branch Expenses paid by the Branch Rs.16 800 arid by Head Office Rs.800.

 

Data for Adjustment on 31-12-2003

(1) Accrued operating Expenses Rs.600.

(2) Ending Inventory of Merchandise: Rs.16,000 consisted of local purchases and Rs.15,000 consisted of shipments from Head Office.

 

REQUIRED:

(a) Prepare Journal Entries (including Adjusting and Closing) in the Branch.

(b) Journal Entries in the Head Office Books to incorporate Branch Profit or Loss and adjustment of Over Valuation.

(c) Show Computation of over-valuation adjustment.

 

5. Company Accounting- Absorption:

Following is the Balance Sheet of Maheen Ltd. As on June 30, 2004.

 

Assets   Liabilities & Equities
Cash 2,00,000 Share Capital 350,000 shares of Rs. 10 each 3500,000
Accounts Receivable 3,00,000 5% Debentures 500,000
Merchandise inv. 3,50,000 Accounts Payable 318,000
Plant Machinery 1850,000 Accumulated Dep.
Building 1550,000 Machinery 1,90,000
Furniture 72,500 Building 160,000
Furniture 72,500
Retained Earning 2,34,500
Total Rs. 4975,000 Total Rs. 4975,000

 

On that data the Company was absorbed by Afzal Ltd. on these terms:

 

1. All Assets (except Cash) and Accounts payable were taken over at Book Value.

2. Debentures were to be redeemed by Maheen Ltd.

3. The purchase consideration was satisfied by allotment of four Shares of Rs.1O each in Afzal Ltd. (At Market value Rs.12.50) for every five shares in Maheen Ltd. and the balance paid in cash.

4. Maheen Ltd. paid off the Debentures with redemption premium @ Rs.10. Also paid Rs.15000 for Liquidation Exp.

 

REQUIRED:

(a) Compute the amount of Purchase consideration.

(b) Entries in the General Journal of Maheen Ltd. for Absorption.

 

6. — Accounting for Installment Sales:

Alam Co. follows the perpetual inventory system and closes its books twice in a year at June 30, and Dec. 31.

 

Balance at January 1, 2003

Installment A/Receivable — 2002 Rs. 175,000

Deferred Gross Profit — 2002 Rs. 75,000

 

At June 30, 2003

Installment sales made at 40% gross profit during the 6 months period Rs. 450,000

An Installment A/Receivable — 2002 cancelled 5,000

Repossessed merchandise was assigned a value of 2,500

Installment A/Receivable 2002  —    45,000

Installment A/Receivable 2003  — 175,000

 

REQUIRED:

(1) Compute Gross Profit Rate of the Installment sales originated in 2002.

(2) Show collection of installment A/Receivable of 2002 and 2003, at June 30, 2003.

(3) Give all necessary entries under installment method for recording transactions concerning installment sales including an adjusting entry for recording realized gross profit.

(4) Record repossession recognizing loss or gain.

 

7. Consignment Accounts:

NOT INCLUDED IN THE NEW COURSE

 

8. Accounting for Incomplete Records:

NOT INCLUDED IN THE NEW COURSE

 

9. Write note on any Three of the following:

(1) Joint Venture

(2) Hire-sale/ Purchase.

(3) Value Added Tax

(4) Reconstruction of a Company

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