B.com Part 2 – ADVANCED AND COST ACCOUNTING 2007 (Regular)

by • 01/09/2012 • GeneralComments (0)312



Time : 3 Hours                Max. Marks:100


Instructions: Attempt FIVE questions, THREE from Section-I and TWO from Section-II.

SECTION “A” (Advanced Accounting) 60 Marks


1(a). Followings are some of the transactions completed by Asif Corporation Ltd. The corporation has an authorized capital of Rs.50,00,000 divided into 5,00,000 shares of Rs.10 each.

Acquired office Equipment Costing Rs.5,00,000 and in payment issued sufficient number of shares of Rs.10 each fully paid up to the vendor. The market price of the share is Ra. 12.50 each.

Issued 2,000; 6% Debentures of Rs.100 each at Rs.103, redeemable at Rs.105 each.

The company issued 40,000 shares to capitalize profit of Rs.500,000.

Building extension reserve was increased by Rs,3,00,000.

Restriction imposed on Retained Earnings in the form of ‘Contingencies’ was removed Rs.600,000.


Give entries in the General Journal to record the above transactions.



Decent Company Limited

Income Statement

For the year ended June 30, 2007.

Net sales

Rs ______?

Cost of good sold

Rs ______?

Gross profit (30% of net sale)

Rs ______?

Operating expenses

Rs ______?

Operating Income (10% of net sale)

Rs ______?

Interest expense


Income before income tax

Rs ______?

Income tax – 25% of income before income tax


Net income





Complete the Income Statement using only the information available.



3. Two companies A and B carrying on similar business decided to amalgamate and a new company called AB Company Ltd. Being formed to take over the assets and liabilities of each. The followings are the respective Balance Sheets, showing the values of assets as agreed in the contract and it is provided that fully paid up Rs.100 shares will be issued by the new company to the value of net assets of each of the old companies:




A Co. Ltd


B. Co. Ltd

Cash 16,500 52,500
Accounts Receivable ———– 52,500
Merchandise Inventory 1,12,500 67,500
Retained Earning 30,000 ———–
Building 1,42,500 1,12,500
Machinery 1,35,000 1,50,000
Total Assets 436,500 4,35,000
Liabilities & Capital A. Co. Ltd B. Co. Ltd
Accounts Payable 61,500 45,000
Share Capital 3,75,000 3,00,000
Reserve Fund ———– 75,000
Retained Earnings ———– 15,000
Total Liabilities and Capital Rs.436,500 Rs.435,000



(i) Compute purchase consideration for each liquidatingCo.

(ii) State what shares the liquidator of each company will receive in the new company.

(iii) Give entries in the books of new company.



  1. The comparative financial data of Brothers Limited for the last two years are:






Cash 20,000 20,000
Accounts Receivable 50,000 1,60,000
Merchandise Inventory 1,00,000 75,000
Land and Buildings 80,000 1,20,000
Plant and Machinery 5,00,000 8,00,000
Total Assets 7,50,000 1,175,000

Liabilities and Capital



Accounts Payable 53,000 1,90,000
Bills Payable 40,000 50,000
Outstanding expenses 7,000 5,000
Share capital 5,00,000 7,00,000
Retained Earning 1,00,000 1,60,000
General Reserves 50,000 70,000
Total Liabilities and Capital 7,50,000 1,175,000


Additional Information:

(i) 10% depreciation has been charged on Plant and machinery during the year 2006.

(ii) A piece of machinery was sold for Rs.8000 during the year 2006. It has cost Rs.12,000; depreciation of Rs.7,000 had been provided on it.



Prepare a schedule of changes in working capital and a statement showing the sources and application of fund for the year 2006.


4. The X,Y Company Ltd. Completed the following transactions during the year.


i) Sold on account inventory costing Rs.72,000 for Rs.65,000.

ii) Issued additional shares of capital for Rs.500,000 cash.

iii) Sold temporary investment costing Rs.80,000 for Rs.100,000.

iv) Acquired temporary investment for Rs.200,000 cash.

v) Wrote off uncollectible accounts Rs.18,000.

vi) Declared a cash dividend accounts Rs.2,50,000

vii) Sold on account inventory costing Rs.75,000 for Rs.90,000

ix) Paid accounts payable Rs.1,50,000.

x) Borrowed cash from a bank by issuing a long-term note Rs.300,000



Indicate the effect (increase, decrease and no effect) of each independent transaction listed above on the current ratio, quick ratio, working capital and net cash flow from operating activities. Use the following four-column format.


Current Ratio

Working Capital

Quick Ratio

Net cash flow from operating activities



5.(a) Irfan and Company sells refrigerators at 20% above cost and keeps accounts for sales by the installment method. In 2007, repossessions were made on unpaid installment contract balances of Rs.60,000, repossessed units had a total resale value of Rs.54,000. The company records such repossessions at a value that will permit the normal magin on sales.



Give the entry to summarize the repossession for 2007.


(b) The Head Office of Zubair and Company carries all branch Plant Assets in its own ledger. Give entries that would appear in the books of head office and the branch as a result of the following transactions:

(i) The Head Office purchases Branch equipment for cash Rs.80,000.

(ii) The Branch pays Rs.6000 for installation of the equipment.

(iii) The Branch pays Rs.4000 for insurance of the equipment

(iv) The Head Office records depreciation on equipment Rs.4000



SECTION “B” (Cost Accounting) 40 MARKS


6(a) The following information is taken from the Financial statements of M/S. Adnan & Brothers Ltd. at the end of the year 06.

Goods in process inventory Rs.6,00,000

Cost of raw materials used Rs.31,20,000

Cost of goods manufactured Rs.74,44,000

Factory overhead, 75% of direct labor… Rs.18,00,000



Compute the cost of goods in process inventory at January 1, 2006.


(b) From the following information compute the Net Cost of raw materials purchased during the year:

Factory overhead is 30% of cost of goods manufactured. Direct labor is 20% of sales and 40% of cost of goods manufactured. Ending raw materials inventory is Rs.40,000 more than beginning raw materials inventory. Sales totaled Rs.10,00,000 for the year.


7. Given below are the production data for Department No.1 for the first month of operation:

Inputs to Department:

Material 1,000 units Rs. 1,00,00

Direct labor Rs.1,90,000

Factory overhead Rs,1,42,500

During the first month 800 units were completed and the remaining 200 units were 100% completed as to material and 75% completed as to conversion cost.



Compute the following

(i) Unit cost of material used.

(ii) Equivalent units of production for direct labor and factory

(iii) Unit cost of factory overhead.

(iv) Total cost of 800 units completed.

(v) Total cost of 200 units in process at the end of the month.



8.(a) The standard for materials in manufacturing item Y is one pound at Rs.40. During the current month 5.000 units of item Y re produced and 5100 pounds of materials costing Rs.2,14,200 were used. Analyze the variance between actual cost and standard in such a way as to show how much of it was attributable to price change arid how much the excess quantity of materials used. Indicated whether the variances are favorable or unfavorable.


(b) The standard cost and variances for direct materials, direct labor and factory overhead for the month of Nov. are given below:



Standard Cost Unfavourable Favourable
Direct materials 60,000
Price variance 3000
Quantity variance 1,800
Direct Labor 1,20,000
Rate variance 1,200
Usage variance 1,500
Factory overhead 1,80,000
Controllable variance 2,400
Volume variance 3,600



Determine the actual cost increased during the month of Nov for direct material, direct labor and factory overhead.

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