ADVANCED AND COST ACCOUNTING 2008 (Private)
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. ACCOUNTING FOR COMPANIES, FINANCIAL. STATEMENTS
Star Co. Ltd. Was regIstered with Capital of Rs.8,00,000 divided into shares of Rs.10 each. The following are the account balances of the company as on June 30, 207:
Cash Rs,11000, All for B/D Rs.1,000, Marketable Securities Rs.6,000, Accounts Receivable Rs.22,000, Merchandise Inventory Rs.10,000, Machine cost Rs.55,000, Purchases Rs.3,25,000, Sales returns & Allowances Rs.3,000. Office Salaries Expense Rs.13,000, Sales Salaries Expense Rs. 15,000, Advertising Expense Rs.8000, Office Rent Expense Rs.24,000, Auditors Fees Rs.5,000, Directors
Fee Rs.14,000, Discount Shares Rs.10,000.
Accounts payable Rs.6,000, Debentures Payable Rs.5,000, shares Capital Rs.1,10,000, Sales Rs,4,00,000, Retained Earnings?
DATA FOR ADJUSTMENT ON JUNE 30, 2007:
1) Merchandise Inventory valued at Rs.58,000
2) Estimated Allowances for Bad Debts Rs.1,300
3) Depreciation Expense for the year Rs.9,000
4) Prepaid Rent Rs. 4000
5) Declared cash Dividend Rs.4,000 & Stock dividend Rs.1,000
(i) An Income Statement for the year ended Juno 30, 2007
(ii) Statement of retained Earnings
(iii) A Balance Sheet as of June 30, 2007 in a classified form
Hafeez Co. Ltd. and Rasheed Co. Ltd. decided to amalgamate their business and a new company Hameed Co. Ltd. was formed to take over all assets and liabilities of the two Companies. Hameed Co. Ltd. Issued 1,00,000 shares of Rs.10 each at Rs.26 to Hafeez Co. Ltd. And 98,000 shares of Rs.10 each at Rs.26 to Rasheed Co. Ltd. At the time of amalgamation following were the Balance Sheets of the two companies.
HAFEEZ CO. LTD.,
Balance Sheet as on Dec. 31, 2007
|Cash 1,10,000||Account Payable 2,80,000|
|Account Receivable 4,00,000||Share Capital:|
|Merchandise Inventory 6,00,000||190,000 shares of Rs.10 19,00,000|
|Building 13,00,000||General Reserves 3,00,000|
|Total 24,80,000||Total 24,80,000|
RASHEED CO. LTD.,
Balance Sheet as on Dec. 31, 2007
|Cash 200,000||Account Payable 2,00,000|
|Account Receivable 3,50,000||Share Capital:|
|Merchandise Inventory 6,00,000||185,000 shares of Rs.10 18,50,,000|
|Building 9,00,000||General Reserves 1,00,000|
|Total 21,50,000||Total 21,50,000|
(i) Compute purchase consideration for each of the amalgamating company.
(ii) Give all necessary entries in the general journal of Hameed Co. Ltd.
(iii) Prepare a Balance sheet for Hameed Co. Ltd. after amalgamation.
3. ACCOUNTING FOR INSTALLMENT SALES:
Rehan Co. Ltd. reports profits on installment basis. It uses perpetual inventory system, for recording merchandise. The transaction for the year ended Dec 31, 2007 are as under:
(i) Purchased merchandise on account for Rs.3,60,000
(ii) Sales on installment basis Rs.4,501000
(iii) Cost of installment sales Rs.2,50,000
(iv) Collection of installment Account Receivable Rs.3,00,000
(v) Payment of Accounts Payable Rs.1 ,55,000
(vi) Repossession of goods sold on installment basis:
Installment Account cancelled Rs.22,000
Repossession of goods valued Rs.1 1,000
(vii) Expenses incurred but not paid Rs.8,000
Give entries in general journal to record the above transactions including adjusting and closing entries.
4. HEAD OFFICE AND BRANCH ACCOUNTING:
Following are the transactions entered into by Zafar Co. Ltd. with its branch atHyderabadduring the year ended June 30, 2007. The head Office billed merchandise to Branch at 25% above cost:
(i) Shipped to the branch merchandise billed at Rs.701000
(ii) The branch returned merchandise at billed price of Rs.1,500
(iii) At June 30, the branch inventory was valued at billed price o Rs.3,000
(iv) The branch reported a loss of Rs.4500 for the year.
(i) Give journal entries on the books of Head Office to record above transactions
(ii) Calculate and record the profit it from Allowance for overvaluation.
5. FINANCIAL STATEMENT ANALYSIS:
The selected data given below are taken from the record of the Hasan Co. Ltd. at the end of the year 2007:
|Cash 30,000||Account Receivable Beginning 4,150|
|Prepaid insurance 12,500||Account Receivable Ending 43,500|
|Inventory (Beginning) 18,150||Sales 2,55,000|
|Invcentory (Ending) 32,500||Operating Expenses 52,300|
|Purchases 120,000||Account Payable 22,500|
|Share Capital (per value Rs.10) 2,50,000||Accrued Expenses 32,500|
|Retained Earning 30,000|
Determine following ratios on the basis of above information:
(i) Working Capital (ii) Acid Test Ratio
(iii) Current Ratio (iv) Operating Expense Ratio
(v) Rates of Gross Profit on Sales (vi) Equity Ratio
(vii) Account receivable Turnover Rate
(viii) Inventory Turnover Rate
SECTION “B” (Cost Accounting) 40 MARKS
6. ACCOUNTING FOR MANUFACTURING CONCERNS:
Moon Co. has provided following for the year ended December31, 2007:
Advertising Expense 65,000
Direct Labour cost incurred 1,48,000
Direct Material Purchased 2,25,000
Building rent: 60% allocated to manufacturing and 30% to administrative & selling functions
Utilities — factory 50,000
Maintenance — factory 32,0000
Selling and administrative salaries 95,000
FOH applied at the rate of 90% of direct labour
Jan 1,2007 ———- Dec 31. 2007
1. Material Rs.21,000 ———- Rs.10,000
2. Work in process Rs.28,000 ———- Rs.42000
3. Finished Goods Rs.42,000 ———- RS. 45,000
(i) Prepare a statement Cost of goods Manufactured for the year ended Dec 31, 2007.
(ii) Prepare an income statement.
7. JOB ORDER COSTING
Skyline Co. uses Job order cost System. The manufacturing operating for the year ended December 31, 2007 were as follows:
(i) Purchases raw material on account Rs.72,000.
(ii) Materials issued to factory of Rs.64,500 of which Rs.4,500 was indirect materials.
(iii) Direct labour cost incurred Rs.58,000 and Rs.4,800 indirect labour.
(iv) Factory overhead application rate was 80% on Direct Labour.
(v) Factory overhead cost incurred on account Rs.35,000.
(vi) Cost of job completed Rs.1,50,000.
(vii) Cost of jobs Rs.1,30,000.
(viii) Sales on account Rs.1,70,000
Record all the above transactions in the general journal and give an entry to close the factory overhead account.
8. STANDARD COSTING:
Irfan Co. provided following standard and actual cost data for the month of June, 2007.
Materials 500 Kgs @ Rs.1.50
Labour 500 Hours @ Rs.3.50
Factory overhead Rs.2.70 per labour hour
Materials 490 Kgs @ Rs.1.80
Labour 510 Hours @ Rs.3.60
Factory overheads Rs.1,480
(i) Compute material Price variance, material quantity variance, Labour rate variance, Labour efficiency variance and Overhead variance.
(ii) General Journal entried to close the variance account.