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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH CMA DECEMBER, 2017 EXAMINATION
FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING
Time: Three hours Full Marks: 100
All questions are to be attempted.
Show computations, where necessary.
Answer must be brief, relevant, neat and clean.
Start answering each question from a fresh sheet.
Q. No.1.
The trial balance of PQR Company contained the following accounts at December 31, the end of the company’s fiscal year.
PQR Company Trial Balance December 31, 2015
(Figures in Taka) Debit Credit Cash
Accounts Receivable Merchandise Inventory Land
Building
Accumulated Depreciation – Building Equipment
Accumulated Depreciation – Equipment Notes Payable
Accounts Payable Capital
Sales Discount Sales
Cost of Goods Sold Salaries Expenses Utilities Expenses Repair Expenses Gas and Oil Expenses Insurance Expenses Totals
25,400 37,600 90,000 92,000 1,97,000 83,500
6,100
7,09,900 69,800 19,400 5,900 7,200 3,500 1,347,300
54,000
42,400 50,000 39,000 2,57,800 9,04,100
1,347,300 Adjustment Data:
(i) Depreciation is Tk. 10,000 on Building and Tk. 9,000 on Equipment (Both are administrative expenses).
(ii) Interest of Tk. 5,000 is due and unpaid on notes payable at December 31.
(iii) Merchandise inventory actually on hand is Tk. 88,900.
Other Data:
(i) Salaries are 80% selling and 20% administrative.
(ii) Utilities expenses, repair expenses, and insurance expenses are 100% administrative.
(iii) Tk. 10,000 of the notes payable is payable to next year.
(iv) Gas and oil expenses are selling expenses.
Required:
Prepare a multiple-step income statement and a classified balance sheet for the period concerned.
[Marks: (10+10) = 20]
Page 2 of 3 CMA DECEMBER, 2017 EXAMINATION
FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING Q. No. 2
(a) PQR Ltd. uses perpetual Inventory system and follows FIFO method to determine the cost of ending inventory. Why?
(b) PQR Ltd. made the following transactions.
March 01 : Sold goods for Tk. 20,000 to AB Co. Ltd on terms 2/12, n30;
11 : Received the payment from AB Co. Ltd of March 01.
12 : Accepted M CO’s Tk. 20,000, 6 months 12% note.
13 : Made sales through credit card for Tk. 13,200.
15 : Made sales through American Express card for Tk. 6,700; 5% service charge is applicable.
30 : Received full payment of American Express Card sales of March 15.
April 11 : Sold Accounts Receivable of Tk. 8000 to X factory; 2% service charge is applicable.
13 : Record collections of Tk. 8,200 of credit card sales of March 13.
May 10 : Write of an uncollectable of Tk. 16,000 of Accounts Receivable.
June 30 : One of the Accounts Receivable written off in May 10 paid Tk. 4,000.
Required: Record the above transactions in the books of the PQR Ltd.
(c) Explain the rule of ‘Lower of cost or Market (LCM)’ in line with IAS-2. Give an example.
[Marks: (5+10+5) = 20]
Q. No. 3
(a) Which of the following qualities of an asset are characteristic of plant assets?
(i) Capable of repeated use in operations of the business.
(ii) Tangible.
(iii) Held for sale in normal course of business.
(iv) Long lived.
(v) Intangible.
(b) Why the accelerated depreciation method is frequently used for income tax purpose?
(c) ABC Company Ltd. acquired and put into use a machine on January 1, 2015, at a total cost of Tk. 45,000.00. The machine was estimated to have a useful life of 10 years and a salvage value of Tk. 5,000.00. It was also estimated that the machine would produce one million units of product during its life. The machine produced 90,000 units in 2015 and 125,000 units in 2016.
Required:
Compute the amounts of Depreciation to be recorded in 2015 and 2016 under each of the following method:
(i) Straight -line method.
(ii) Units-of-production method.
(iii) Sum-of-the-years-digits method.
(iv) Double-declining balance method.
(v) Assume 30,000 units were produced in the 1st quarter of 2015, Compute depreciation for this quarter under each of the four methods.
[Marks: 3+2+(2+2+3+3+5) = 20]
Page 3 of 3 CMA DECEMBER, 2017 EXAMINATION
FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING Q. No. 4
(a) A Tk. 15,000, 90-day, 12% note dated June 15, 2014, was received by ABC Company from the XYZ Company in payment of its account.
Required:
Prepare the Journals entries in the book of ABC Company in following cases:
(i) The ABC Company received the note on June 15, 2014
(ii) The ABC Company discounted the note on July 15, 2014 at 10% at the National Bank.
(iii) The XYZ Company paid the note at maturity
(iv) Assume that the XYZ Company did not pay the note at maturity. The National Bank charged the note to the ABC Company. The ABC Company decided that the note was uncollectible.
(b) Selected data on merchandise inventory purchase and sales for ABC Trading Company are presented below:
Cost (Tk.) Retail (Tk.) Merchandise inventory , March 1, 415,000 595,000 Transactions during the month-
Purchases 125,000 215,000 Purchases discount 1,200
Transportation-in 3,900
Sales during the month - 575,500 Sales return and allowances - 3,500 Required:
Determine the estimated cost of merchandise inventory of ABC Trading Company on March 31, by retail method, presenting details of the computations.
[Marks: 10+10 = 20]
Q. No. 5
(a) Explain measurement principle as per revised FASB Framework.
(b) The Cash at Bank account in the ledger of ABC Company Ltd. at 31st December 2016 indicated a balance of Tk. 486,006.00. The Bank Statement indicated a balance of Tk. 640,748.00 on the same date. A comparison of the bank statement and the Cash book disclosed the following reconciling items:
(1) Cheques issued but not presented Tk. 202,687.00
(2) A deposit of Tk. 89,017.00 on 31st December did not appear on the Bank Statement of December.
(3) A cheque of Tk. 20,000.00 drawn by ABC Traders Ltd. had been wrongly charged by the Bank to the Account of ABC Company Ltd.
(4) The Bank had collected for ABC Company Ltd. Tk. 51,000.00 on account of notes Receivable sent for collection. The face value of the note was Tk. 50,000.00.
(5) Bank service charges for December 2016 amounted to Tk. 675.00 debited on the statement.
(6) Interest credited by the Bank for Tk. 10,000.00.
(7) A customer’s cheque for Tk. 900.00 had been entered as Tk. 90.00 by the depositor.
(8) A cheque issued for Tk. 392.00 had been entered in the cash book as Tk. 329.00.
Required:
(i) A bank reconciliation statement using the form where both cash book and bank statement balances are brought to corrected balance.
(ii) Journal entries to rectify the cash book balance.
[Marks: 5+(10+5) = 20]
= THE END =
