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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH CMA JUNE, 2018 EXAMINATION
PROFESSIONAL LEVEL-II
SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I Model Solution
Solution of Question No. 1(d) (i) No entry necessary.
(ii)
Depreciation Expense 19,375.00
Accumulated Depreciation-Equipment 19,375.00
Original cost 510,000
Accumulated Depreciation [(510,000-10,000) /10] x 7 (350,000)
Book Value(1/1/2005) 160,000
Estimated salvage value (5,000)
Remaining depreciable basis 155,000
Remaining useful life (15 years-7 years) 8
Depreciation expenses-2005 19,375
(iii)
Equipment 5,10,000
Less: Accumulated Depreciation 3,69,375
1,40,625 Solution of Question No. 2(b)
Consignment account in the Books of Hannan
Dr. Cr.
Expenses Taka Taka Income Taka Taka
Goods sent to Consignment A/C 500 x 1,000 500,000 Mannan's A/C (Sales) 300 X 2,000 600,000
Cash A/C:
Freight 150,000 Goods lost in Transit 142,000
Loading 50,000 Consignment Stock 66,500
Insurance 10,000 210,000
Mannan (consignee) A/C:
Unloading 24,000
Carrying 16,000
Rent 20,000 60,000
Mannan's Commission A/C: 30,000
Profit on consignment transferred to Profit and Loss A/C
8,500
818,000 818,000
Page 2 of 5 Workings:
(1) Valuation of goods lost in Transit: Taka
Value of Consignments 500 X 1,000 500,000 Add: Expenses incurred by Consignor
(1,50,000+50,000+10,000) 210,000 710,000 Less: Amount of loss in transit of 100 units
(7,10,000/500 x 100) 142,000
568,000 Add: Expenses paid by Consignee after Loss
(24,000+16,000) 40,000
Value of 400 units 608,000
(2) Cost of Consignment Stock:
(6,08,000/400 X 50) 66,500
Market value(50 x 1400) 70,000
(-) (70,000x5%) 3,500
66,500
Which even is lower as per IAS-2, i.e. value of consignment stock will be = Tk. 66,500 Solution of Question No. 3(b).
Western Bank Limited Profit and Loss Account For the year ended 31 December 2017
Particulars Taka Taka
Income from Interest:
Interest and Discount (31,000,000 +1,000,000 - 860,000)
31,140,000Less: Interest paid on Deposits, Borrowings etc
13,000,000 Net Interest Income
18,140,000
Income from Other sources:
Rent Received
120,000Net profit on sale of Investments
1,000Commission, Exchange and Brokerage
1,800,000Miscellaneous Receipts
85,0002,006,000
Total Operating Income 20,146,000
Salaries, Allowances and Provident Fund
12,500,000Law charges
20,000Rent & Taxes
300,000Postage and Telegrams
110,000Auditors’ Fees
50,000Directors’ Fees
25,000Printing and Stationery
220,000Depreciation on Property
190,000Repairs to Property
40,000Telephone and Stamps
150,000Page 3 of 5
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35,000Bad Debts
50,000Insurance and Lighting
200,000Miscellaneous Expenditure
260000Total Operating Expenses 14,150,000
Profit before provisions 5,996,000
New provision for Bad & doubtful debts 750,000
Old provision for Bad & doubtful debts 600,000
150,000
Profit before Taxation 5,846,000
Provision for taxation {3,500,000 -(3,000,000 - 2,500,000)} 3,000,000
Net Profit after Taxation 2,846,000
Solution of Question No. 4 (c)
Req # (i) BAPA COMPANY Ltd.
Computation of gross profit realized under Cost Recovery Method Year Cash realized (Tk.) Original cost
recognized (Tk.)
Balance of recorded cost
(Tk.)
Gross profit realized (Tk.)
2014 - 300,000 - -
2015 200,000 (200,000) 100,000 -
2016 120,000 (100,000) - 20,000
2017 80,000 - - 80,000
Total 100,000 Taka
Req # (ii) 2015 gross profit realized (25% of Tk.200,000) 50,000 2016 gross profit realized (25% of Tk.120,000) 30,000 2017 gross profit realized (25% of Tk.80,000) 20,000 Total gross profit realized in three years 100,000 Req #(iii)
Necessary Journal Entries
Date Description L.F. Debit
Taka
Credit Taka
2015
(a) Notes Receivable 400,000
Real Estate Sales 400,000
(b) Real Estate Sales 400,000
Cost of Real Estate 300,000
Deferred Gross Profit on Real Estate
Sales 100,000
(c ) Cash 200,000
Notes Receivable 200,000
(d) Deferred Gross Profit on Real Estate Sales 50,000
Realized Gross Profit on Real Estate
Sales 50,000
N.B. Entry (d) not to pass under cost recovery method in the year 2015.
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Solution to question # 5 (i) December 31, 2004
Leased Equipment under Capital Leases 129,195
Lease Liability
129,195(To record leased asset and related obligations at the present value of 5 future annual payments of
$32,000Discounted at 12%, $32,000 * 4.03735)
December 31, 2004
Leased Liability 32,000
Cash 32,000
(To Record the first rental payment) (ii) December 31, 2005
Depreciation Expense 18,456
Accumulated Depreciation-Capital Lease 18,456
(To record depreciation of the leased asset based upon a cost to Brennan of $129,195 and a life of 7 years)
Discounted at 12%, $32,000 * 4.03735)
December 31, 2005
Interest Expense 11,663
Lease Liability 20,337
Cash 32,000
{To Record annual payment on lease obligation of which $11,663 represents interest at 12% on the unpaid principal of $97,195)
Brennan Steel Company (Lessee) Lease Amortization Schedue
(Annuity Due Basis)
Date Annual Lease Payment Interest (12%) Reduction of Lease Liability Lease Liability
12/31/04 --- --- --- $129,195
12/31/04 $32,000 $ 0 $32,000 97,195
12/31/05 32,000 11,663 20,337 76,858
12/31/06 32,000 9,223 22,777 54,081
12/31/07 32,000 6,490 25,510 28,571
12/31/08 32,000 3,429 28,571
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(iii) December 31, 2006
Interest Expense 9,223
Lease Liability 22,777
Cash 32,000
(To record annual payment on lease obligation of which $9.223 represents interest at 12% on the unpaid principal of $76,858)
December 31, 2006
Depreciation Expense 18,456
Accumulated Depreciation- Capital Leases 18,456
((To record depreciation of the leased asset based upon a cost to Brennan of $129,195 and a life of 7 years)
(iv)
