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NED UNIVERSITY OF ENGINEERING AND TECHNOLOGY

Financial Accounting and F. Management (EM-502)


Questions for Assignment
Important Note: Attempt any eight questions in all, all questions carry equal marks, submit
duly completed in hand written form. You can send it personally or through courier on this
address:

M. Sajeeruddin, Director Finance, Directorate of Finance,


NED University of Engineering and Technology
University Road Karachi.
Q-1
(a) What are the functions and Characteristics of Accounting?
(b) What are the two basis for the preparation of Accounting Statement?
(c) What are the silent features of Accounting Equation?
(d) What are the difference between Matching Principle and Revenue Realization
Principle?
Q-2 Alfa Co. a manufacturing firm produces a single product. The following information
has been taken from the company's production , sales and cost records for the just completed
year.
Production in Units29,000
Sales in Units. ?
Ending Finished Goods inventory in units... ?
Sales Rs 1,300,000
Costs:
Advertising in 105,000
Entertainment and Travel ... 40,000
Direct labour 90,000
Indirect labour .85,000
Raw Materials Purchased 480,000
Building Rent(Production uses 80% of the space, rest is
for Admin. and sales offices)Rs40,000
Utilities, factory..108,000
Royalty paid for the use of production Rs 1.50/unit.?
Maintenance, factory 9,000
Rent for special production equipment Rs 87,000 per year
Plus Rs 0.30 per unit produced.?
Selling and administrative salaries.210,000
Other FOH cost.6,800
Other Selling and Admin Expenses 17,000
Beginning of year

End of year

Inventories;
Raw Material
Rs20,000
Rs30,000
WIP
50,000
40,000
Finished Goods
0
?
The finished goods inventory is being carried at average unit production Cost for the year.
Selling price of the product is Rs 50.00 pre units.

Required:
1. Prepare a schedule of Cost of Goods Manufactured.
2. Prepare Income Statement for the year
Q-3
(a) Mr. Jawaid has just reached age of 58. In 12 years he plans to retire. Upon retiring, he
would like to take an extended vacation, which he expects will cost at least Rs
400,000. What lump-sum amount must he invest now to have the needed Rs 400,000
at the end of 12 years if the rate of return is; (i) Eight percent (ii) Twelve percent
(b) Mr. Ahmed would like to send his son to an expensive summer camp at the end of
each five years. The camp costs Rs 100,000 at the end of each year if the rate of is: (i)
Eight percent (ii) Twelve percent
(c) You have just received an inheritance from a relative. You can invest the money and
either receive a Rs 200,000 lump sum amount at the end of 10 years or receive Rs
14,000 at the end of each year for the next 10 years. If your minimum desired rate of
return is 12%, which alternative would you prefer?
(d) G&N Ltd. Is studying a project that would have an eight year life and require a Rs
1,600,000 investment in equipment. At the end of eight years, the project would
terminate and the equipment would have no salvage value. The project would provide
net income each year as follows:
Sales.Rs 3,000,000
Less variable expenses .1,800,000
Contribution margin..1,200,000
Less fixed expenses:
Advertizing, salaries and other fixed
Expenses.Rs 700,000
Depreciation ....200,000
Total fixed expenses.. 900,000
Net Income. 300,000
The company's discount rate is 18%.
Required:
(i)
(ii)
(iii)
(iv)
(v)

Compute the net annual cash inflows from the project.


Compute the project's net present value. Is the project acceptable?
Compute the project's Internal Rate of Return.(IRR)
Compute the project's payback period. If the company requires a maximum
payback of three years, is the project acceptable?
Compute Average Rate of Return. (ARR)

Q-4
Following are the balances of ledger accounts, you are required to prepare Trial Balance for
M/s Aliya Inc. as on june 30,2011
S.No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Account Name
Land
Building
Furniture and Fixture
Equipment
Capital Work in Progress
Cash
Bank
Accounts Receivable
Prepaid Rent
Prepaid Insurance
Prepaid Salaries
Accounts Payable
Accrued Liabilities
Capital
Revenue Reserve
Services Revenue
Salaries expenses
Utilities expenses
Insurance expenses
Rent expense
Depreciation Expense-Building
Depreciation expense-Furniture
Depreciation expense-Equipment

Balance

Q -5
(a) What are the parts of Income Statement? Explain in details.
(b) The records of the High Tec Head Phones Company show the following information for
the three months ended March 31, 2010
Materials purchased Rs1,946,700
Inventories January 1, 2010
Finished goods (100 Head Phones) 43,000
Materials 268,000
Direct labor
2,125,800
Factory overhead (40% variable)... 764,000
Marketing expenses (all fixed). 516,000
General and administrative expenses (all fixed).461,000
Sales (12,400 Head Phones) 6,634,000
Inventories, March 31, 2010
No unfinished work on hand.
Finished goods 9200 Head Phones) @
395 each.
Materials.. 167,000

Rs 1,200,000
860,000
400,000
350,000
400,000
350,000
450,000
277,000
100,000
75,000
90,000
150,000
120,000
1,918,000
102,000
3,000,000
350,000
210,000
25,000
20,000
75,000
33,000
25,000

Required:
(1) An income statement for the period.
(2) The number of units manufactured.
(3) The unit cost of Head Phones manufactured.
(4) The gross profit per unit sold.
(5) The income per unit sold.
(6) The ratio of gross profit to sales.
(7) The income to sales percentage.
Q-6
(a) What are the objectives and causes of Depreciation? Explain separately both of them.
(b) Colligun Water Corp. purchased machinery for Rs 315,000 on May 1, 2009. It is
estimated that it would have a useful life of 10 years, salvage value of Rs 15,000, production
of 240,000 units and working hours of 25,000. During 2010 Colligun Water Corp. Used the
machinery for 2,650 hours, and the machinery produces 25,500 units.
Instructions
From the information given, compute the depreciation charge for 2010 under each of the
following methods. (Round to the nearest Rupee)
(a)
(b)
(c)
(d)
(e)

Straight-line.
Units-of-output.
Working hours.
Sum-of-the-years-digits.
Declining-balance (use 20% as the annual rate.)

Q-7
(a) What are the items of operating cash flows under IAS-7?
(b) Following is the data of Goods Dealers Ltd for two financial years

Additional information
1. Tax provision of Rs. 500,000 was made for 20x7
2. The company paid 20% dividend on ordinary shared fof the year ended Dec. 31 20x6, on
March, 20x7
3. Depreciation charge during 20x7 amounted to Rs. 200,000
4. Equipment with a book value of Rs. 200,000 was sold for Rs. 180,000
5. During the year Rs. 50,000 were incurred on issue of shares. The amount was charged to
deferred costs.
Required
Prepare Cash Flows from Operating Activities under the indirect method
Q-8
(a) Differentiate between Job order Costing and Process Costing.
(b) A shop-floor supervisor of FICASSO, a small factory presented the following cost for
job No. S-87/11 to determine selling price.

Material
Direct Wages 18 hrs. @ Rs. 2.50
(Deptt. X 8 hrs ; Deptt. Y 6 hrs; Deptt. Z 4 hrs.)
Chargeable expenses (Special stores items)
Add: 33 % for expenses
Cost

Per unit
Rs.
70
45
5
_______
120
40
_______
160.00

Analysis of the profit and loss Account of 2009-10 shows the following:
Material used
Rs 150,000
Sales less returns
Rs 250,000
Direct Wages:
Rs
Department X 10,000
Y 12,000
Z 8,000
30,000
Special store items:
Overheads:
Department: X 5,000
Y 9,000
Z 2,000
Gross profit c/d

4,000

16,000
50,000
250,000

250,000

Selling expenses
Net profit

20,000
30,000
50,000

Gross Profit b/d

50,000
50,000

It is also noted that average hourly rates for the 3 departments X, Y and Z are similar:
You are required to:
1) Draw up a Job Cost Sheet.
2) Calculate and enter revised cost using 2009-10 actual figures as basis.
3) And 20 % to total costs to determine selling price
Note: Overheads Rates: No. of working hours has been ascertained by dividing the direct
wages in each department by the labour hour rate.

Q -9
The JS Company began business on 1st April 2010 and produced by the end of month June,
2010 40,000 units of its single product called SU- 211 Nozzle. The product requires three
basic raw materials, A,B and C, which were purchased during the first three months at the
following prices and quantities:
Material
A
B
C

Purchased Price
Per Kg.
Rs 25
20
50

Quantities
Purchase
Kg 35,000
10,000
8,000

Ending inventory
June 30, 2010
Kg 4,000
6,000
5,000

Factory wages and other salaries paid were:


Direct labour
Indirect labour
Supervision factory
Selling and Administrative Salaries

Rs 450,000
225,000
180,000
300,000

Other information:
Factory Over head
Supplies
Repair and Maint.
Depreciation
Utilities
Insurance
Delivery expenses

Rs 140,000
90,000
80,000
270,000
560,000
-

Selling & Admin. Expenses


Rs 80,000
40,000
35,000
110,000
280,000
90,000

At the end of the three month finished goods inventories contained 1,500 units, while 38,500
units sold at an average sales price of Rs 175 per unit.
Required: A detailed profit and loss account showing the cost of goods finished and cost of
goods sold.

Q-10
The following data pertain to a small store. The owner has made the following sales forecasts
for the first five months of the coming year.
Rs.
January
February
March
April
May

40,000
45,000
55,000
60,000
50,000

Other data are as follows:

(a)

Debtors and creditors balances at the beginning of the year are Rs 30,000 and
Rs 14,000 respectively. The balances of other relevant assets and liabilities are:
Rs.
Cash balance
Stock
Accrued sales commission

7,500
51,000
3,500

(b)

40% sales are on cash basis. Credit sales are collected in the month following sale.

(c)

Cost of sales is 60% of sales.

(d)

The only variable cost is a 5% commission to sales agents. Sales commission is paid
in the month after it is earned, i.e. time-lag is one month; 80% sales are subject to the
commission.

(e)

Inventory (stock) is kept equal to sales requirement for the next two months budgeted
sales.

(f)

Trade creditors are paid in the following month after purchases.

(g)

Fixed costs are Rs. 5,000 per month, including Rs. 2,000 depreciation.

You are required to prepare a cash budget for each of the first three months of coming year on
the basis of format given below.

Month

(A)

January
(Rs.)

February
(Rs.)

60,000
24,000
84,000
51,000
?

69,000
27,000
96,000
60,000
?

March
(Rs.)

Cash inflows
Cash sales (40% of total sales)
Collection from debtors (one month after sale)
Total cash receipts
Cash outflows

(B)
Paid to trade creditors for purchases
(Purchase budget)
Sales commission (5% of prior months sales)
Fixed costs (Excluding depreciation)
Total cash payments
(C )

Surplus/(deficiency)(A) (B)
Beginning balance
Ending balance

Working notes:
Purchase budget
Desired ending inventory (at cost price)
Plus cost of goods sold (current month)
Total requirements
Less beginning inventory
Purchase

66,000
33,000
99,000
69,000
?