v. Level) Examination, August 2011 Accounting 1- Two Hours (instructions: + Select the correct answers for questions No. 1-30 and write ts number on the dotted line giver + Wrlte short answers for question No, 31-30 on the dotted line. + Each question carries nro marks + Hite your index Number inthe space provided above. ‘The changes in financial position ofan entity fora given period shoves the change in @) profit earned 2) total assets ©) equityand liabilities G) borrowings @) cashflows, Use the "owing information to answer questions No, 2 and 3. ‘A-company whieh commenced its business on 01.04.2009 with stated capital of Rs. 75 following information forthe years 2010/11 and 2009/10, lon, has given the Description [2010/41 (Rs, milion) | 2009/10 (Rs, million) Total Income 150 100 “Total Expenses (excluding Income Ta) 0, BD Treoms Tax 2 = Dividends Paid 10 5 Revaluation Surplus as al 31s March is = "Total Avseis as at Tet Marsh 1 EJ ‘What were the total liabilities a. 31.03.20102 QQ Rs.Smillion (2) Rs. 15 mull G) Rs.20mition @ Rs.25 million ) Rs 6omili ; ‘Wa: was the equity as at 31.03.2011 ie Rs 85million @ Rs.95 milion G) Rs. 100 mition @ Rs 115million )_Rs.120million ) The draftincome statement of en entity forthe year ended 31 03.2011 showeda profit of Rs. 10 000.000. ‘The following information relates to tems with cost oFRs. 000.000 inekided inthe inventory asa 313.2011. ‘© Expiry date of theve items was 30.04.2011. ‘+ 50% .f these fem Had been subsequently sold for Rs. 1 000 000 before 30.04.2011 by incurring asolling ‘expense of Re, 200 000, ‘© There is no sales value for the balance items. ‘What were the value of above inventory items as at 31.03.2011 and the profit forthe year respectively after ‘sonsidering the above information? (Assume that the financial Sslemen's have not yet been authorized for issue.) Inventory (Rs-000) Profit Rs. "000) @ 800 8.800 @ 1,000 9,900 o 1200 9.200 @ 2/000 93800 eo 2,000 10.000 5 ni se: tion during he cyt 3 eens samp snr fort pupae of ‘ventory contol, Further Ro. milion i expected tobe incurred inthe ext year to complete he sohware development and itil be inuseat the end of tie ext year. Mhemarke pce ofa simlnr sofware packagels Rs. Onlin, Based on the above information, firaneial statements forthe current year should recognise (@) anassetof Rs. 4 milion. (Q) anexpense of Rs. million. G) anasset of Bx 5 million (©) anexpenseofRs.Smillion (3) anasset of Rs. 6 milion. «GCE. (Ads Level Examination 2011 August Accounting I~ Question Paper * Use the following information ofan entity relating to an item of inventory to answér questions No. 17 and 18. Description Units [Unit Cost es) 01.01.2010, Balance’ 2000 3 14012010. Purchases 4000 ® 20012010 Purchases, 6000 0 31.01.2010 Balance: 1000" = 11 000 units have been sold between 21” and 31@ amvary, 17, What is the cost of inventory as at 31.01.2010 if weighted overage method is used for issuing inventories? @ R500 @)Rs.73000 G) Re.80000 (@) Rs,86000. (3) Rs. 90000. c 18 Whats the cos ofsales forthe year ending 31.01.2010 if First-In First-Out (FIFO) method ie used for issuing inventories? @ Rx550000 @) Rs.860000 (5) Rs. 870000 (4) Rs.960000 (5) Rs.990000, (ee 19. Directors of a company signed the financial statements for the year ended 31.03.2011 on 30.062011. The financial statements were approved by the shareholders a the Atrual General Meeting held on 15.072011 ‘The information on the following events are given. A = Office equipment zmounting toRs.250 000 has damaged on 20.05.2011, due to floods. 5B - The judgement delivered on 15.06.2011 in relation toa case filed by a customer against the company {n2009. Itmade the company liable for acompensation of Rs, 150 000. © Acustomer whohed abalance of Rs. 300.000 asat 31.03 201 | was declared bankrupt on 05.07.2011 ‘The company has already made a full provision for this atthe balance shect dat. ‘Which ofthe above events require an adjustment inthe financial statements forthe year ending 31.03.2011? (@ Acnly 2) Aad Bonly (3) Bony (4) Band only (3) AIlA,BandC, r 20. Which of the following costs incurred ia relation fo the establishment ofa new production process, that has ‘been identified as a feasible project, could be recognized as development cost tobe capitalized? A + Materials used for the evelopment of the production process, B - Training costs incurred to familiarize the staf withthe production process, C= Consultancy fees incurred to assess the feasibility of the production process. D = Deprecetion of laboratory equipment used for the establishment of the proctiction process, (DA and C only ©) Aand Donly ©) A,BandConly (8) A,CandD only @)AIA.B, Cand D. t 21, Acompany changed the depreviation method from straight-line to reducing balance in the current year, The above change should be adjasied in the financial stements of the: (D) prior periods asi is an accounting policy change. @ Suture periods as itis an accounting policy change. (@) future periods as its a change in accounting estimates. current and future periods as it is a change in accounting estimates. (© prior periods and curren period as it is an aecounting policy change. ‘ 22, Which of the following is understated if ales commission is exroncously debited tothe sales account? () Gross profit. ©) Profit forthe year, (@)Cash collected from debtors. Equity. ©) Costofsales. Co 2 The following information relates toa share ssuance of'a company. ‘Number of shares applied for 2000000 Tesue Price per share Rs 10 ‘Rejected number of Soares 200000 ‘Shares alloted (Money received on exoass chares was raurned) Toned Share fue expenses Ks. 500000GCE. (Ady Level) Examination 2011 August * Accounting I- Question Peper Wit is the nct impact of this share issuance on the net zssste of the company? @ Rs. 9Smillion (2) Rs.10miltion —G) Rs.10Smilion (4) Rs. 17 Smillion (SR. 19:5milfion ) 24, What isthe total ibility inthe lessees books as at 31.03.2011, based on the following information? [Type oF Tease Finance. Date ofthe ase agreement 31.052010 Lease period year ‘Annual Tease Tasaloent Rs.500000 ‘Date on wich the first instalment was paid 31052011 Present vale of rina lease payments asat31.05,2010, Rs, 1200000 Tnterest foc the year ending 31.03.2011 Rs. 29000) @) Rs.500000 2) Rs. 799000) Rs.990000 (4) Rs.1200000 (5) Rs.1 790000, 25. Which of the following equations does not represent the total cost? () Total costs = Produet eosts + Non-manurseturing costs. @) Total costs ~ Manufacturing costs + Nor-manufacturing costs. {G) Total costs = Prime costs + Total overhead costs. @) Total costs ~ Direct cox + Indirect cos (6) Total costs = Manufacturing costs + Total ovethead costs. 5. 26. InCost-Volume-Profit(CVP) analysis, coniibution means the difference between. (j) sales revenue end profit. (@) sales revenue and total costs, ) sales revenne and fixed cost, @) sales revenue and variable costs. (G) sales revenue and cost of sales. 27. A company uses machine our ate 10 absoe overheads. The budgeted machine hours and ovetbeads were 15000 and Rs 300.000 respectively. Machines worked for 20000 hours. Actal mr facturing overheads were Rs 360000, Wha the over/ andes) absorption of overheads? (Rs40000) RS (E000)—G) R400 RS.6OOD—_ Re ioom 28 Total oiect materia! and labour cost per unit ofa product was Rs. 160. manufacturing royalty of Rs. $0 per product should also be paid. Time taken at each department to manufacture a unit of the product ard the predetermined overhead absorption rates (OAR) are given beiow, Department Tabourhours ‘Machine hours ‘ake Machining, $ 10 Re. 1S permachine hour ‘Assembling o eee Rs. 12 permachine hour Sinishing 6 2 R&_Sperlabour hour ‘What is the unit cost of this product?” R350 @)Rs. 400 @) Rs.430 ()R5450 (5) Re. 480 Ca 29. Whats the eash cycle ofthe entity based on the following information? Inventories atthe besianing of the period (Rs.) 10000 Tnvenloris atthe end ofthe period (Rs) 15000 “Total Purchases forthe period (Rs.) 130000 ‘Average Amount of Creditors (Ra) 6500) Debi Collection Period Days) ED ‘Allthe purchases are done on erodit Consider 300 days per year (1) 18 days (2) 48days.—G) 66 cays @) TBdays (5) BddaysGCE. (Ade Leved Examination 2017 August * Accounting Question Paper 40. An entity sels a product at a price of Rs. $0 per unit. The contribution to sale ratio ofthe product is 40%, Current sales volume is 1100 units and it is considering the following sales strategies, The entity is earning a profit tthe curren sales volume, ‘Strtegy 1: To increase the celling rice up to Rs. 55 per nit. (This will reduce the sales volume t0 900 nits.) Strategy? : Toreduce the selling price 10 Rs. 45 per unit (This will inrease the sales volume up t0 1600 units) (@) Indicate whether the profit will increase or decrease by how mch ifthe strategy 1 is adopted? (0) Which srmegy is ore profs to teeny? 41. Inventory ofan etity consisted of wo items A and B, The following information is provided with regard tothe inventory blancesasat 31.03.2011 Inventory Physical Book UnitCost | Expected | Expected Tiers Balance Balance (®s) | Cnitseting | Unitselting Wits) (Unies) Price (Rs) _| Expense (Rs) A 1000 1000 40 5 5 B 800 900 Dp 65 5 (@ Compute the inventory value 10 be shown in the balance sheet as at 31.03.2011, ifthe inventory ie valued cn tern by Kem basis (b) Waite the journal entry to adjust the inventory difference assuming that the value ofthe difference between ‘the book balance and the pysial balance of inventory item B is recovered from the store keeper atthe expected selling price. 42 "Neteash flows generated from operating activities necessarily imply that an entry has enrned 2 profi forthe ‘same period" (@) Do you agree with the above statement? (@) State 4 reason to jus the answer io (@) sbove 48. Iadicate by sing a tisk (7) in he appopciat colunin whether the Notes tothe accounts provided a an imegral par of franca statements would assure each ofthe folowing qualitative careers of inci infomation. ‘Qualiaive Characters [Ave Notasured Relbly Relevance Comers : Understandably = ‘The following information relates to to entities operating in the same indasiy, ‘ConipanyA (Rs. milion) ‘Sales forthe year ened 31.03.2011 100 “Total Equig as at 31.03.2011 800 “Tora Licblitiesas at 31.08.2011 200