THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH

CMA JUNE, 2016 EXAMINATION

PROFESSIONAL LEVEL-III
SUBJECT : 301. ADVANCED FINANCIAL ACCOUNTING-II.
Solution to the Question No. 1 (b)
Basic EPS Earnings Shares Per Share
Tk. Tk.
Profit attributable to ordinary equity
Holders of in Percent entity for year 20×6 12,00,000
Weighted average shares outstanding 20×6 500,000
Basic earnings per share (12,00,000/500,000) 2.40

Diluted EPS
Weighted average number of shares under option 100,000
Issued at full market price (Tk.15×100,000)/Tk.20 75000
Issued at no consideration (100,000 – 75000) 25,000
Number of equity shares for basic EPS 500,000
Number of dilutive shares under option 25,000
Adjusted number of shares 5,25,000
Diluted EPS = (12,00,000/5,25,000) 2.29

(c)
Earnings Tk. 22,08,000
Number of shares 82,40,000
Options (W) 51,111
83,91,111
So fully diluted earnings per share Tk. 22,08,000 ÷ 83,91,111 = Tk. 0.2666
Workings for options:
Options 9,20,000×Tk.1.70 = Tk. 15,64,000
At fair value Tk. 15,64,000 ÷ Tk. 1.80 = 868889
Number of issued free (9,20,000 – 8,68,889) = 51,111

Solution to the Question No. 2 (b)

URBAN LTD.
Step – 1 Calculate differences

Item Carrying amount Tax base Differences L/(A)

Accelerated Capital allowances Tk. 560,000 Tk. 364,000 196,000 L
Development expenditure 32,000 0 32,000 L
Losses 0 160,000 (160,000) A
Revaluation 400,000 80,000 320,000 L
Totals : Tk.992,000 Tk.604,000 (160,000)/548,000

Step – 2 Calculate of tax

Tk. 548,000 × 24,75% = Tk. 135,630

Tk. (160,000 × 24.75%) = Tk. 39,600
Step – 3 Movement of deferred tax liability.

Deferred tax liability up to 31 March, 2012 Tk. 1,35630

Less deferred tax liability of previous year 59,360
Increase in deferred tax liability Tk. 76,270
JOURNALS
Deferred tax assets Tk. 39,600
Revaluation reserve (320,000 × 24.75%) 79,200
Income statement Tk.42,530 (balancing
figure)
Deferred tax Liability 76,270

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Solution to the Question No. 3 (b)

Consolidated Balance Sheet of Fizz Ltd. and in Subsidiary SAMMY Ltd. as at 30.06.2016
Liabilities Tk. Assets Tk.
Share Capital Fixed Assets:
50000 equity shares @ Tk. 10 5,00,000 Building 3,00,000
Reserve & Surplus : Plant and Machinery 3,19,200
Capital Reserve 44,000 Investments:
General Reserve 2,16,000 Other Investments 40,000
Profit & Loss Account 1,83,960 Current Assets, Loan and
Advances:
Secured Loan --- Stock 1,80,000
Un Secured Loan --- Debtors 2,00,000
Current Liabilities Provision:
Sundry Creditors 1,40,000 Bank 2,00,000
Bills Payable 70,000
Liability for expenses 25,000
Minority Interest 60240
12,39,200 12,39,200
Workings
1) Degree of Control 8000/10000 = 4/5 or 80%
Minority interest 1/5 or 20%
Workings
a) Capital profit :
1. Pre-acquisition profit 40,000
Less Dividend paid 10% (10,000)
30000
2. Pre acquisition General Reserve 40000
Less Bonus Share (25000)
15000
45,000
Fizz (4/5) (36,000)
Minority (1/5) (9,000)

b) Post acquisition profit:

As per Balance sheet 140000
Less pre acquisition profit (30000)
110000
Add Depreciation over charged on plant (12000×10%) 1200
1,11,200
Fizz (4/5) (88960)
Minority (1/5) (22240)

(c) Post acquisition General Reserve 60,000

Less Bonus Share (25,000)
35,000
Less post acquisition general reserve 15,000
(From (a) 20,000
Fizz (415) (16,000)
Minority (1/5) (4,000)

(d) Share capital:

1000 equity shares of Tk. 10 1,00,000
Add Bonus share 25,000
1,25,000
Less Minority interest (1/5) 25,000
1,00,000
(e) Computation at goodwill/capital reserve
Cost at investments 80,000
Add share at post acquisition profit 12,000

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Wrongly credited to investment 92,000
Less Capital profit (a) (36,000)
56,000
Less face value at shares (d) 1,00,000
Capital reserve (Being negative) (44,000)

(f) Plant & machinery:

Fizz Ltd. 230,000
Sammy Ltd. 100,000
330,000
Less unrealized profit (12,000)
318,000
Add depreciation overcharged 1200
319,000
(g) Consolidated P/l account:
P/l account (Fizz) 120,000
Add post acquisition profit wrongly credited 12,000
132,000
Less unrealized profit on sale of plant (12,000)
120,000
Less amount of expenses not yet adjusted (25,000)
95,000
Add share of post acquisition profit (b) 88,960
183,960
(h) General Reserve:
Fizz ltd. 200,000
Share of from Sammy Ltd. 16,000
216,000

(i) Though the entire bills payable at Sammy Ltd. represent bills accepted in favour at Fizz Ltd. but
Fizz Ltd. has no bill receivables in its balance sheet. It means all bills receivables have already
been discounted.
(j) It has been given in the problem that bonus dividend has been treated properly in the books at Fizz
Ltd. But it is clear from the balance sheet at Fizz Ltd. that the number of share held have not been
altered.
Therefore, the statement is not right.

Solution of Q. No. 4.
Statement of cash flows for the year ended 31, December 20x8:

(i) Cash flows from operating activities:

Tk.000 Tk.000
Cash generated from operation (note-1) 5,271
Interest paid (152)
Tax paid (w-4) (2,319)
Net cash from operating activities 2,800
(ii) Cash flows from investing activities:
Investment (198)
Purchase of property, plant and equipment (2500)
Proceeds from sale of PPE 168
Net cash used in investing activities (2,530)
(iii) Cash flows from financing activities-
Issue of ordinary shares (480+312) 792
Redemption of non-current interest-bearing debt (560)
Payment to acquire leasehold premises (1,300)
Net cash used in financing activities (1068)
Net change in cash and cash equivalent (798)
Cash and cash equivalent brought forward (opening) 576
Cash and cash equivalent carried forward (closing) (222)

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1. Note to the statement of cash flows:
Reconciliation of profit before tax to cash generated from operations:
Tk. 000
Profit before tax 4,625
Interest payable 152
Depreciation (400+964) (W-1 to W-3) 1364
Loss on sale (W-3) 108
Increase in deferred repairs provision 186
Increase in inventory (894)
Increase in receivables (594)
Increase in payable 324
Cash generated from operation 5,271

Workings:
(1)
LEASEHOLD PREMISES
Tk. 000 Tk. 000
B/d 5,700 Depreciation 400
Addition 1300 Balance C/d 6,600
7,000 7,000
(2)
PLANT
B/d 3,780 Disposals 276
Addition 2500 Depreciation 964
- Balance C/d 5040
6280 6280
(3)
DISPOSAL
Plant 276 Cash 168
- Loss on sale 108
276 276
(4)
TAXATION
Cash 2,319 Balance b/d 2,410
Balance c/d 2,322 Income statement 2,231
4,641 4,641

(5)
SHARE CAPITAL
Balance c/d 2280 Balance b/d 1800
- Cash 480
(6) 2280 2280

SHARE PREMIUM
Balance C/d 2112 Balance b/d 1800
- Cash 312
(7) 2112 2112

INVESTMENT
Balance C/d 2208 Balance b/d 2406
Addition 198 -------
2406 2406

= THE END =

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