THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH

CMA JUNE, 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 account balances taken from the ledger of United Motors Ltd. On December 31, 2016 are
given below:
Accounts Receivable 431,000 Capital – Unique Motors Ltd. 975,500
Notes Receivable 122,000 Accounts Payable 210,240
Cash 710,500 Notes Payable 112,000
Inventory 55,000 Sales 178,750
Unexpired Insurance 800 Interest Income 3,000
Purchase 110,350 Foreign Loan 40,860
Freight in 3,400 Allowance for bad debt 1,500
Delivery expenses 3,400 Accumulate depre-Computer 8,200
Sales salaries 18,000 Accumulate depre-Equipment 7,800
Rent 3,600 Computer 42,000
Interest expenses 2,000 Equipment 15,800
Office expenses 20,000
Adjustments:
(a) Inventory on December 31, 2016 was taka75,000
(b) The Allowance for bad debts are to be increased to taka 2,000
(c) Accrued delivery expenses amounted to taka 500
(d) Sales salaries accrued amounted to taka 2,500
(e) Office supplies on hand taka 5,520
(f) Depreciation – Computer – 8%, Equipment – 10% p.a.
(g) Taka 3,000 is reported as interest income from which taka 1,200 is unearned
(h) Taka 2,000 is reported as interest expenses of which taka 500 represents a payment for
the year 2017
Required:
(i) Prepare a ten column work sheet.
(ii) Show necessary adjustment entries.
[Marks: (15+5) = 20]
Q. No. 2
(a) “Anticipate no profit, provide for all possible losses” – Explain.
(b) On January 1, 2016, Kloppenberg Company had Accounts Receivable TK. 39,000, Notes
Receivable Tk.25,000, and Allowance for Doubtful Accounts Tk.13,200.The note
receivable is from Sara Rogers Company. It is a 4-month, 12% note dated December 31,
2015. Kloppenberg Company prepares financial statements annually. During the year the
following selected transactions occurred.

Jan. 05. Sold Tk.20,000 of merchandise to Dedonder Company, terms n/15.

Jan. 20. Accepted Dedonder Company’s Tk.20,000, 3-month, 9% note for balance due.
Feb. 18 Sold Tk.8,000 of merchandise to Ludwig Company and accepted Ludwig’s
Tk.8,000, 6-month, 9% note for the amount due.
Apr. 20 Collected Dedonder Company note in full.

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CMA JUNE, 2017 EXAMINATION
FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING

Q. No. 2 (cont’d………)

Apr. 30 Received payment in full from Sara Rogers Company on the amount due.
May 25. Accepted Jenks Inc.’s Tk.4,000, 3-month, 7% note in settlement of a past-due
balance on account.
Aug. 18 Received payment in full from Ludwig Company on note due.
Aug. 25 The Jenks Inc. note was dishonored. Jenks Inc. is not bankrupt; future payment is
anticipated.
Sept. 01 Sold Tk.12,000 of merchandise to Lena Torme Company and accepted a
Tk.12,000, 6-month, 10% note for the amount due.

Required:
Journalize the transactions.
[Marks: (5+15) = 20]
Q. No. 3
(a) Jamuna Trading Company uses a perpetual inventory system. The Company has the
opening inventory, purchases and sales data for the month of March 2016 as under:
Tk.
Inventory March 01 200 units @ Tk. 4.00 800.00
Purchases: March 10 500 units @ Tk. 4.50 2,250.00
March 20 400 units @ Tk. 4.75 1,900.00
March 30 300 units @ Tk. 5.00 1,500.00
Sales March 15 500 units
March 25 400 units

The physical inventory count on March 31 shows 500 units on hand.

Required:
Determine the cost of inventory on hand at March 31 and the cost of goods sold for March
under the (1) FIFO, (2) LIFO and '( 3) average cost method.
(b) "The key to successful business operations is effective inventory management". Do you
agree? Explain.
[Marks: (15+5) = 20]
Q. No.4.
(a) What are different methods that may be employed in reconciling the bank and the cash
balances? Which method would you recommend? Why?
(b) The cash account of United Motors Ltd. disclosed a balance of Tk. 17,056 on June 30,
2016. The bank statement as of June 30, showed a balance of Tk. 21,209. Upon
comparing the bank statement with the cash records the following facts were developed:
(i) United Motor’s account has been charged for a customer’s uncollectible cheque
amounting to Tk. 1,143 on June 30.
(ii) A customer’s cheque for Tk. 725 had been entered as Tk. 625 both by the depositor
and the bank but was later corrected by the bank.
(iii) A two month 9% Tk. 3,000 customer’s note dated April 28 discounted on June 5 had
been protested on June 29 and the bank had charged United Motor for tk. 3,050
which included a protest fee of Tk. 5.
(iv) Cheque No. 0151 for Tk. 1,242 had been entered in the cash book as Tk. 1,224 and
cheque No. 0159 for Tk. 629 had been entered as Tk. 926. The company uses the
voucher system.
(v) There were bank service charges for June Tk. 41 not yet recorded on the books.

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CMA JUNE, 2017 EXAMINATION
FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING

Q. No. 4 (cont’d………)
(vi) A bank memo statement stated that notes receivable for Tk. 2,500 and interest of
Tk. 75 had been collected on June 28 and the bank had made a charge of Tk. 25.
(No entry had been made on the books when sent to the bank for collection)
(vii) Cheques outstanding on June 30 were Tk. 12,308.
(viii) Receipts of June 30 for Tk. 6,850 were deposited July 02.

Required:
(i) Prepare a bank reconciliation statement using the form where both bank and book
balance is brought to corrected cash balance.
(ii) Give necessary journal entries in United Motor’s book.
[Marks: 5+(10+5) = 20]
Q. No. 5
(a) What is Intangible Asset and Wasting Asset? Explain.
(b) United Motors Ltd. reported the following as plant assets on December 31, 2015:

Land Tk. 60,00,000

Building Tk. 1,32,50,000
Less: Accumulated Depreciation Tk. 60,50,000 Tk. 72,00,000

Equipment Tk. 2,00,00,000

Less: Accumulated Depreciation Tk. 25,00,000 Tk. 1,75,00,000

Total assets Tk. 3,07,00,000

During 2016 the following selected cash transactions occurred.
April 01, Purchased Land for Tk. 44, 00,000
May 01, Sold Equipment that cost Tk. 300,000 which was purchased on January 01,
2012. The Equipment was sold for Tk. 175,000.
June 01, Sold Land purchased on June 01, 2008 for Tk. 36,00,000. The Land was
purchased for Tk. 10,00,000.
July 01, Purchased Equipment for Tk. 600,000.
December 31, Retired Equipment that cost Tk. 250,000 which was purchased on
December 31, 2005.
Required:
(i) Journalize the above transactions. United Motors Ltd uses straight line depreciation for
Building and Equipment. The Building is estimated to have a 40 years life and no salvage
value, the Equipment to have a 10 years useful life and no salvage value. Update
depreciation on assets disposed off at the time of sale or retirement.
(ii) Record the adjusting entries for depreciation for 2016.
(iii) Prepare the Plant assets section of United Motors Ltd balance sheet at December 31,
2016.
[Marks: 5+ (8+3+4) = 20]

= THE END =

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