CMA DECEMBER, 2019 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 following balances are taken from the ledger of ABC Co. Ltd. as on 31st December, 2018.

Taka
Accounts Receivable 4,545,000
Advertisement 145,000
Building 550,000
Building Maintenance 32,500
Furniture 110,000
Cash 2,617,500
Freight in 185,000
Insurance 187,000
Interest Expenses 127,000
Inventory 01.01.2018 2,258,440
Land 2,955,000
Office Expenses 788,000
Purchase 7,955,460
Sales Return 237,900
Selling Expenses 418,300
Supplies Expenses 114,000
Rent, Rates and Taxes 225,400
Loss on Sale of Furniture 7,500
Accounts Payable 1,817,500
Allowance for Depreciation of Building 65,000
Allowance for Doubtful accounts 57,500
Share Capital 10,000,000
Retained Earnings 751,500
Purchase Discount 50,000
Sales 10,058,900
Interest Income 38,600
Rental Income 620,000

Adjustment as on 31st December 2018 are required as follows:

(a) The Inventory on hand 2,618,700

(b) The allowance for Doubtful account is to be increased to a
balance of Tk. 128,300. 128,300
(c) Building are depreciated @ 3.50% per annum.
(d) Accrued selling expenses are Tk. 42,000
(e) There are supplies of Tk. 7,800 on hand.

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CMA DECEMBER, 2019 EXAMINATION
FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING

Q. No. 1(cont’d...)

(f) Accrued rent, rate and Taxes is Taka 25,000

(g) Accrued rental Income Taka 45,000
(h) Interest Received in advance Taka 700
(i) Write off the following accounts receivable:
(i) Quality Feeds Ltd. Tk. 4,000.00
(ii) Alam & Associates Tk. 1,500.00

Requirements:
(i) An eight column work sheet
(ii) Income Statement and Balance Sheet
[Marks: (15+10+5) = 30]
Q. No. 2
(a) What are the benefits of using the perpetual inventory system as compared with periodic
system?
(b) The following data pertain to Orbit Company:
(1) Balance per bank statement, dated March 31, 2018 is Tk. 4,450.
(2) Balance of Cash Account on the Company’s book as of March 31, 2018 is Tk. 4,459.
(3) The Tk. 1,300 deposit of March 31 was not on the Bank Statement.
(4) Of the Cheques, recorded as cash disbursements in March, some cheques totaling Tk.
1.050 have not yet been cleared by the bank.
(5) Service and collection charge for the month were Tk. 10.
(6) The bank erroneously charged the Orbit Company Account for Tk. 200 cheque of
another company. The cheque was included with the cancelled cheques returned with
the Bank Statement.
(7) The bank credited the Company’s Account with the Tk. 1,000 proceeds of a non –
interest bearing note that it collected for the company.
(8) A customer’s Tk. 75 cheque marked NSF was returned with the bank statement.
(9) As directed the bank paid and charged to the Company’s Account a Tk. 507.50 non-
interest-bearing note of Orbit Company. This payment has not been recorded by the
company.
(10) An examination of the cash receipts and the deposit tickets revealed that the book
keeper erroneously recorded a customer’s cheque of Tk. 148.50 as Tk. 135.
(11) The bank credited the company’s checking Account for Tk. 20 interest earned.
Requirements:
(i) Prepare a bank reconciliation as of March 31, 2018.
(ii) Prepare the necessary Journal entry or entries to adjust the Cash Account.
[Marks: 10+(10+5) = 25]
Q. No. 3
(a) Which of the following qualities of an asset are characteristic of plant assets?
(i) Capable of repeated use in operations of the business.
(ii) Tangible.
(iii) Held for sale in normal course of business.
(iv) Long lived.
(v) Intangible.
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CMA DECEMBER, 2019 EXAMINATION
FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING

Q. No. 3(cont’d...)
(b) Why the accelerated depreciation method is frequently used for income tax purpose?
(c) A plant asset acquired at the beginning of the fiscal year at a cost of Tk. 28,20,000 has an
estimated trade – in value/ salvage value of Tk. 3,00,000 and an estimated useful life of 8
years. Determine the following:
(i) The amount of annual depreciation by the straight line method.
(ii) The amount of depreciation for the second year computed by the double declining
balance method.
(iii) The amount of depreciation for the second year computed by the sum – of – the year –
digits method and what is the book value of the end of the year.

[Marks: 5+4+(3+4+4) = 20]

Q. No. 4
(a) On January 1, 2006, a company purchased a machinery at an acquisition cost of Tk. 84,000.
The machinery has been depreciated by the straight line method using a 4 year service life
and a Tk. 12,000 salvage value. The company’s fiscal year ends on December 31.
Requirements:
Prepare the journal entries to record the disposal of the machinery that it was:
(i) Retired and scrapped with no salvage value on January 1, 2010.
(ii) Sold for Tk. 15,000 on July 1, 2009.
(iii) Traded in on a new machinery on January 1, 2009. The fair market value of the old
machinery was Tk. 34,000 and Tk. 6,000 was paid in cash.
(b) A Ltd. Company depreciates its machinery at 10% on diminishing balance method, had on 1st
January 2010 Tk. 175,000 to the debit of machinery account. A part of machinery purchased
on 1st January, 2008 for Tk. 30,000 was sold for Tk. 15,000 on July 01, 2010. A new
machinery at of cost of Tk. 35,000 was purchased and installed on the same date installation
charge being Tk. 2,500. The company wanted to change its method of depreciation from
diminishing balance method to straight line method with effect from 1st January, 2010. The
rate of depreciation is remained the same.
Requirements:
(i) Pass Journal entries to record the sale of the machinery.
(ii)Calculate the depreciation expense of the existing machinery to be recorded in the
books for 2010.
[Marks: (10+10) = 20]
5 marks are reserved for:
(i) Good presentation - 2
(ii) Fairness of answer - 2
(iii) Good hand writing - 1

= THE END =

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