FINANCIAL ACCOUNTING (BAF-304) SEMESTERS FALL 2015 EXAMINATIONS Thursday, the 25th February 2016 Entra Reading Time: 15 Minutes ae Sans Writing Time: o2Hours 40 Minutes eae eee (Attempt all questions, (i) Write your Roll No. in the space provided above. (ii) Answers must be neat, relevant and brief. Itis not necessary to maintain the sequence, (iv) Use of non-programmable scientific calculators of any model is allowed, (v) Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper. (vi) In marking the question paper, the examiners take into account clarity of exposition, logic of arguments, effective presentation, language and use of clear diagram chart, where appropriate (vi) DO NOT write your Name, Reg, No. or Roll No., or any irrelevant information inside the answer script (vi) Question No. 1 ~ "Multiple Choice Questions” printed separately, is an integral part of this question paper. () Question Paper must be returned to invigilator before leaving the examination hall DURING EXTRA READING TIME, WRITING IS STRICTLY PROHIBITED IN THE ANSWER SCRIPT EXAMINEES ARE ADVISED TO MANAGE SOLUTIONS/ ANSWERS WITHIN PROPOSED TIME Marks Question No. 2 Proposed Time : 36 Min. | Total Marks : 18 ‘Al-Marjan Company acquired 90% shares in Al-Burhan Company on July 1, 2014 when Al-Burhan Company had the reserves of Rs.4.75 million. The statements of financial position of the two companies as on June 30, 2015 are given below: Rs. ‘000° ‘Al-Marjan jurhan Non-current assets Property, plant and equipment 75,000 14,000 Investment in Al-Burhan 12,000 . 87,000 14,000 Current assets Inventories 8,000 4,100 Trade receivables 2,000 4,200 Cash and bank 3,000 200 Total assets 100,000 13,500 Equity Share capital @ Rs. 10 at par each 40,000 5,000 Retained earnings 45,000 6,000 85,000 11,000 Non-current liabilities 8,000 - Current liabilities 7,000 2,500 Total equity and liabi 100,000 13,500 Additional Informatio ©The market price per share of Al-Burhan Company, at the date of acquisition, was Rs. 20. © On January 1, 2015, Al-Burhan Company sold inventory of Rs. 1.92 millon to Al-Marjan Company on credit, Al-Marjan Company had sold 40% of these goods to its customers till June 30, 2015, Al-Marjan Company returned 20% of total goods to Al-Burhan Company before year end and paid half of its credit. Al-Burhan Company sells goods at cost plus 60%. ‘+ tis the group policy to value non-controlling interest at the date of acquisition at fair value. Required: Prepare ‘Consolidated Statement of Financial Position’ of Al-Marjan Group as on June 30, 2015. 18 FasEal 2015 104 PTOMarks Question No. 3 Proposed Time : 38 Min. | Total Marks : 19 (a) Gem & Co., acquired an asset on finance lease. The lease term is for three (3) years at a rental of Rs. 222,635 per half year payable in advance. The lease commences on January 1, 2015 and fair value of the asset is Rs. 1,500,000. A deposit of Rs.300,000 was also payable on January 1, 2015. The Director of Gem & Co., considers that the asset has a useful life of five (5) years. The rate of interest implicit in the lease is 4.5% per half year. It is expected that the assets will be transferred to Gem & Co., at the end of the lease term. Required: Prepare ‘Lease Amortization Schedule’ 05 {b) Qasim Intemational has imported goods during the year. The following expenses are related to these goods: Rupees Invoice amount | 200,000 Import duty and other non-adjustable taxes 65,000 Transportation charges 12,000 Labour handling charges 5,000 ‘The company has acquired a warehouse on rent to store the imported goods until they are sold out. The rent is Rs. 60,000 per annum, The estimated selling expenses are Rs. 15,000. The selling price of the imported goods is Rs. 340,000. Due to rain in the city the goods were affected. The net realizable value of the goods is assessed to be Rs. 275,000. Required: () Calculate the landed cost of the goods. 03 (ii) Show at what amount will the inventories be shown in the Statement of Financial Position in accordance with IAS 2, 02 (c) Friends Company Limited consists of three cash generating units. One of its cash generating units’ assets comprises the following Rs. in million Property, plant and equipment 26 Goodwill 2 Patent rights 1 Inventory 12 Total a. (On December 31, 2015, an exercise with regard to assessment of impairment losses revealed that the recoverable amount of the assets of the cash generating unit is Rs. 35 million, Following information is relevant: +The goods worth Rs. 1 million were destroyed by fire. +The patent rights have no market value. + Revaluation surplus account showing a credit balance of Rs. 1 million as of January 1, 2014 represents an upward revaluation of the property, plant and equipment. Required: ‘As a Management Accountant, you are required to: ()) Allocate the impairment losses to the above-mentioned assets. 06 ‘Account for the same in the books of accounts in accordance with the requirements of IAS 36 by preparing a journal entry 03 FasEal 2015 2oF4Question No. 4 Proposed Time : 50 Min. | Total Marks : 25 The following relates to Tehraz Company for the year ended June 30, 2015: Statement of Financial Position as on June 30 Rs. 000" 20152014 Assets Non-current assets Property, plant and equipment 50,500 [39,000 Investment property 5,300 | | 6,000 Intangible assets 7,500 | 8,000 63,300 53,000 Current assets Inventories: 3,500] [2,000 Trade receivables, 1,000 | | 1,500 Cash and bank balances 500 | | 2,000 = c0D0F Total assets "68,300 Equity and liabilities Share capital @ Rs. 10 each 25,000 [25,000 Retained earings 33,930 | | 24,350 Revaluation surplus 500 | |_ 2,000 61,430 51,350 Non-current I a Long-term loan 1,500] [ 2,500 Liabilties against finance lease 1,400 | | 1,200 Deferred tax liabilities 120 4100 3,020 3,800 Current liabilities Trade and other payables 950] [ 1,050 Interest payable 850 750 Dividend payable 1,250| | 1,000 Current portion of liabilities against finance lease | “400 300 Provision for taxation 400 250 3,850 _ 3,350 Total equity and liabilities 68,300." 58,500 The following information is relevant for the year: * On June 30, 2015, the management transferred one of its ‘investment property’ to ‘property, Plant and equipment’ having fair value of Rs. 2,500,000. © On July 1, 2014, Tehraz Company purchased an ‘investment property’ for Rs. 1,500,000, the fair value of said property was Rs. 1,800,000 at the end of the year. Tehraz Company has adopted fair value policy to value ‘investment property’ Revaluation surplus is related to property, plant and equipment only. During the year, the management sold part of its ‘property plant and equipment’ for Rs, 2,000,000 having carrying value of Rs. 1,500,000 and revaluation surplus of Rs. 300,000 on the date of sale ‘= During the year, the management charged depreciation of Rs. 1,800,000, © During the year, the management wrote-off intangible assets of Rs.800,000 due to ‘obsolescence and purchased new intangible assets of Rs. 1,200,000. During the year, there were no sales of intangible assets, Interest and tax expenses for the year are Rs, 700,000 and Rs. 800,000 respectively. Dividend declared for the year is Rs. 1,250,000. Paid Rs. 700,000 to leasing company against finance lease (other than interest), Required: Prepare Statement of Cash Flows using indirect method for Tehraz Company for the year ended June 30, 2015, Faso 2015 B0f4 Marks 25 PTOQuestion No. 5 Proposed Time : 36 Min. | Total Marks : 18 {a) Describe the following bases under the Conceptual Framework for the preparation of financial statements: (i) Historical cost (i) Current cost (b) On January 1, 2011, Abrar Enterprises had acquired a franchise of a well-known courier ‘company to offer courier services in ‘Northem Areas’ of Pakistan. It had paid Rs. 5,000,000 being the franchise license fee. A recurring fee of Rs.2,000,000 is payable each year in arrears. Abrar Enterprises had incurred lawyer's fee of Rs. 150,000 for vetting the franchise agreement. The company had also incurred Rs.50,000 and Rs. 100,000 being the franchise documentation charges and staff training expenses respectively. ‘The franchise license was issued for a period of 10 years and is transferable. The company amortizes the license cost on straight-line basis. ‘On December 31, 2015, the market value of the license was Rs. 3,000,000. The company decided to revalue the franchise license cost. Required (i) Compute the franchise license cost in accordance with the requirement of the IAS 38 ‘Intangible Assets’ (i) Prepare journal entries for recording the franchise license cost and revaluation of the franchise license, (©) In January 2014, the management of Faiz Enterprises decided to invest in a new project, which will attract foreign investment and create new jobs in the country. In July 2014, the management acquired assets of Rs. 100 million and hired 80 new employees for this project and started operation. During the year, Faiz Enterprises received a cash grant of Rs, 13,000,000 from the goverment for this project including Rs. 37,500 per new employee for creation of new jobs in the country after fulfilling all requirements, Required Prepare necessary joumal entries for the year ended June 30, 2015. THE END FasEal 2015 4of4 Marks 02 02 04 06 04