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ITFAQuestion June 2018 Exam
ITFAQuestion June 2018 Exam
ITFAQuestion June 2018 Exam
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CMA JUNE, 2018 EXAMINATION
PROFESSIONAL LEVEL-I
SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING
Q. No. 2(cont’d…)
Classification by Month of Sale Balance in Estimated %
Each Category Uncollectible
November–December 2010 Tk.10,80,000 2%
July–October 6,50,000 10%
January–June 4,20,000 25%
Prior to 1/1/10 1,50,000 80%
Tk.23,00,000
Based on the review of collectibility of the account balances in the “prior to 1/1/10” aging
category, additional receivables totaling Tk.60,000 were written off as of December 31,
2010. The 80% uncollectible estimate applies to the remaining Tk.90,000 in the category.
Effective with the year ended December 31, 2010, Fortune adopted a different method for
estimating the allowance for doubtful accounts at the amount indicated by the year-end
aging analysis of accounts receivable.
Instructions:
(i) Prepare a schedule analyzing the changes in the Allowance for Doubtful Accounts for the
year ended December 31, 2010. Show supporting computations in good form. (Hint: In
computing the 12/31/10 allowance, subtract the Tk.60,000 write-off).
(ii) Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful
Accounts balance as of December 31, 2010.
[Marks: (10+10) = 20]
Q. No. 3
The comparative balance sheets for Himu Incorporation show the following information.
Particulars December 31 2014 December 31 2013
Cash 38,500 13,000
Accounts receivable 12,250 10,000
Inventory 12,000 9,000
Investments 0 3,000
Buildings 0 29,750
Equipment 40,000 20,000
Patents 5,000 6,250
Total Assets 107,750 91,000
Allowance for doubtful accounts 3,000 4,500
Accumulated depreciation—equipment 2,000 4,500
Accumulated depreciation—building 0 6,000
Accounts payable 5,000 3,000
Dividends payable 0 5,000
Notes payable, short-term (nontrade) 3,000 4,000
Long-term notes payable 31,000 25,000
Common stock 43,000 33,000
Retained earnings 20,750 6,000
Total Liabilities and Equity 107,750 91,000
Additional data related to 2014 are as follows.
(1) Equipment that had cost Tk.11,000 and was 30% depreciated at time of disposal was sold
for Tk.2,500.
(2) Tk.10,000 of the long-term note payable was paid by issuing common stock.
(3) Cash dividends paid were Tk.5,000.
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CMA JUNE, 2018 EXAMINATION
PROFESSIONAL LEVEL-I
SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING
Q. No. 3(cont’d…)
(4) On January 1, 2014, the building was completely destroyed by a flood. Insurance
proceeds on the building were Tk.33,000 (net of Tk.4,000 taxes).
(5) Investments (available-for-sale) were sold at Tk.1,500 above their cost. The company has
made similar sales and investments in the past.
(6) Cash was paid for the acquisition of equipment.
(7) A long-term note for Tk.16,000 was issued for the acquisition of equipment.
(8) Interest of Tk.2,000 and income taxes of Tk.5,000 were paid in cash.
Required:
(a) Use the indirect method to analyse the above information and prepare a statement of
cash flows for Himu.
(b) What would you expect to observe in the operating, investing, and financing sections of a
statement of cash flows of:
(i) A severely financially troubled firm?
(ii) A recently formed firm that is experiencing rapid growth?
[Marks: (14+6) = 20]
Q. No. 4
(a) Why are inventories valued at the lower-of-cost-or-net realizable value (LCNRV)? What
are the arguments against the use of the LCNRV method of valuing inventories?
(b) The records of Sejuti’s Boutique report the following data for the month of April:
Sales Tk.95,000 Purchases (at cost) Tk. 55,000
Sales returns 2,000 Purchases (at sales price) 88,000
Markups 10,000 Purchase returns (at cost) 2,000
Markup cancellations 1,500 Purchase returns (at sales price) 3,000
Markdowns 9,300 Beginning inventory (at cost) 30,000
Markdown cancellations 2,800 Beginning inventory (at sales price) 46,500
Freight on purchases 2,400
Required:
Compute the ending inventory by the conventional retail inventory method.
(c) The cash account of ABC company showed a ledger balance of Taka 3,969.85 on June
30, 2015. The bank statement as of that date showed a balance of Taka 4,150. Upon
comparing the statement with cash records, the following facts were determined.
(1) There were bank service charges for June of Taka 25.
(2) A bank memo stated that XYZ’s note for Taka 1,200 and interest of Taka 36 had been
collected on June 29, and the bank had made a charge of Taka 5.50 on the collection. (No
entry had been made on ABC’s books when XYZ’s note was sent to the bank for collection.)
(3) Receipts for June 30 for Taka 3,390 were not deposited until July 2.
(4) Checks outstanding on June 30 totaled Taka 2,136.05
(5) The bank had charged the ABC’s account for a customer’s uncollectible check
amounting to Taka 253.20 on June 29.
(6) A customer’s check for Taka 90 had been entered as Taka 60 in the cash receipts
journal by ABC on June 15.
(7) Check no. 742 in the amount of Taka 491 had been entered in the cash journal as
Taka 419 and check no. 747 in the amount of Taka 58.20 had been entered as Taka
582. Both checks had been issued to pay for purchases of equipment.
Required:
(i) Prepare a bank reconciliation dated June 30, 2015, proceeding to a correct cash balance.
(ii) Prepare any entries necessary to make the books correct and complete.
[Marks: (4+6+10) = 20]
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CMA JUNE, 2018 EXAMINATION
PROFESSIONAL LEVEL-I
SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING
Q. No. 5
(a) Do you agree the underline statements? Why, or why not? Explain.
(i) Treasury stock as an asset.
(ii) Gain or loss on sale of treasury stock as additions to or deductions from income.
(iii) Dividends received on treasury stock as income.
(b) On January 1, 2015, ABC sold 12% bonds having a maturity value of Tk. 800,000, for Tk.
860,651.79, which provides the bondholders with a 10% yield. The bonds are dated
January 1, 2015, and mature January 1, 2020, with interest receivable December 31 of
each year.
Required:
(i) Prepare the journal entry at the date of the bond issuance.
(ii) Prepare a schedule of interest expense and bond amortization for 2015–2017.
(iii) Prepare the journal entry to record the interest payment and the amortization for 2015.
(iv) Prepare the journal entry to record the interest payment and the amortization for 2017.
(c) Dhaka company’s Tk. 10 par ordinary shares are selling for Tk. 110 per share. Four
million shares are currently issued and outstanding. The board of directors wishes to
stimulate interest in Dhaka Company’s ordinary shares before a forthcoming share issue
but does not wish to distribute cash at this time. The board also believes that too many
adjustments to the equity sections, especially retained earnings, might discourage
potential investors. The board has considered three options for stimulating interest in the
shares:
(1) A 20% shares dividend;
(2) A 100% share dividend;
(3) A 2–for–1 share split.
Required:
Acting as financial advisor to the board, you have been asked to report briefly on each option
and considering the board’s wishes, make a recommendation. Discuss the effects of each of
the foregoing options.
[Marks: (4+8+8) = 20]
= THE END =
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