Pir Mehr Ali Shah

Arid Agriculture University, Rawalpindi

Office of the controller of Examinations
Final Exam (Theory)/ Spring 2020 (Paper Duration 48 hours)
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Course No.: ……………………………Course Title:…………………….…………………………………………………………………

Total Marks:……….……………………………Date of Exam:………………………………………......................................
Degree: ……………………………………….Semester:………………………… Section:……………………………………
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Answer the following questions.

Q.No.1.
You are a professional accountant working for ALI resort that is listed on stock market and
find yourself in a difficult situation. Firms’ claims that You have discovered some
irregularities in the financial records of your firm’s client. You are uncertain whether these
irregularities are the result of carelessness on the part of the company’s employees or
represent intentional steps taken to cover up questionable activities. You approach your
superior about this, and she indicates that you should ignore it. Her response is, “These things
happen all of the time and usually are pretty minor. We are on a very tight time schedule to
complete this engagement, so let us just keep our eyes on our goal of finishing our work by
the end of the month. Further, not every company uses December 31 as the accounting year-
end. Some companies whose year-ends differ from December 31 are General Electric, May
27; PTV Productions, September 30; and Macdonald Inc., October 31. Why do companies
choose the particular year-ends that they do? Many choose to end the accounting year when
inventory or operations are at a low. Compiling accounting information requires much time
and effort by managers, so companies would rather do it when they aren’t as busy operating
the business. Also, inventory is easier and less costly to count when it is low.

a. What year-end would you likely use if you owned a SKI resort and ALI rental
business?
b. What if you owned a college bookstore what year end will you choose?
c. What would you do if you find any irregularity and your boss respond it usual routine
issues?
d. What will be the possible implications in case you take any action or if you do not
take any action in case of irregularities?
(Marks10)
Answer:
Q.No.2.
NADEEM & CO. reported the following current-year purchases and sales for its
only product.

Units
Units sold
Date Activities Acquired at
at Retail
Cost

Jan. Beginning $10.0

100 units @ = 1,000
1 inventory 0

Jan. $40.0
Sales 90 units @
10 0

Mar. $15.0
Purchase 250 units @ = 3,750
14 0

Mar. $40.0
Sales 140 units @
15 0

July $20.0
Purchase 400 units @ = 8,000
30 0

Oct. $40.0
Sales 300 units @
5 0

Oct. $25.0 15,00

Purchase 600 units @ =
26 0 0

$27,7
Totals 1,350 units 530 units
50

Required:

NADEEM uses a perpetual inventory system.

Determine the costs assigned to ending inventory and to cost of goods sold
using FIFO & LIFO

(Marks 10)
Answer:

Q.No.3.
(A)
Consider a machine that costs $25,000, with an estimated total unit production of 100 million
and a $0.50M salvage value. During the first quarter of activity, the machine produced 4
million units.

Calculate the depreciation. (5 marks)

Answer:

(B) How is the income statement linked to the balance sheet? (Marks 2.5)
(c) How is it possible for a company to show positive net income but go
bankrupt? (Marks 2.5)