NED UNIVERSITY OF ENGINEERING AND TECHNOLOGY

Financial Accounting and F. Management (EM-502)

Questions for Assignment

Important Note: Attempt any eight questions in all, all questions carry equal marks, submit
duly completed in hand written form. You can send it personally or through courier on this
address:
M. Sajeeruddin, Director Finance, Directorate of Finance,
NED University of Engineering and Technology
University Road Karachi.

Q-1
(a) What are the functions and Characteristics of Accounting?
(b) What are the two basis for the preparation of Accounting Statement?
(c) What are the silent features of Accounting Equation?
(d) What are the difference between Matching Principle and Revenue Realization
Principle?

Q-2 Alfa Co. a manufacturing firm produces a single product. The following information
has been taken from the company's production , sales and cost records for the just completed
year.

Production in Units…………………………………………………29,000
Sales in Units………………………………………………………. ?
Ending Finished Goods inventory in units………………………... ?
Sales ……………………………………………………… Rs 1,300,000

Costs:
Advertising in ………………………………………………………105,000
Entertainment and Travel ………………………………………... 40,000
Direct labour……………………………………………………… 90,000
Indirect labour …………………………………………………….85,000
Raw Materials Purchased ……………………………………… 480,000

Building Rent(Production uses 80% of the space, rest is

for Admin. and sales offices)…………………………………Rs40,000
Utilities, factory………………………………………………..108,000
Royalty paid for the use of production Rs 1.50/unit……………….?
Maintenance, factory ……………………………………………9,000
Rent for special production equipment Rs 87,000 per year
Plus Rs 0.30 per unit produced…………………………………….?
Selling and administrative salaries…………………………….210,000
Other FOH cost………………………………………………….6,800
Other Selling and Admin Expenses ……………………………17,000

Beginning of year End of year

Inventories;
Raw Material Rs20,000 Rs30,000
WIP 50,000 40,000
Finished Goods 0 ?
The finished goods inventory is being carried at average unit production Cost for the year.
Selling price of the product is Rs 50.00 pre units.
Required:
1. Prepare a schedule of Cost of Goods Manufactured.
2. Prepare Income Statement for the year

Q-3
(a) Mr. Jawaid has just reached age of 58. In 12 years he plans to retire. Upon retiring, he
would like to take an extended vacation, which he expects will cost at least Rs
400,000. What lump-sum amount must he invest now to have the needed Rs 400,000
at the end of 12 years if the rate of return is; (i) Eight percent (ii) Twelve percent
(b) Mr. Ahmed would like to send his son to an expensive summer camp at the end of
each five years. The camp costs Rs 100,000 at the end of each year if the rate of is: (i)
Eight percent (ii) Twelve percent
(c) You have just received an inheritance from a relative. You can invest the money and
either receive a Rs 200,000 lump sum amount at the end of 10 years or receive Rs
14,000 at the end of each year for the next 10 years. If your minimum desired rate of
return is 12%, which alternative would you prefer?

(d) G&N Ltd. Is studying a project that would have an eight year life and require a Rs
1,600,000 investment in equipment. At the end of eight years, the project would
terminate and the equipment would have no salvage value. The project would provide
net income each year as follows:

Sales……………………………………….Rs 3,000,000
Less variable expenses ……………………….1,800,000
Contribution margin…………………………..1,200,000
Less fixed expenses:
Advertizing, salaries and other fixed
Expenses…………………….Rs 700,000
Depreciation …………………....200,000
Total fixed expenses………………………….. 900,000
Net Income……………………………………. 300,000

The company's discount rate is 18%.

Required:
(i) Compute the net annual cash inflows from the project.
(ii) Compute the project's net present value. Is the project acceptable?
(iii) Compute the project's Internal Rate of Return.(IRR)
(iv) Compute the project's payback period. If the company requires a maximum
payback of three years, is the project acceptable?
(v) Compute Average Rate of Return. (ARR)
Q-4
Following are the balances of ledger accounts, you are required to prepare Trial Balance for
M/s Aliya Inc. as on june 30,2011

S.No Account Name Balance

.
1 Land Rs
1,200,000
2 Building 860,000
3 Furniture and Fixture 400,000
4 Equipment 350,000
5 Capital Work in Progress 400,000
6 Cash 350,000
7 Bank 450,000
8 Accounts Receivable 277,000
9 Prepaid Rent 100,000
10 Prepaid Insurance 75,000
11 Prepaid Salaries 90,000
12 Accounts Payable 150,000
13 Accrued Liabilities 120,000
14 Capital 1,918,000
15 Revenue Reserve 102,000
16 Services Revenue 3,000,000
17 Salaries expenses 350,000
18 Utilities expenses 210,000
19 Insurance expenses 25,000
20 Rent expense 20,000
21 Depreciation Expense- 75,000
Building
22 Depreciation expense- 33,000
Furniture
23 Depreciation expense- 25,000
Equipment

Q -5
(a) What are the parts of Income Statement? Explain in details.
(b) The records of the High Tec Head Phones Company show the following information for
the three months ended March 31, 2010

Materials purchased …………………………Rs1,946,700

Inventories January 1, 2010

Finished goods (100 Head Phones)………… 43,000

Materials …………………………………… 268,000
Direct labor………………………………… 2,125,800
Factory overhead (40% variable)……………... 764,000
Marketing expenses (all fixed)…………………. 516,000
General and administrative expenses (all fixed)….461,000
Sales (12,400 Head Phones)…………………… 6,634,000

Inventories, March 31, 2010

No unfinished work on hand.
Finished goods 9200 Head Phones) @ 395 each.
Materials……………………………………….. 167,000

Required:
(1) An income statement for the period.
(2) The number of units manufactured.
(3) The unit cost of Head Phones manufactured.
(4) The gross profit per unit sold.
(5) The income per unit sold.
(6) The ratio of gross profit to sales.
(7) The income to sales percentage.

Q-6
(a) What are the objectives and causes of Depreciation? Explain separately both of them.

(b) Colligun Water Corp. purchased machinery for Rs 315,000 on May 1, 2009. It is
estimated that it would have a useful life of 10 years, salvage value of Rs 15,000, production
of 240,000 units and working hours of 25,000. During 2010 Colligun Water Corp. Used the
machinery for 2,650 hours, and the machinery produces 25,500 units.

Instructions
From the information given, compute the depreciation charge for 2010 under each of the
following methods. (Round to the nearest Rupee)

(a) Straight-line.
(b) Units-of-output.
(c) Working hours.
(d) Sum-of-the-years’-digits.
(e) Declining-balance (use 20% as the annual rate.)

Q-7
(a) What are the items of operating cash flows under IAS-7?
(b) Following is the data of Goods Dealers Ltd for two financial years
Additional information

1. Tax provision of Rs. 500,000 was made for 20x7

2. The company paid 20% dividend on ordinary shared fof the year ended Dec. 31 20x6, on
March, 20x7

3. Depreciation charge during 20x7 amounted to Rs. 200,000

4. Equipment with a book value of Rs. 200,000 was sold for Rs. 180,000

5. During the year Rs. 50,000 were incurred on issue of shares. The amount was charged to
deferred costs.
Required
Prepare Cash Flows from Operating Activities under the indirect method

Q-8
(a) Differentiate between Job order Costing and Process Costing.

(b) A shop-floor supervisor of FICASSO, a small factory presented the following cost for
job No. S-87/11 to determine selling price.

Per unit
Rs.
Material 70
Direct Wages 18 hrs. @ Rs. 2.50 45
(Deptt. X 8 hrs ; Deptt. Y 6 hrs; Deptt. Z 4 hrs.)

Chargeable expenses (Special stores items) 5

_______
120
Add: 33 % for expenses 40
_______
Cost 160.00

Analysis of the profit and loss Account of 2009-10 shows the following:
Material used Rs 150,000 Sales less returns Rs 250,000
Direct Wages: Rs
Department X 10,000
Y 12,000
Z 8,000 30,000

Special store items: 4,000

Overheads:
Department: X 5,000
Y 9,000
Z 2,000 16,000

Gross profit c/d 50,000

250,000 250,000

Selling expenses 20,000

Net profit 30,000 Gross Profit b/d 50,000
50,000 50,000

It is also noted that average hourly rates for the 3 departments X, Y and Z are similar:
You are required to:

1) Draw up a Job Cost Sheet.

2) Calculate and enter revised cost using 2009-10 actual figures as basis.
3) And 20 % to total costs to determine selling price

Note: Overheads Rates: No. of working hours has been ascertained by dividing the direct
wages in each department by the labour hour rate.

Q -9
The JS Company began business on 1st April 2010 and produced by the end of month June,
2010 40,000 units of its single product called SU- 211 Nozzle. The product requires three
basic raw materials, A,B and C, which were purchased during the first three months at the
following prices and quantities:

Purchased Quantities Ending

Materia
Price Purchase inventory
l
Per Kg. June 30, 2010
A Rs 25 Kg Kg 4,000
35,000
B 20 10,000 6,000
C 50 8,000 5,000

Factory wages and other salaries paid were:

Direct labour Rs 450,000

Indirect labour 225,000
Supervision factory 180,000
Selling and Administrative Salaries 300,000

Other information:
Factory Over head Selling & Admin. Expenses

Supplies Rs 140,000 Rs 80,000

Repair and Maint. 90,000 40,000
Depreciation 80,000 35,000
Utilities 270,000 110,000
Insurance 560,000 280,000
Delivery expenses - 90,000
At the end of the three month finished goods inventories contained 1,500 units, while 38,500
units sold at an average sales price of Rs 175 per unit.

Required: A detailed profit and loss account showing the cost of goods finished and cost of
goods sold.

Q-10
The following data pertain to a small store. The owner has made the following sales forecasts
for the first five months of the coming year.

Rs.
January 40,000
February 45,000
March 55,000
April 60,000
May 50,000

Other data are as follows:

(a) Debtors and creditors balances at the beginning of the year are Rs 30,000 and
Rs 14,000 respectively. The balances of other relevant assets and liabilities are:

Rs.

Cash balance 7,500

Stock 51,000
Accrued sales commission 3,500

(b) 40% sales are on cash basis. Credit sales are collected in the month following sale.

(c) Cost of sales is 60% of sales.

(d) The only variable cost is a 5% commission to sales agents. Sales commission is paid
in the month after it is earned, i.e. time-lag is one month; 80% sales are subject to the
commission.

(e) Inventory (stock) is kept equal to sales requirement for the next two months budgeted
sales.

(f) Trade creditors are paid in the following month after purchases.

(g) Fixed costs are Rs. 5,000 per month, including Rs. 2,000 depreciation.
You are required to prepare a cash budget for each of the first three months of coming year on
the basis of format given below.

Month
January February March
(Rs.) (Rs.) (Rs.)
(A) Cash inflows
Cash sales (40% of total sales)
Collection from debtors (one month after sale)
Total cash receipts
Cash outflows
(B)
Paid to trade creditors for purchases
(Purchase budget)
Sales commission (5% of prior months sales)
Fixed costs (Excluding depreciation)
Total cash payments

(C ) Surplus/(deficiency)(A) – (B)
Beginning balance
Ending balance

Working notes:

Purchase budget
Desired ending inventory (at cost price) 60,000 69,000 66,000
Plus cost of goods sold (current month) 24,000 27,000 33,000
Total requirements 84,000 96,000 99,000
Less beginning inventory 51,000 60,000 69,000
Purchase ? ? ?