TABANI’S SCHOOL OF ACCOUNTANCY

MID TERM EXAMINATION CAF-5 (Section-B2+B1-N+C1-N)

FINANCIAL ACCOUNTING AND REPORTING-I Sunday: 13th June, 2021
Time Allowed: 02.15 (Including reading time) Maximum Marks: 65
Marks

Section - A
Q.1. Following balances were extracted from the books of PK Ltd (PKL) as a 31 December 2018: (08)

Rs.’000’
Ordinary share capital @100/- each 250,000
Share premium 40,000
Surplus on Revaluation (Land Rs.35,000; Building Rs.25,000) 60,000
Un-appropriate Profit 120,000

Transactions for 2019:

(1) The directors have proposed final dividend on 2nd February 2020; on ordinary shares @15/-
(2019 @12%).

(2) On 1st July 2019 interim bonus issue was made one for every 10 shares held on ordinary
capital.

(3) PKL has revalued its assets as 31 December, 2019 but effect is not incorporated in above
balance.

(Rs.’000’s)
Balance as at 31 December, 2019 before revaluable cost 85,000 260,000
 Accumulated depreciation - 80,000
 Re-valued amounts as at 31 December, 2019 72,000 156,000
(4) Profit before above adjustment is 48 million and transfer of incremental depreciation is Rs.6
million (credited to general reserve).
Requirement:
Prepare statement of changes in equity for the year ended 31 December 2019.
Q.2. Account Department of the Aqib Khan Co. provides the following data at end of June 2017, you are required (08)
to prepare cost of Goods Manufactured; Cost of Goods Sold, find out Gross Profit / Loss & Net profit / Loss
and Per unit Manufacturing Cost at the Year ended May 30th, 2009 assuming that Net Sales of Rs.72,000.
Marketing expense 5%, Advertising Expense 1% and Other Expense 3% of Net Sales.

Net purchases Rs.36,000 and Direct Expenses are 1% of Net Purchases; FOH 2/3 of Direct Labor and Direct
Labor cost is Rs.15,000. Units are produced during the period was 5,000.

Q.3. Extravagant Inc: is installing a new plant at its production facility. It has incurred these costs. (05)
1. Cost of the plant (cost per supplier’s invoice plus taxes) $2,500,000
2. Initial delivery and handing costs $200,000
3. Cost of site preparation $600,000
4. Consultants used for advice on the acquisition of the plant $700,000
5. Interest charges paid to supplier of plant for deferred credit $200,000
6. Estimated dismantling costs to be incurred after 7 years $300,000
7. Operating losses before commercial production $400,000
Required:
Please advise Extravagant Inc. on the costs that can be capitalized in accordance with IAS-16.
Q.4 Select the most appropriate answers(s) from the options available for each of the following Multiple Choice
Questions (MCQs).
(1) Which of the following companies is most likely to face cash flow problems? (01)
(a) A loss making government organisation
(b) A company which has recently sold part of its operations so as to concentrate on its core areas
(c) A reasonably profitable and long established company with no expansion plans
(d) A profitable retailer about to embark on ambitious expansion plans (01)
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FINANCIAL ACCOUNTING AND REPORTING-I – MID TERM EXAM SCHOOL OF ACCOUNTANCY

(2) Which TWO of the following fall under the definition of investment property? (02)
(a) Property occupied by an employee
(b) A building owned by an entity and leased out under an operating lease
(c) Property being constructed on behalf of third party
(d) Land held for long term appreciation

(3) Under IAS 36 Impairment of Assets, if the fair value less costs to sell of an asset cannot be (02)
determined then:
(a) the asset is not impaired
(b) the recoverable amount is the value in use
(c) the net realizable value is used
(d) the carrying value of the asset remains the same
(4) A plant has a carrying amount of Rs.1,500,000 as at 31 December 2019. Its fair value is Rs.900,000 and (02)
costs of disposal are estimated at Rs.50,000. A new plant would cost Rs.2,500,000. Cash flows from the
plant for the next four years are estimated at Rs. 350,000per annum. Applicable discount rate is 10%.
What is the approximate impairment loss on the plant to be recognised in the financial statements as at
31 December 2019?

(a) Rs. 650,000 (b) Rs. 390,000

(c) Rs. 1,000,000 (d) Nil

Section - B

Q.5. Statement of financial position of Trackers Limited (TL) as on 31 December 2020 is as follows: (17)

2020 2019 Assets 2020 2019

Equity & Liabilities
Rs. in million Rs. in million
Share capital (Rs. 100 each) 1,300 900 Property, plant and equipment 1,920 1,350
Share premium 310 160 Investment property 310 120
Retained earnings 380 120 Inventories 205 250
Surplus on Revaluation 215 200 Debtors 342 291
Long-term loans 720 950 Advances, deposits prepayments 14 20
Trade and other payables 152 120 Cash and bank balances 376 479
Current portion of long-term loans 90 60
3,167 2,510 3,167 2,510

Additional information:

(1) Long term loan Rs.120 million was converted into share capital by issuing 1 million shares.
(2) Fully depreciated assets was exchanged with new assets costing Rs.75 million, of which 45 million
is still outstanding.
(3) Depreciation charged during the year was 260 million and incremental depreciation Rs.25 million.
Out of total upward revaluation of Fixed Assets during the year, Rs.40 million was credited to profit
& loss account.
(4) Investment property acquired during the year Rs.220 million. Impairment loss on investment was
charged to profit & loss account.
(5) Interest charged to profit & loss account Rs.42 million. Accrued interest was Rs.10 million (Rs.8
million 2019)
(6) Income tax charged to profit & loss account Rs.70 million and net profit during the year after tax
280 million.

Required:
Prepare TL’s statement of cash flows for the year ended 30 June 2020 in accordance with the requirements
of IFRSs

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FINANCIAL ACCOUNTING AND REPORTING-I – MID TERM EXAM SCHOOL OF ACCOUNTANCY

Q.6 Mr. Rahail has provided following balances as at 31 December: (20)

Rs.000 Rs.000
2018 2019
Property, plant & equipment – cost 545,000 ?
Provision for Depreciation 120,000 ?
Loan payable 90,000 120,000
Stock 20,000 ?
Interest payable ? ?
Advance rent 5,250 5,880
Cash 2,000 2,600
Accrued salaries (one month) ? ?
Creditors 15,500 ?

OTHER INFORMATION:

1. Summary of Bank Statement is as follow:

(Rs.000’s)
Bal. b/d 16,000 Loan repaid on (30 May & 50,000
Banking ? 30 Nov. @25,000)
Loan received ? Interest on loan paid ?
(received on 1st July) Purchases 180,000
Rent paid ?
Bal. c/d Rs.18,500

2. The rate of gross profit for 2018 was 25% on sales and selling price for 2019 has increased by 10% and
20% of the total purchases was remained in stock. Goods costing Rs.2 million was lost out of opening
stock and insurance claimed received Rs.1.2 million.

3. An assets having book value on 1st January 2019 Rs.14.4 Million, which was bought on 1st July 2017,
was sold on 1st July 2019 for Rs.14.5 Million; received in cash. The rate of depreciation was 20% on
book value.
4. Annual increment @10% in salaries was made on 1st April 2019.
5. The rate of markup on loan was 12%. Mark on loan is paid on 30th May & 30th November each year.
6. Annual rent is payable on 1st August each year.
7. Outstanding cheques of creditors Rs.3,500,000 at 31st December 2018 and Rs.4,500,000 on
31st December 2019.
8. Payment made through cash:
- Salaries paid Rs.14,160
- Drawings Rs.10,500
9. On 30 November 2019 cash was stolen, and insurance company agreed to pay claim upto 80% of total
cash stolen.
Required:
Prepare for the year ended 31 December 2019:
(a) Statement of Comprehensive Income
(b) Statement of Financial Position
THE END

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