2018-06 ICMAB FL 001 PAC Year Question JUNE 2018

THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH
CMA JUNE, 2018 EXAMINATION

FOUNDATION LEVEL
SUBJECT: 001. PRINCIPLES OF ACCOUNTING
Time: Three hours Full Marks: 100
 All questions are to be attempted.
 Show computations, where necessary.
 Answer must be brief, relevant, neat and clean.
 Start answering each question from a fresh sheet.
Q. No. 1
ABC Company Limited closed its books of accounts as on 30.06.2017. The followings are the
balances taken from the ledger of the Company:
Taka
Cash and Bank 240,000
Accounts Receivable 672,000
Inventory 01 July, 2016 648,000
Store Supplies 16,000
Office Supplies 5,800
Prepaid Insurance 25,000
Store Equipment 170,000
Accumulated Depreciation (Store Equipment) 45,000
Office Equipment 52,000
Accumulated Depreciation (Office Equipment) 16,000
Accounts Payable 360,000
Mortgage Notes Payable (due 2022) 600,000
Capital 528,000
Sales 2,460,000
Sales Discount 54,000
Sales Return 33,600
Purchase 1,384,800
Purchase Return 78,000
Purchase Discount 31,600
Sales Salaries 246,000
Delivery Expenses 68,000
Rent Expenses 48,000
Freight-in 36,000
Office Salaries 136,000
Office Expenses 15,000
Misc. General Expenses 13,600
Gain on disposal of Assets 7,200
Interest Expenses 30,000
Land 232,000
Page 1 of 4
FOUNDATION LEVEL
Q. No. 1(cont’d…)
Other relevant information on June 30, 2017 are as follows:
(a) The Inventory on hand 507,200

(b) Supplies on hand :
Office Supplies 2,200
Store Supplies 9,000
(c) Insurance Expired during the year:
Allocable to selling expenses 9,700
Allocable to general expenses 2,600
(d) Equipments are depreciated at the rate of 10% per annum.
(e) Accrued sales salaries 4,600
(f) Accrued office salaries 2,100
(g) Accrued interest on the mortgage notes payable 4,800
(h) Income tax is estimated at 45% of the income.
Required: Prepare -
(a) Statement of Financial Performance for the year ended June 30, 2017 and
(b) Statement of Financial Position as at June 30, 2017.
[Marks: 20]
Q. No. 2.
(a) Explain the concept of Business entity and going concern.

(b) On January 31, 2016 Orion Company Limited had a cash balance per books of Tk.
6,781.50.The bank statement from Bank Asia on that data showed a balance of Tk.
6,404.60. A comparison of the statement with the cash account revealed the following
facts:
(i) The statement included a debit memo of Tk. 40 for the printing of company cheques.
(ii) Cash sales of Tk. 836.15 on January 12 were deposited in the bank. The cash
receipts journal entry and the deposit slip were incorrectly made for Tk. 886.15. The
bank credited Orion Company for the correct amount.
(iii) Outstanding cheques at January 31 totaled of Tk. 576.25. Deposits in transit were
Tk. 1,916.15.
(iv) On January 18, the company issued cheque no. 1181 for the Tk. 685 to Star
Limited, on account. The cheque, which cleared the bank in January, was incorrectly
journalized and posted by Orion Company Limited for Tk. 658.
(v) A note receivable of Tk. 2,500 was collected by the bank for Orion Company Limited
on January 31 plus Tk. 80 interest. The bank charged a collection fee of Tk. 20. No
interest has been accrued on the note in the book of the company.
(vi) Included with the cancelled cheques was a cheque issued by Lalmai Company
Limited to Pharma Limited for Tk. 800 that was incorrectly charged to Orion
Company Limited by the bank.
(vii) On January 31 , the bank statement showed a NSF charge of Tk. 680 for a cheque
issued by Alom, a customer, to Orion Company Limited on account.
Required:
(i) Prepare the bank reconciliation statement on January 31, 2016.
(ii) Prepare the necessary adjusting entries for Orion Company Limited at January 31, 2016.
Marks: (5+10+5) =20]
Page 2 of 4
FOUNDATION LEVEL
Q. No. 3.
(a) Differentiate between stock split and reverse stock split. Explain the impact of such split
on stockholder’s Equity section of Balance sheet.
(b) On January 01, 2016 Halim Motors Ltd. had the following stockholders’ equity account:
Common stock (Tk.10 per share value, 520,000 issued and Outstanding) Tk. 52,00,000
Paid up capital in excess of par value Tk. 30,00,000
Retained earnings Tk. 6,40,000
During the year the following transactions took place:
April 01 Declared 15% cash dividend to stock holders which is payable on May 01.
May 01 Paid the dividend declared on April 01.
August 01 Declared 10% stock dividend to stock holders which will be credited on
August 31. Market value of Halim’s stock was Tk. 15 on August 1.
August 31 Issued the stocks for the stock dividend declared before.
December 01 Declared 15% cash dividend to stock holders which is payable on January
05, 2017.
December 31 Determined that net income for the year was Tk. 12,00,000.
Required:
Journalize the transactions and the closing entry for the net income.
[Marks: (8+12) = 20]
Q. No. 4
(a) Critically analyze the application of depreciation methods from accounting and income tax
perspectives with reference to relevant standards and laws.
(b) The following selected transactions are related to Falcetto Company:
March 01 Sold Tk. 20,000 of Merchandise to Potter Company, terms 2/10, n/30.
11 Received payment in full from Potter Company for balance due.
12 Accepted Juno Company’s Tk. 20, 000, 6-month, 12% note for balance due.
13 Made credit card sales for Tk. 13,200.
15 Made Visa credit sales totaling Tk. 6,700, a 3% service fee is charged by Visa.
April 11 Sold accounts receivable of Tk. 8,000 to Harcot Factor. Harcot Factor assesses
a service charge of 2% of the amount of receivables sold.
13 Receive collection of Tk. 8,200 on Falcetto company credit card sales and added
finance charges of 1.5% of the remaining balance.
May 10 Wrote off as uncollectible Tk. 16,000 of accounts receivable. Falcetto uses the
percentage of sales basis to estimate bad debts.
June 30 Credit sales recorded during the first 6 months total Tk. 2,000,000.The bad debt
percentage is 1% of credit sales. At June 30, the balance in the allowance
account is Tk. 3,500.
July 16 One of the account receivable written off in May was from J. Simon, who pays
the amount due, Tk. 4,000, in full.
Required:
Prepare the Journal entries for the above transaction.
[Marks: (5+15) = 20]
Page 3 of 4
FOUNDATION LEVEL
Q. No. 5.
(a) Explain prepaid expenses and unearned revenues with reference to relevant accounting
principles.
(b) There are 500 employees of United Motor Ltd. on the payroll register for the month of
January 2017. Employees are working in different departments as follows:
Production department – 300 Nos.
Service department – 175 Nos.
Admin & Finance department – 25 Nos.
Summary of payroll data for the employees of January 2017 is given below:
(i) Basic wages and salaries Tk. 24,00,000.
(ii) House rent allowance: 10% of basic wages and salaries.
(iii) Medical allowance: Tk. 200 per employee per month.
(iv) Dearness allowance: 10% basic wages and salaries.
(iv) Conveyance allowance: Tk. 250 per employee per month.
(v) 10% of basic wages salaries deducted from each employee as contribution to Provident
fund and company contributes equivalent amount to the provident fund.
(vi) Union subscription is deducted Tk. 25 per month from each employee of all departments.
(vii) Incentive production bonus is given to the employees 25% of basic wages and salaries for
extra production.
Required:
(1) Prepare a payroll register for the month of January, 2017.
(2) Prepare necessary journal entries to record the pay roll.
[Marks: 5+ (10+5) = 20]
= THE END =
Page 4 of 4

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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH

CMA JUNE, 2018 EXAMINATION

Other relevant information on June 30, 2017 are as follows:

(a) The Inventory on hand 507,200

(a) Explain the concept of Business entity and going concern.

During the year the following transactions took place:

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