ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – SEPT/OCT. 2015

B.COM – V SEMESTER

C1 12 502: COST & MANAGEMENT ACCOUNTING III

Duration: 3 Hours Max. Marks: 100

SECTION – A

Answer ALL the questions. Each carries 2 marks. (10×2=20)

What is the effect of increase in working capital and decrease in working capital in the fund flow statement?

Current ratio is 4:5, Acid test ratio is 3. Inventory is Rs.24,000. Find out total current liabilities.

What type of activity is Interest received and dividend paid for a financing and non-financing company?

Distinguish between Management Accounting and Financial Accounting on the basis of (i) Period of Reporting (ii) Users of information.

What is meant by Life Cycle Costing?

Cost of goods sold is 1,20,000; stock turnover is 6 times, opening stock is Rs.3,000 more than closing stock. Calculate the value of opening and closing stock.

State the treatment of increase in deferred tax liability and decrease of deferred tax asset in the Cash Flow Statement.

What is the difference between comparative Balance Sheet and Common Size Balance Sheet?

What is Trend Analysis?

10.

What is notional cash? Give two examples of Notional Cash inflow.

SECTION – B

II)

Answer any FOUR questions. Each carries 5 marks. (4×5=20)

A company has the following capital structure

9% Preference Shares of Rs.100 each	10,00,000
Equity Shares of Rs.10 each	40,00,000
	50,00,000

The following information relating to the financial year just ended are:

Equity dividend paid – 20%

Profit after tax – Rs.22,00,000

Market price of equity shares – Rs.20 each

You are required to calculate the following:

(1) Dividend yield on equity shares

(2) Cover for preference dividend

(3) Cover for equity dividend

(4) Earnings yield ratio

Calculate funds from operation from the information given below as on 31.03.2015.

a. Net Profit for the year ended 31.03.2015 is Rs. 13,00,000.

b. Gain on sale of building Rs. 61,000.

c. Goodwill appears in the books at Rs. 3,60,000 out of which 10% has been written off.

d. Old Machinery worth Rs. 16,000 has been sold for Rs. 13,000 during the year.

e. Rs. 2,50,000 has been transferred to General Reserve.

f. Depreciation has been provided on Machinery and Furniture at 20% of total cost. Total Cost of Machinery and Furniture amount to Rs. 13,00,000.

From the following figures calculate cash flow from operating activities:

	2013 (Rs.)	2014 (Rs.)
Balance of Profit & Loss	6,00,000	5,00,000
Provision for Depreciation	1,20,000	1,60,000
Outstanding wages	36,000	30,000
Prepaid Insurance	12,000	18,000
Goodwill	80,000	64,000
Provision for Doubtful Debts	20,000	28,000
Balance of Trade Receivables	2,80,000	1,96,000
Cash and bank balance	60,000	50,000

A company manufactures and sells 15,000 units of a product. The full cost per unit is Rs.200. The company has fixed its price so as to earn a 20% Return on an investment of Rs.18,00,000

(a) Calculate the selling price per unit

(b) Calculate the profit percentage on the full cost per unit.

“Management accounting helps a manager to take sound decisions”. Explain, Name five tools used by a Management Accountant to analyze data and arrive at sound financial decisions.

From the Balance Sheet and information given below, prepare schedule of changes in working capital.

ABC Co. Ltd. Balance Sheet as on 31^st March 2015.

Particulars	Note No.	31.03.2015	31.03.2014
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		3,00,000	2,00,000
(b) Reserves and Surplus	1	1,04,000	1,00,000
(2) Share Application Money pending allotment
(3) Non-current Liabilities:
(a) Long-term borrowings (6% Debentures)		1,60,000	1,60,000
(4) Current Liabilities:
(a) Short-term borrowings
(b) Trade Payables (Creditors)		1,16,000	1,30,000
( c) Other current liabilities
( d) Short-term provisions (Tax)		20,000	10,000
TOTAL		7,00,000	6,00,000
II. ASSETS:
(1) Non-current assets:
(a) Fixed Assets:
(i) Tangible Assets	2	3,70,000	3,60,000
(ii) Intangible Assets (Goodwill)		20,000	40,000
(b) Non-current Investments		20,000	–
(2) Current Assets:
(a) Current Investments
(b) Inventories		2,20,000	1,40,000
( c) Trade Receivables (Debtors)		50,000	40,000
( d) Cash and Cash Equivalents		20,000	20,000
(e) Short-term Loans and Advances
(f) Other Current Assets
TOTAL		7,00,000	6,00,000

SECTION – C

III)

Answer any THREE questions. Each carries 15 marks. (3×15=45)

17.

Prepare Fund Flow Statement from the following information.

Balance Sheet of Arvind Motor Company Ltd as on 31^st March 2015

Particulars	Note No.	31.03.2015	31.03.2014
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital	1	5,00,000	4,50,000
(b) Reserves and Surplus	2	1,18,000	70,000
(2) Share Application Money pending allotment
(3) Non-current Liabilities:
(a) Long-term borrowings (Loans)
(4) Current Liabilities:
(a) Short-term borrowings
(b) Trade Payables	3	63,000	45,000
( c) Other current liabilities (o/s Exps)		36,000	30,000
( d) Short-term provisions	4	1,00,000	82,000
TOTAL		8,17,000	6,77,000
II. ASSETS:
(1) Non-current assets:
(a) Fixed Assets:
(i) Tangible Assets	5	3,70,000	2,80,000
(ii) Intangible Assets (Goodwill)		80,000	1,00,000
(b) Non-current Investments		30,000	20,000
(c) Other Non-current Assets (Preliminary Expenses)		10,000	15,000
(2) Current Assets:
(a) Current Investments
(b) Inventories		1,09,000	77,000

( c) Trade Receivables	6	2,00,000	1,60,000
( d) Cash and Cash Equivalents	7	18,000	25,000
(e) Short-term Loans and Advances
TOTAL		8,17,000	6,77,000

Note: 1:
Share Capital	31.03.2015	31.03.2014
Equity Shares	4,00,000	3,00,000
8% Preference Shares	1,00,000	1,50,000
	5,00,000	4,50,000
Note: 2:
Reserves and Surplus:
Capital Reserve	20,000	0
General Reserve	50,000	40,000
P & L A/c	48,000	30,000
	1,18,000	70,000
Note: 3:
Trade Payables
Sundry Creditors	47,000	25,000
Bills Payables	16,000	20,000
	63,000	45,000
Note: 4:
Short-term Provisions:
Provision for tax	50,000	40,000
Proposed Dividend	50,000	42,000
	1,00,000	82,000
Note: 5:
Tangible Assets
Buildings	1,70,000	2,00,000
Plant and Machinery	2,00,000	80,000
	3,70,000	2,80,000
Note: 6 :
Trade Receivables
Sundry Debtors	1,70,000	1,40,000
Bills Receivable	30,000	20,000
	2,00,000	1,60,000
Note: 7 :
Cash and Cash Equivalents
Bank	8,000	10,000
Cash in hand	10,000	15,000
	18,000	25,000

Additional information:

a) A portion of the building was sold in 2015 and the profit has been transferred to capital reserve.

b) The written down value of a machine was Rs. 12,000. It was sold for Rs. 10,000. Depreciation of Rs. 10,000 was charged for the year 2015.

c) Investments are trade investments. Rs. 3000 received by way of dividend includes Rs. 1,000 relating to pre-acquisition profit which has been credited to the investments a/c.

d) An interim dividend of Rs. 20,000 has been paid in 2015.

18.

The financial statements of Vijay Limited, for the year 2015, reveal the following:

Ratio of Current Assets to Current Liabilities	1.75 to 1
Liquidity Ratio (Debtors and Bank Balance to Current Liabilities)	Rs.1.25 to 1
Issued Capital in equity shares of Rs.10 each	1,20,000
Working Capital	60,600
Fixed assets (net block)- percentage of share holders’ equity as on the closing date	60%
Gross Profit (percentage of turnover)	20%
Stock turnover	5.26 times
Average age of outstanding debtors for the year	2 months
Net profit percentage on issued share capital	16%

Note: On 31^st December 2015 current assets consists of stock, debtors and bank balances. You are required to prepare:

a) The Balance sheet as on 31^st December 2015

b) The Trading and Profit and Loss Account for the year ended 31^st December 2015

19.

From the following particulars, prepare Cash Flow Statement for the year ended 31^st March 2015.

(i) Total Sales for the year Rs.20,50,000 out of which cash sales amounted to Rs.14,20,000

(ii) Total purchases for the year were Rs.15,30,000 out of which cash purchases totaled Rs.10,20,000

(iii) Cash collected from credit customers during the year amounted to Rs.4,80,000

(iv) Cash paid to suppliers of goods on credit was Rs.4,50,000

(v) Depreciation for the year was Rs.40,000 whereas salaries and other expenses amounted to Rs.1,80,000, out of which Rs.20,000 are outstanding.

(vi) Redeemable preference shares of the face value of Rs.1,00,000 were redeemed during the year at a premium of 10%

(vii) Income tax paid Rs.80,000

(viii) New machinery was purchased for Rs.30,000 on 1^st January 2015

(ix) Rs.25,000 was paid as dividend for the year ended 31^st March, 2014

(x) Equity shares of the face value of Rs.2,00,000 were issued at a premium of 5% during the year.

(xi) The balance of cash and bank as on 1^st April, 2014 was Rs.85,000

20.

From the following Balance Sheet, comment on the financial position of the business using comparative balance sheet technique

Name of the Co.: Raj Ltd. Balance Sheet as at 31^st December, 2014 & 2015

Particulars	Note No.	31.12.2015	31.12.2014
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital	1	21,00,000	11,00,000
(b) Reserves and Surplus	2	7,25,000	6,00,000
(2) Share Application Money pending allotment

(3) Non-current Liabilities:
(a) Long-term borrowings (8% Debentures)		10,00,000	2,00,000
(4) Current Liabilities:
(a) Short-term borrowings
(b) Trade Payables (Creditors)		1,00,000	80,000
( c) Other current liabilities (O/S Exps)		25,000	20,000
( d) Short-term provisions
TOTAL		39,50,000	20,00,000
II. ASSETS:
(1) Non-current assets:
(a) Fixed Assets:
(i) Tangible Assets	3	25,00,000	10,00,000
(ii) Intangible Assets
(b) Non-current Investments		2,00,000	3,00,000
(2) Current Assets:
(a) Current Investments
(b) Inventories		6,00,000	4,00,000
(c) Trade Receivables (Debtors)		3,50,000	2,00,000
(d) Cash and Cash Equivalents (Cash)		3,00,000	1,00,000
(e) Short-term Loans and Advances
(f) Other Current Assets
TOTAL		39,50,000	20,00,000

Note: 1:
Share Capital:	31.12.2015	31.12.2014
Equity Share Capital	12,00,000	6,00,000
Preference Share Capital	9,00,000	5,00,000
	21,00,000	11,00,000

Note: 2:
Reserves and Surplus:
Profit and Loss A/c	2,25,000	2,00,000
General Reserve	5,00,000	4,00,000
	7,25,000	6,00,000

Note: 3:
Tangible Assets
Fixed Assets	40,00,000	18,00,000
Acc. Depreciation	15,00,000	8,00,000
	25,00,000	10,00,000

Additional Information:

a) 10% Dividend was paid in cash.

b) New Machinery for Rs. 30,000 was purchased but old machinery costing Rs. 12,000 was sold for Rs. 4,000. Accumulated depreciation on it was Rs. 6,000.

c) Rs. 20,000 8% Debentures were redeemed by purchase from the open market at the rate of Rs. 96 for a debenture of Rs. 100 each.

d) Rs. 36,000 worth of investments was sold at book value.

21.

Prakash Ltd. provides the following details of its new product.

Years 1 and 2: Research and Development Costs : Rs. 2,40,000, Design Costs : Rs. 1,60,000.

Years 3 to 6 : Other Functional Costs:

Function	One-time Costs (Rs.)	Cost per unit (Rs.)
Production	1,00,000	25
Marketing	70,000	24
Distribution	50,000	16
Customer Service	80,000	30

The sale quantities during the Product Life Cycle at various Selling Prices are:

Selling Price per unit (Rs.)	400	480	600
Sale Quantity in units	5,000	4,000	2,500

Ignoring time value of money, compute the Net Incomes generated over the Product Life Cycle at various prices. Which price should the company select?

SECTION – D

IV)

Compulsory Question: (1×15=15)

22.

(a) Classify the following activities into (i) Operating Activities, (ii) Investing Activities and (iii) Financial Activities in case of

Sl. No.	Items
1	Purchase of securities of a Company by a Financing Company
2	Loans and advances made by a non financing company.
3	Receipts from the repayments of loans and advances by a financing company.
4	Dividend received on securities by a financing company.
5	Dividend paid to shareholders by a financing company.

(b) The current ratio of a company is 2:1. Which of the following transactions would improve the ratio, reduce it or would have no effect on the current ratio? why?

(1) To pay a current liability

(2) To sell a motor car for cash at a slight loss

(3) To borrow money for a short time on interest against a promissory note

(4) To purchase stock for cash

(5) To issue bills payable to a creditor.

Particulars	1^st Jan 2014	31^st Dec 2014
Reserves & Surplus	40,000	60,000
Machinery	35,000	1,50,000
Accumulated Depreciation	25,000	20,000
Discount on issue of debentures	–	5,000

A machine costing Rs.35,000 (accumulated depreciation Rs.15,000) was sold for Rs.10,000 on 1^st Jan. There was an issue of Rs.1,00,000 debentures at a discount of 5% for the purchase of a machine. Rs.10,000 was paid as dividend during the year.

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