St. Joseph’s College of Commerce M.I.B. 2013 I sem Accounting For Decision Making Question Paper PDF Download

St. Joseph’s college of commerce (Autonomous)

End Semester Examination – OCTOBER 2013

MIB – I SEMester

Accounting for Decision Making

            Duration: 3 hours                                                                                        Max. Marks: 100               

SECTION-A

  1. Answer any SEVEN questions out of Ten:           (7×5=35)

 

  1. The income statements of a concern are given for the year ending on 31st December 2010 and 2011. Rearrange the figures in a comparative form the study the profitability position of the concern.       ‘000
  2010 (Rs.) 2011 (Rs.)
Net sales 785 900
Cost of goods sold 450 500
General and administrative expenses 70 72
Selling expenses 80 90
Interest paid 25 30
Income tax 70 80

 

  1. These are two similar factories under the same management. The management desires to merge these two plants. The following particulars are available:
  Factory I Factory II
Capacity operation 100% 60%
Sales 300 lakhs 120 Lakhs
Variable costs 220 Lakhs 90 Lakhs
Fixed costs 40 Lakhs 20 Lakhs

You are required to calculate:

  1. What would be the capacity of the merged plant to be operated for the purpose of Break-even?
  2. ii) What would be the profitability on working at 75% of the merged capacity?
  3. From the following forecasts of income and expenditure, prepare a cash budget for the months January and April, 2011: (Rs)
Months Sales (credit) Purchases (credit) wages Manufacturing expenses Administrative expenses Selling expenses
2007 November 30,000 15,000 3,000 1,150 1.060 500
December 35,000 20,000 3,200 1,225 1,040 550
2008 January 25,000 15,000 2,500 990 1,100 600
February 30,000 20,000 3,000 1,050 1,150 620
March 35,000 22,500 2,400 1,100 1,220 570
April 40,000 25,000 2,600 1,200 1,180 710

 

Additional information is as follows:

  • Customers are allowed a credit period of 2 months
  • A dividend of Rs. 10,000 is payable in April
  • Capital expenditure to be incurred: plant purchased on 15th of January for Rs. 5,000; a Building has been purchased on 1st March and the payments are to be made in monthly installments of Rs. 2,000 each
  • The creditors are allowing a credit of 2 months
  • Wages are paid on the 1st of the next month
  • Lag in payment of other expenses in one month
  • Balance of cash in hand on 1st January,2011 is Rs. 15,000
  1. The following information at 50% capacity is given, prepare a flexible budget and forecast the profit and loss at 60%, 70% and 90% capacity:
  Expenses at 50% capacity
Fixed expenses: salaries 50,000
Rent and taxes 40,000
Depreciation 60,000
Administrative expenses 70,000
Variable expenses  
Material 2,00,000
Labour 2,50,000
Others 40,000
Semi-variable expenses: Repairs 1,00,000
Indirect Labour 1,50,000
Others 90,000

It is estimated that fixed expenses will remain constant at all capacities. Semi-Variable expenses will not change between 45% and 60% capacity, will rise by 10% between 60% and 75% capacity, a further increase of 5% when capacity crosses 75%.

Estimated sales at various levels of capacity are:

Capacity.                    Sales (Rs.)

60%                             11, 00,000

70%                             13, 00,000

90%                             15, 00,000.

 

  1. Write a note on Activity based costing, life cycle costing and target costing.

 

  1. Write journal entries for the following:

(1) Proprietor withdrew for his personal use cash Rs.2000 and goods worth RS.1000.

(2)Rs.1000 due from Rohit is now written off as bad debts.

(3)Rahul who owed us Rs.20,000 becomes insolvent and a final dividend of 60 paise in a rupee is received from his estate.

(4)Goods worth Rs.10,000 were destroyed by a fire. Insurance company admitted a claim for 60% amount.

(5)Goods worth Rs.5000 were distributed as free samples.

 

  1. From the following list balances, extract from the books of Rakesh, prepare a trial balance as on 31/3/2005. The amount requires to balance should be entered as capital.
PARTICULARS

Purchases

Stock(1/4/2004)

Sales

Sundry expenses

Leasehold premises

Free hold premises

Return inward

Furniture &Fixtures

Equipment

Repairs to equipment

Depreciation

Bank

AMNT(Rs)

18,20,000

3,50,000

40,00,000

15,000

5,00,000

18,00,000

25,000

2,90,000

8,00,000

5000

80,000

34,600

PARTICULARS

Drawings

Sundry Debtors

Sundry Creditors

Bad debts

Investments (10%)

Interest-investments

Long term borrowings

Loan from UTI bank

Interest on loan

Petty cash A/C

Stock(31/3/2005)

 

AMNT(Rs)

60,000

3,60,000

1,20,000

10,000

2,00,000

20,000

6,00,000

8,00,000

65,000

400

4,60,000

 

 

  1. M/s Raj and Co. purchased a machine for Rs.1,00,000. Estimated useful life and scrap value were 10 years and Rs.12000 respectively. The machine was put to use on 1/1/2006. Show the machinery A/C and depreciation A/C in their books for 2011 by using Sum of Years digits method.

 

  1. Under what headings will you show the following items in the balance sheet of a company

(A) Interest accrued and due on unsecured loans

(B)  Interest accrued and due on secured loans

(C) Interest accrued but not due on loan

(D) Mortgage Loan

(E) Government and trust securities

(F) Loose tools

(G) Live Stock

(H) General Reserve

(I) Capital Reserve

(J) Discount on issue of shares

 

  1. Write short notes on any two:

(a) Going Concern Concept

(b) Money Measurement Concept

(c) Periodicity Concept

 

SECTION-B

  1. II) Answer any three out of five questions: (3×15=45)

 

  1. The following are the summarized balance sheets of Good Luck Ltd., as on 31st December, 2010 and 31st December 2011.
Liabilities 31st Dece. 2010 31st Dec 2011 Assets 31st Dec. 2010 31st Dec. 2011
Equity share capital 2,00,000 2,40,000 Land and buildings 1,05,000 1,50,000
8% Debentures 50,000 Plant and machinery ( at cost) 2,90,000 3,20,000
Share Premium   10,000 Furniture (at cost) 9,000 10,000
General reserve 30,000 50,000 Inventories 1,30,000 1,05,000
Profit and Loss account 48,000 68,000 Sundry debtors 75,000 85,000
Sundry Creditors 1,30,000 1,50,000 cash 15,000 26,000
Proposed Dividend 20,000 24,000      
Provision for depreciation          
Plant and machinery 1,40,000 1,50,000      
Furniture 6,000 4,000      
  6,24,000 6,96,000   6,24,000 6,96,000

 

Additional information is as follows:

  • Furniture which cost Rs. 5,000 written down value Rs. 1,000 was sold during the year 2011 for Rs. 2,000
  • Plant and machinery which cost Rs. 20,000 and in respect of which Rs. 13,000 had been written off as depreciation was sold during the year 2011 for Rs. 3,000
  • The dividend of 2010 was paid during 2011
  • You are required to prepare:

The statement of change in working capital during 2011

Funds flow statement for the year 2011.

  1. A company finds on 1st January, 2008 that it is short of funds with which to implement its programme of expansion. On 1st January, 2007 it had a bank balance of Rs. 1.80,000. From the following information, prepare a statement for Board of directors, to show how the overdraft of Rs. 68,750 as at 31st December, 2007, has arisen:

Figures as per balance sheet as at 31st December of each year are as follows:

  2006 (Rs.) 2007 (Rs.)
Fixed assets 7,50,000 11,20,000
Stock and stores 1,90,000 3,30,000
Debtors 3,80,000 3,35,000
Bank balance 1,80,000 68,750 (overdraft)
Trade creditors 2,70,000 3,50,000
Share capital (in shares of Rs. 10 each) 2,50,000 3,00,000
Bills receivable 87,500 95,000
  • The profit for the year ended 31st December, 2007 before charging depreciation and taxation amounted to Rs. 2, 40,000.
  • 5,000 shares were issued on 31st January, 2007 at a premium of Rs. 5 per share.
  • 1, 37,500 were paid in March, 2007 by way of income tax. Dividend was paid as follows.

2006 (final) on the capital on 31-12-2006 at 10% less tax at 25%.

2007(interim) 5% free of tax

 

  1. Given the following information for ABC Company at the end of 2011 determine balances for the income statement and the balance sheet:

Net sales Rs. 1, 00,000

Debtor’s turnover ratio based on net sales: 2

Inventory turnover ratio: 1.25

Fixed assets turnover ratio: 0.8

Debt-assets ratio: 0.6

Net profit margin: 5%

Gross profit margin: 25%

Return on assets: 2%

ABC Company

Income statement

(For the year ending Dec 31, 2011)

sales Rs. 1,00,000
Cost of goods sold ………………..
Gross profit ………………..
Other expenses ………………..
Earnings before tax ………………..
taxes@50% ………………..
Earnings after tax ………………..

Balance sheet

As on 31st Dec 2011

Liabilities Rs. Assets Rs.
Equity ……………….. Net fixed assets ………………..
Long term debt ……………….. Inventory ………………..
Short term debt 50,000 Debtors ………………..
    Cash ………………..
Total ……………….. Total ………………..

 

  1. On 1st August 2010 a firm purchased 2 vehicles at Rs.3,00,000 each to serve for 10 years, at the end of which scrap value shall be 25% of the cost price. Another vehicle was purchased on 1st October 2010 for Rs.4,00,000, charging depreciation at 10% on original cost. On 1st January 2012, a new vehicle was acquired for Rs.4,20,000 to serve for 5 years. On 1st July 2012 one vehicle which was purchased on 1st August 2010, was auctioned at 20% of book value. Prepare the Vehicle A/C from 1st August 2010 to 31/3/2013.

Books are closed on 31st March every year.

Also prepare depreciation A/C for the above period.

 

  1. Oil India is a bulk distributor of high octane petrol. A periodic inventory of petrol on

hand is taken when the books are closed at the end of each month. The following summary of information is available for the month of June 2008.

ITEMS:

Sales

General Administrative Cost

Opening Stock: 1,00,000 litres at Rs.3 per litre

Purchases (Including Freight) in:

June 1 – 2,00,000 litres

June 30 – 1,00,000 litres

Closing Stock on June 30th – 1,30,000 litres

AMOUNT(Rs)

9,45,000

25,000

 

 

Rs.2.85/litre

Rs.3.03/litre

 

 

 

 

 

 

 

Compute the following data by FIFO, weighted average and LIFO method of inventory costing.

  • Value of inventory on June- 30th
  • Amount of the goods of goods sold for June
  • Profit or loss for June

SECTION – C

III) Compulsory case study.                                                                                           (20 marks)

  1. From the ratios given below, draw the profit and loss and the balance sheet of X Co. Ltd.,
    Trading and profit and loss account

 

For the year ending 31st December, 2010

To opening stock 4,80,000 By sales ……………
To purchases …………… By closing stock ……………
To purchases expenses 40,000    
To gross profit ……………    
  ……………   ……………
To office expenses 2,40,000 By gross profit ……………
To selling expenses 1,86,000 By commission ……………
To interest on debentures 30,000    
To provision for taxation ……………    
To net profit ……………    
  ……………   ……………
To proposed dividends …………… By balance b/f 60,000
To transfer to general reserves …………… By net profit this year ……………
To balance carried to balance sheet ……………    
  ……………   ……………

Balance sheet

As at 31st December 2010

Authorized share capital:

5,000 equity shares of Rs. 100 each

5,00,000 Fixed Assets  
Issued, subscribed and paid up capital:

4,000 equity shares of issued, subscribed and Rs. 100 each fully paid.

4,00,000 Goodwill 72,000
Reserves and surplus   Land 3,00,000
Previous reserves …………… Plant and machinery 2,00,000
Additions during the year …………… Current assets  
Balance of P/L A/c …………… Stock in trade ……………
Secured loans:   Sundry debtors ……………
15% debentures of Rs. 100 each …………… Bank balance 40,000
Current Liabilities ……………    
  ……………   ……………
  • dividends proposed are 30% of share capital
  • current ratio 2:1
  • sundry debtors represents 2 months sales
  • stock turnover ratio 6 2/3 %
  • gross profit ratio 33 1/3 %
  • provisions for taxation is at 50% of profits
  • profit carried forward were 10% of the transfer to general reserve
  • transfer to general reserve was equivalent to proposed dividends
  • Secured loans were half of current liabilities.
  • Balance to the credit of general reserve at the beginning of the year was twice the amount transferred to that account from current profits. Workings should form part of your answer.

 

 

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