COMSATS Institute of Information Technology Abbottabad
Department of Management Sciences
Terminal Section B & C: Fall 2016
Class: MBO 1
Subject: Issues in Accounting Practices
Total Time Allowed: 145 Minutes
Date: 04-01-2016
Instructor: Zaheer A. Swati
Max Marks: 70
Registration #
Signature
SECTION-B
(Marks 10 * 3 = 30)
Q1. Data related toABC are presented below. Prepare a statement of cash flows, for the year ended December 31, 2016
ABC
Income Statement
For the Year Ended December 31, 2016
Sales
(Marks 10)
Rs. 185,800
Cost of Goods Sold
( 73,600)
Gross Profit
112,200
Operating Expenses:
Selling & General Expenses
Depreciation Expense
Rs. 29,200
11,400
(40,600)
Operating Income
71,600
Loss on Sale of Investment
(5,000)
Income before Income Tax
66,600
Income Tax Expense
(26,600)
Net Income
Rs. 40,000
ABC
Balance Sheets
December 31, 2015 and 2016
2015
Assets
Cash
Accounts Receivable
Inventory
Prepaid Insurance
Total Current Assets
Long-Term Investment
Equipment (net)
Total Assets
Rs. 24,200
21,200
29,400
2,600
77,400
10,200
71,400
Rs. 159,000
Liabilities
Accounts Payable
Rs. 20,800
Stockholders’ Equity
Common Stock
45,400
Retained Earnings
92,800
Total Stockholders’ Equity
138,200
Total Liabilities & Stockholders’ Equity Rs. 159,000
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2016
Rs. 73,000
25,400
26,000
1,400
125,800
0
60,000
Rs. 185,800
Rs. 17,800
50,200
117,800
168,000
Rs. 185,800
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Solution:
ABC
Cash Flow Statement
For the Year Ended December 31, 2016
Operating Activities:
Net income
40,000
Depreciation
11,400
Loss on sale of investment
5,000
Increase in accounts receivable
(4,200)
Decrease in inventory
3,400
Decrease in prepaid insurance
1,200
Decrease in accounts payable
(3,000)
Net cash flow from operating activities
53,800
Investing Activities:
Sale of long term investment (10,200 - 5,000)
5,200
Net cash flow from operating activities
5,200
Financing Activities:
Sale of common stock
4,800
Dividend paid
(15,000)
Net cash flow from financing activities
(10,200)
Net increase in cash
48,800
Cash at Last year
24,200
Cash at Current year
73,000
Q2. Pass Journal entries, Prepare Joint Venture and Capital Accounts for Rahim and Rehman for following Joint Venture
business.
(Marks 10)
Rahim and Rehman entered into a joint venture to take a building contract which was worth of Rs. 240,000. They provide
following information regarding the expenses incurred by them.
Rahim
Rehman
Wood ………………….……………………….
68,000 ……………..
50,000
Steel ……………………………………………
13,000 ……………..
17,000
Salaries ……………………………….……….
00000 ………………
27,000
Aluminum …………………………..…………
10,000 ………………
00000
Machinery ……………………………….…....
000000 …………….
20,000
Plastic ……………………………….…………
000000 …………….
5,000
Machinery was value at Rs. 10,000 at the end of contract and Rahim agreed to take it at that value. Contract amount of Rs.
240,000 was received by Rehman. Pass necessary journal entries in the book of Rahim and Rehman and prepare joint venture and
co-ventures’ accounts assuming 1/4th and 3/4th profit sharing ratio.
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General Journal (Joint Venture)
Date
Rahim's Book
JV
Rehman's Book
91,000
JV
Cash
91,000
JV
119,000
Rehman
119,000
Machinery
10,000
JV
10,000
Rehman
240,000
JV
240,000
JV
40,000
Profit and Loss
10,000
Rehman
30,000
Cash
91,000
Rehman
91,000
Total
91,000
Rahim
91,000
JV
119,000
Cash
119,000
Rahim
10,000
JV
10,000
Cash
240,000
JV
240,000
JV
40,000
Profit and Loss
30,000
Rahim
10,000
Rahim
91,000
Cash
91,000
591,000
Total
591,000
Joint Venture Account
Date
Description
Ref
Cash
Rehman
Amount (Rs.)
91,000
119,000
Profit of Rahim (1/4)
Profit of Rehman (3/4)
Date
Description
Cash
Rehman
Ref
Amount
(Rs.)
10,000
240,000
10,000
30,000
Total
250,000
Total
250,000
Co-venturers’ Capital Accounts
Date
Description
Rahim
Rehman
JV
10,000
----
JV
----
240,000
Balance
91,000
Total
101,000
240,000
Date
Description
Rahim
Rehman
JV
91,000
----
JV
10,000
----
JV
----
119,000
JV
30,000
Balance
91,000
Total
101,000
240,000
Q3. Prepare
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7
SECTION-C
(Marks 15 * 2 = 30)
Q1. Pass Journal entries, Prepare Bank Account and Balance Sheet.
(Marks 15)
ABC Limited Company was established with Authorized Capital of 100,000 shares and invited applications for 10,000 shares of
10 each at premium of Rs. 5 per share payable as: On application Rs. 3 per share, on allotment Rs. 6 per share including premium
and balance in two calls in equal amount. Applications were received for 18,000 shares. 8,000 share applications were refunded
and were allotted to all the other applicants. Mr. Ahmed fail to pay the allotment money for 200 shares issued to him; so these
shares were forfeited when he will fail to pay the 1 st and 2nd call money. Thereafter, 100 shares were reissued at stated rate of 9 per
share. All other monies were received by the AAA Ltd. as on December 31st, 2009.
General Journal
Date
2009
Dec
Account Title and Explanations
31
Ref
Amount (Rs)
Debit
Credit
Bank (18,000 * 3)
Share Application
54,000
Share Application (8,000 * 3)
Bank
24,000
Share Application (10,000 * 3)
Share Capital
30,000
Share Allotment (10,000 * 1)
Share Capital
10,000
Bank (9,800 * 6)
Allotment in arrear (200 * 1)
Share Capital
Share Premium (9,800 * 5)
58,800
200
Share First Call (10,000 * 3)
Share Capital
30,000
Bank (9,800 * 3)
First Call in Arrear (200 * 3)
Share First Call
29,400
600
Share Second Call (10,000 * 3)
Share Capital
30,000
Bank (9,800 * 3)
Second Call in Arrear (200 * 3)
Share First Call
29,400
600
54,000
“
“
24,000
30,000
“
“
“
“
“
“
10,000
10,000
49,000
30,000
30,000
30,000
30,000
“
Share Capital (200 * 10)
Allotment in Arrear
First Call in Arrear
Second Call in Arrear
Share Forfeited
“
Bank (100 * 9)
Share Capital
2,000
200
600
600
600
900
900
Total
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Bank Account
Date
Description
Share Application
Share Capital
Share Premium
Share First Call
Share Second Call
Share Capital
Total
Ref
Amount (Rs.)
54,000
9,800
49,000
29,400
29,400
900
Date
Description
Share Application
Balance c/f to B/S
172,500
Total
Ref
Amount (Rs.)
24,000
148,500
172,500
AAA Limited Company
Balance Sheet
As on December 31st, 2009
Assets
Bank
Amount
Equities
Amount
148,500
Share Capital:
Authorized Capital
100,000
@
10
1,000,000
10
100,000
Issued Shares
10,000
@
Subscribe Shares
18,000
@
10
180,000
Called and Paid up Shares
Total
148,500
9,800
@
10
98,000
100
@
9
900
Share Premium
49,000
Share Forfeited
600
Total
148,500
Q2.
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