®ICMAB
CMA MAY 2024 EXAMINATION
INTERMEDIATE LEVEL I
INTERMEDIATE FINANCIAL ACCOUNTING
Course Code
Roading Time
: FR222
:15 minutes
H
Total Marks
Writing Time
ICMWhTMIftrwcuw1'
t 100
; 180 minutes
Ins truet ions fo
• You MUST NOT write anything during Iho reading time.
You should attempt ALL quosbens.
*
* Answers should be properly siruelured and relevant.
• Carefully read ALL the requirements end sub-questions before a Sampling a specific question.
• ALL answers must be written in the answer book.
• AVOID WRI71NG/MARKING on the question paper al any lime which may cause disciplinary
action,
•
*
Sian answering each question from a fresh sheeL
Answers should be clearly numbered with Ihe cub-quo stion number.
Allowable Materials
»
Writing Stationeries
• Non-programmablc Calculator
Assessment Structure
Subgect^ori
A
Question 1
Question 2
Question 3
Question 4
Section Question 5
5
Question 6
Question 7
Multiple-choice questions.
Modified True/Falsc
Matching
Es&ay/Computaltenal/Case
Essay/Computational/Case
Essay/Computalional/Case
EGsay/Compulallonal/Cass
Revision
Total
queslion
10
5
5
3
2
2
3
Marks
to
5
5
20
Expected Time
Required
20 minutes
10 minutes
10 minutes
32.50 minutes
20
20
20
100
RESTRICTED USE
This paper MUST NOT BE REMOVED from the examination venue
Do not tom the page until instructed
32.50 minutes
32.50 minutes
32 50 minutes
10 minutes
180 minutes
SECTION A [3Q MARKS]
THERE ARE 3 (THREE) QUESTIONS IN THIS SECTION. ANSWER ALL THE QUESTIONS |N
THE ANSWER SCRIPT FOLLOWING THE EXAMPLE PROVIDED FOR THE SPECIFIC
QUESTION.
QUESTION 1
[iox1 = 1O MARKS]
Wo am ton (10) multiple*chctcc questions with five options. Pick Iha oplion that best explains the
given question. Write your answer on ths answer script (DO NOT PUT ANY MARK ON THE
QUESTION PAPER). Follow (he example given below In providing your answer.
Example:
-
(i) ICMAB stands For the
(a) In^tuto of Cost Management Accounting of Bangladesh
(b) Institute of Cost and Management Accountants of Bangladesh
(c) institute tor Cost Managers and Accounting of Bangladesh
(d) Institute of Cost Management Accountants of Bangladesh
(e) Industrial Cost Management Accountants of Bangladesh
Answer; (t) (b)
Which accounting standard deals with the recognition, measurement, presentation, and
disclosure of financial instruments?
(a) IAS 39
(b) IFRS 9
(C) IFRS 15
(d) 1FRS 16
(e)lFRS t
(n) Which of the following is a method of Internal re construction?
(a) Merger
(b) Demerger
(c) Reduction of share capital
(d) Bonus issue
(e) Right Issue,
fr*i)
What is the primary objective of liquidation?
(a) Maximizing shareholders' wealth
(b) Settling creditors' claims
(c) Distributing profits to shareholders
(d) Expanding the business
(e) Minimizing shareholders' wealth
(hr)
Which inventory valuation method assumes that tho most recently purchased items are the
first to bo sold?
(a) FIFO (First-In. First-Owl)
(b) LIFO(UsHn. Firat-Oul)
(c) Weighted average
(d) Specific identification
(aj None of the above
According to IFRS 15. revenue should be recognized when:
(a) The goods are shipped
(b)The customer pays
(c) The performance obligation is satisfied
(d) The contract is signed
(e) All of the above.
(v)
CMA Muy 2024 ExUfninutioH, FR222 [Page 2 aj7]
W Undur IFRS 16. how should a lessee recognize a right -of-use asset and tease liability for an
operating lease?
(a) Initially at for value
(b) Over Iho lease term using the oifocUvo interest method
(c) At the present value of minimum lease payments
(d) Al the end of the lease term
(e) As and when required.
(vii) When testing foe impairment of goodwill. which Jove! of reporting units should be cornidorc'd first?
(a } Operating tegmenl
(b) Reporting segmoni
(c} Cosh-gon orating unit
(d) Business unh
(e) Investing unit.
(viiil How is diluted EPS calculated?
(a J Mal income drvided by weighted average common shares outstanding
(b) Net income minus preferred dividends divided by weighted average common shares
outstanding
(c) Net income divided by diluted weighted average common shares outstanding
(d) Net income divided by basic weighted average common shares outstanding
(e^ Nel income divided by total number of shares outstanding
i nr)
Which criterion is used to determine whether an operating (segment should be reported
separately?
(a) Revenue Lest
(b) Profit cr loss test
(c) Asset test
(d) All of the above
fo) None of the above
(x)
Both fair values and subsequent growth of the investee arc nol as relevant for invastm&nts in
which of the following categories?
(a) Securities reported under Iho equity method
(b) Trading securities,
{c) HeId-tD- maturity Securities.
(d) Securities available for sale
[e) None of Une above.
(5 * 1 « 5 MARKS]
QUESTION 2
There arc five (5} statemonls given under the question Identify the statements as True or Fatso. If
the statement is false, rewrite the statement on the answer script to make 11 True'. Reasoning is
NOT required. Follow the example given below in providing your answer,
Example:
(a) ICMAB stands for the Industrial Cost Management and Accounling of Bangladesh.
Answar:
(a) FqIm. fCMAB stands for the Institute of Cost and Management Accountants of
Bangladesh.
Noto:
• You will not get any murk if you simply rewrite os ICMAB does nof stand for the Industrial
Cost Management Accountants of Bangladesh.
• If the statement is true, you need NOT to rewrite the statement rather only mention that
the statement Is True.
CAM Muy 202-1 EtamiMtion. FR122 [Puyc J uf 1]
ta)
(b)
(c)
(d]
(e)
Ths accounting for changes In accounting principles and changes in accounting ostimatus are
the same for both GAAP and 1FRS.
The relationship between current liabrlillcs and currant assets is important in evaluating
company's ability to pay off its long term debt.
Depreciation is provided for an Item of property that Is idle, or retired from active use unless it
is fully deprecfolod
When equipment held under an operating lease Is subleased by the original lessee, the
original lessee would account for the sublease as operating lease
Discount on bond payable is not contra liability.
QUESTION 3
[5*1= 5 MARKS]
Match the items of column A with the moat suitable items of column S. Match only one item of
column A with one item of column B. Write your answer on the answer script. Follow the example
given below in providing your answer.
Example:
Column A
1. 1CMAB
Column B
(a) Professional accountancy body
(b) University
Answer: 1 (a)
Column A
The best accountants don't just seo numbers; they see
the potential for
2. COGS is based on the cost of the earliest purchased
materials, while the remaining inventory value is based
on the cost of the latest purchased
3. Proper inventory management allows businesses to
minimize costs and create or receive goods on
4. Understanding assets and liabilities is essential for
making informed financial
5. IFRS 9 specifies how an entity should classify and
measure financial assets, financial liabilities, and some
contracts to buy or sei!
1,
Column S
a) estimated
b) financial transformation
cj notified
d) materials
e) the reporting process
f) an as-needed basis.
g) decisions
hj impairment
1) non-financial items.
j) correction of errors
END OF SECTION A
CMA Muy 2024 Esamitfutiun, FB222 /Page 4 of7j
SECTION B [BQ MARKSJ
4
(FOUR)
QUESTIONS IN THIS SECTION, ANSWER ALL THE QUESTIONS IN THE
THERE/ARE
ANSWERSCRIPT. SHOW ALL RELEVANT COMPUTATION.
QUESTION 4
(a)
(b)
[Marks; 4+3+(8+5) = 20]
As a Profossional Accountant you havo to apply the fundamental pnnopfos of the code.
Write down 5 principles and discuss any two of them.
The capital structure for Nissan Furniture Inc. on 3CT Juno 2023 are as follows:
(tare*
Tk.
12,00,000
40,35,000
21.60,000
Capital Stock, Tk. 20 par
(c)
Premium on Capital Stock
Retained Earnings
At this limo shares of ihu company arc selling al Tk. 35.
What entries would you malto in ouch case beliow7
(1) A slock dividend of 10% Is declared and issued.
(2) A 2 for 1 stock split is declared and issued.
Presented bellow is information related to Shistr company for 2023:
Account tiUes
} mirtrt e
t a unmu
A r4 eJi
1a ni 1 Slfu 1
iiii lys jjiiuciiy
ifrs 2
AmountfTk.)
q nn
' - ’ J,DU j.UUU
„
2,50.00,000
Sales for the year
of yoods sold
interest revenue
.i1 yn
nn nnn
/UjUU'UUU
t
70,000
47 nn onn
WritB-off goodwill
the ywr
' income tax fnr
sale of investment (normal recurring)
on
the
Gain
। LU4u
/Fjctraordinarv item-net of taxV
tn (lend
1 ni=c dtia SV
IIWUM rfamane
UCUHOyG ^aliuwi
J
Loss on the disposition of the wholesale division (net of tax)
. Loss on tne operation or tne wnoiesaie a(vision \nei or lax,;
common stock
। Dividend declared on
Dividend declared on preferred stock
vf
—
8.20.000
-
-9,05.000
1.10,000
3.90.000
—
——
4^40^000
an nnn
-
2.50.000
-70,000
Other information;
(r)
The company decided to discontinue its entire wholesale division ant to retain the
manufacturing section. On September 15. 2023 the company sold the wholesale
division.
(it) Dunng 2023 there were 3.00,000 shares of outstanding.
Required:
(i)
Income statement far the year ended December 31, 2023
(ii)
earnings statement showing Ute EPS.
eps
Retained
[Marks; (5+5H4+4+2) = 20]
Q1JESTJ0N !5
(a>—<5uring the year ended December 31. 202x, Iho liliyun Care PLC. reported Tk.95,000 of
revenues, Tk.70.000 of operaling expenses, and Tk.5.000 of income taxes expense.
Following is a list of transactions Iha t occurred during the year:
(3) Depreciation expense. Tk.3.000 (included with operaIIng expenses)
(b) Increase m wages payable, Tk.5O0
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Increase in accounts receivable, Tk.900
Decrease in merchandise inventory, Tk.1,200
Amortization of patent, Tk.100
cash flow
Non-current borrowings paid in cash. Tk.5.000
Issuance of common slock tar cash, Tk.12.500
Equipment, cost Tk. 10.000, acquired by issuing common stock
At the end of the fiscal year, a Tk.5.000 cash dividend was declared but not paid.
CMA May 2024 Examination, FR222 (Page 5 of 7/
U)
Old machinery sold lor Tk 6.000 cash; it originally cost Tk 15.000 (one-half depre elated).
Loss reported on income statement as ordinary item and included in the Tk 70,000 of
operating expenses.
(k) Decrease in accounts payable. Tk. 1,000.
(11
Cash Bl January 1, 202x was Tk. 1,000; increase in cash dunng the year, Tk.37.900
(m) There was no change in income taxes owing
Required;
Prepare a stalement of cash flows.
p)
(il) Explain what this statement lolls you aboul THiyun Care PLC.
b)
Somih Textures Inc has Tk. 1 million of 7%. convertible bonds outstanding. Each Tk 1.000
Pond ,s convertible into 30 no-par value common shares. The bonds pay interest each January
31 and July 31. On July 31. 2020, just after the intcrosl payment, the holders of Tk. 600.000
worth cf these bonds oxerclsod their conversion entitlement. Cn that date, 1he following
infemtabon iws determined;
Market pneo of the bonds
Morkel price of the common shares
Carrying vstuo of the common shares
Balance in the contributed surplus convertible bonds
Unamortued bond premium
-
Tk.102
Tk. 26
Tk. 16
fin ins
Tk. 150,000
Tk. 80.000
। he remaining bonds were not converted, and al Iheir maturity date they were retired, The
company follows IFRS.
Required:
Prepare the journal entry for the bond conversion on July 31, The company uses the
(i)
hook value method.
(ii) Prepare the journal entry for the remaining bonds at maturity, if nol converted to shares.
(Q) What risks arise ii bondholders choose to wait to convert the bonds?
[Marks: 4 (6+10) = 20]
The normal selling price of an item included In yearend inventories is Tk.21 per unit. The item
originally cost Tk.15 per unit, but could only be sold al the normal selling pnee after
modifications were made after the year end at a cqsl of Tk.5 per unit The scrap value of the
item tsTk.11 per unit
Under IAS 2 Inventories at what amount should the Item be included in the financial
QUESTION 6
(a)
statements?
(b)
Difficulties can arise in the presentation of financial insinjmcnls in 1he statement of financial
position of an entity in relation Ip iheir classification as liabilities and equity and to the related
interest, dividends, losses and gams.
The abjective of IAS 32 Financial instruments: Presentation is to address this problem by
establishing principles for presenting financial instruments as liabilities or equity and for
oft setting financial assets and financial liabilities.
On 1 January 20X3 Woodseats Ltd had only 50m Tk.1 ordinary shares in issue, which had
been in issue for many years During Ihe year ended 31 December 20X3 Woodseats Ltd
entered inio the following financing transactions.
(1) On 1 January 20X3 Woodseals Ltd issued 20 million 8% TK.1 preference shares at par.
Tho preference shares are redeemable al par on 30 June 20X8. The appropriate
dividend in respect of these shares was paid on 31 December 20X3.
(2) On 30 June 20X3 Woodseats Ltd issued 10 million 12% Tk.1 irredeemable preference
shares al par. Dividends are discretionary and n on-cumulative. The appropriate dividend
in respect af these shores was paid on 31 December 20X3
In reviewing ihc draft financial statements of Woodseals Lid ihe auditors drew attention to an
error which had begun in the previous year’s financial statements Expenditure had been
capitalized as an Intengibte assel which did nol meet the criteria in IAS 38. The carrying
amount of the intangible asset included in the draft statement of financial position was as
follows.
CAM Afm- 2024 Extminalion. FR222 (Pug!: 6 uf 7]
At 1 January 20X3
fin ins
Tk.m
45
Costs Incurred during 20X3
2.0
Amortization charge
(0 5)
At 31 December 20X3
6.0
The draft pnotd for 20X3. before adjusting for tfwco capitalized costs, was Th 15 million.
Retained namings at 1 January 20X3 wero Tk.75 million.
Required;
(0
Describe tho concept of ‘subslenco over form' and Ils application to the presentation of
financial liabilities under IAS 32 Finflhdal Instruments; Presentation.
(n) Prepare extracts from ttwj financial slatentenls of Woodscats Ltd for tho year ended 31
December 20X3 to the extent the information io available, showing how the above would
be reflected in those financial statements,
Notes to the accounts are not required. Ignore taxation
[Marks: 4+4+(8+4) - 20]
Douglas Ltd is developing a new production process. During 20X7. expenditure incurred was
Tk.100,000. of which Tk.90,000 was incurred before 1 December 20X7 and Tk.10,000
between 1 December 20X7 and 31 December 20X7. Douglas Ltd can demonstrate that, at 1
December 20X7, the production process met the criteria for recognition as an intangible asset.
Tho recoverable amount of the know-how embodied in the process is estimated to be
Tk 50,000. How should the expenditure be treated?
An intangible asset is carried by a company under the revaluation model. The asset was
revalues by Tk.800 in 20X6; this was recognized In other comprehensive income, so that there
is a revaluation surplus of Tk.800 in the statement of financial position. At the end of 20X7, the
asset is revalued downward by Tk. 1.000. State the accounting treatment for the downward
revaluation.
Parson Ltd has entered into the following transaclions during the year ended 31 December
QUESTION 7
ias38 (a)
ias38 (b)
IFRS 15 (cl
(1}
20X3
On 1 October 20X3 Parson Ltd received Tk.400.000 in advance subscriptions. The
subscriptions aro for 20 monthly issues of a magazine published by Parson Ltd. Three issues
of the magazine had been dispatched by the year end. Each magazine is of the same value
and costs approximately the same to produce.
(2) A batch of unseasoned timber, which had cost Tk. 250.000. was sold to Banko Lid for
Tk.100.000 on 1 January 20X3. Parson Ltd has an option to repurchase the timber in 10 years’
time The repurchase price will ba Tk.100,000 plus interest charged at 8% per annum from 1
January 20X3 to ihe date cf repurchase. The market value of the timber is expected to
increase as it seasons
(3) Parson Ltd made a major sale on 1 January 20X3 for a lee of Tk.450.000, which related to a
completed sate and after-sales support for three years. The cost of providing the after-sales
support is estimated al Tk.50.000 per annum, and the mark-up on similar after-sales only
contracts is 20% on cost
(4) The food division of Parson Ltd operates its retail outlets on a franchise basis. On 1 January
20X3 a new outlet was opened. Ihe franchisee paying a fee of Tk.500.000 to cover the initial
services. The franchise is lor five years, and the franchisee will pay an additional annual fee of
Tk.60,000 commencing on 1 January 20X3 to cover marketing, managerial and other support
services provided by Parson Ltd during the franchise period. Parson Ltd has estimated that the
cost of providing these services Is Tk.80.000 par annum, and has achieved a gross margin of
20% on providing similar services on other contracts
Required:
(i) Prepare extracts from Parson Lid s financial statements for the year ended 31 December
20X3, dearly showing how each of the above would be reflected. Notes lo the financial
statements are not required.
(ii) With reference to transaction (2) above explain the concept of ’substance over form'.
= END OF SECTION B =
CAM May 202-1 Exuminaliiw, FR222 [Page 7 of 7]