learnium.org G.C.E.( Advanced level) support seminar 2012 Accounting II Time: 3 Hours -Textiles Distribution expenses % Fixed deposits 900

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1 G.C.E.( Advanced level) support seminar 2012 Accounting II Time: 3 Hours Prepared by : Under the direction of Ministry of Education Answer to six questions inluding No.1 & 2 01' PILOT PLC provides following extracted ledger balances for the year ending 31st March 2012 Rs.000 Inventory Purchases Sales Electric items Textiles Advanced for Electric items 100 Distribution expenses 200 Administration and Establishment expenses % Fixed deposits 900 Received interest 60 Directors remunuration % Debentures Debenture interest 100 Ordinary share capital ( issued at 50/= each) Revaluation reserve ( Land and Buildings) 400 General reserve ( ) 200 Retained earnings ( ) 520 Debtors 300 Land and Buildings( Revalued value) Computers ( cost) 800 Provisions for warranties ( ) 300 Paid dividends Ordinary shares 40 Share issue account 570 Inventory at cost Provision for depreciation Computers ( ) 280 s i. Details relevant to inventory group as at inventory group Cost Rs. 000 Market sales price Rs.000 Electric items Textile

2 ii. Company revalued land and Buildings in every year. Revaled values in previous years were as follows Rs '03' '03' '03' iii. On a Rs.400, 000 (market value) photocopy machine has been obtained under lease agreement, total value should be paid within five annual installments of Rs. 100,000. Rs. 20,000 interest is included in each payment and there were no record regarding this as at iv. Property plant and equipment are depreciated at 20% per annum on cost v. Company is free from income tax. vi. Fraud company has been withdrawn due to their continuous loss from 25 th April This company s debt amount Rs.40,000 is inluded in debtors. vii. A right issue has been made on 28th February 2012 received cash has been credited to share issue account after deducting Rs. 30,000 of share issue expense except that there is no record regarding this. viii. Rs.60,000 should be provided for auditing charges of the year. ix. An employee of the company has filed a case against the company, requesting 1 million compensation for the injuries he met as aresult of insecurity of the prodution floor, according to lawyers opinion employee has a probability to receive compensation any how under the prevailing condition till he receives the medical reports compensation cannot be estimated. x. The maximum warranty which can be raised on sold electric equipment would be 120,000, as at 31st March 2012 there was a provision for 100,000 made on outdated warranty certficates. xi. Rs advance received on 28th March 2012 for Rs. 150,000 electric equipment these items have been delivered to the customer on 9th April 2012 with invoice. (01) You are required in ordered to include annual report of the company (a) Income statement of the year ending 31 st March 2012 with required notes (b) Statement of changes in equity for the year ending 31st March (c) disclosure for the property plant and equipment as at 31st March 2012 relevant to the Balance sheet. (02) Discuss the matters of adjustment No.9 & 10 relating with particular standards. 02' (A) PLC investment intends to buy a machine for Rs. 250,000 details considered with to aternative machines are as follows. Year Estimated net cash flows( Rs.) Machine No.01 Machine No ^ & Machines are depreciated under the straight line method for five years. Machine No.1 has a Rs scrap value and the second machine has no scrap value

3 Expected discount ratio 12% and discount factors of a rupee are as follows Year % Discount factor 1'0 0'9 0'8 0'7 0'6 0'5 1' (i) Payback period of each machine (ii) Net value of each machine (NPV) 2' Your comment about the machine which should be selected and describes the risk of taking decision based on profit. (Marks 10) (B) Haneefa Ltd expects to sell a specific type of bag, following information is related to that. Number of bags sold in next year Sales price of a bag Rs.' 1000 Leather cost of a bag Rs.' 400 Other material cost of a bag Rs. 100 Expected annual fixed cost Employee salaries Rs.3000,000 Buildings Rs 2000,000 Advertising 1. BEP in units and rupees 2. Margin of safety in units 3. Expected annual profit and loss 4. The number of units to be sold to earn 10 million profits Rs.1000, If Rs.100 discount is given for each bag, The number of units to be sold to earn 10 million profit and 6. If employees salaries are increased by Rs.900,000 with the intention of motivating them, sales price of bag Increased by Rs.100, BEP amount is (Marks 10) (Total marks 20) 03. (A) Profit and lost appreciation account prepared for the year ending of Kumudu Vijaya & saliya partnership as follows. Rs''000 Rs.''000 Net profit Interest on capital Salaries Profit shares Kumudu Vijaya Saliya Saliya Kumudu Vijaya Saliya ^900& ^380& ^400&

4 Additional information is as follows 1. A motor vehicle valued for 1 million which was brought by Saliya on his admission date was completely destroyed due to an accident Insurance company agreed to pay compensation on it. There is no record regarding the motor vehicle brought by Saliya and insurance compensation 2. Paid salary to Saliya Rs has been debited to business salary Account. 3. Business operates in a building which belongs to Kumudu. Its annual rent agreed for 120,000 has been paid during the year ending 31.March.2012.Any how partners have agreed to increase the monthly rent up to Rs from 1st of January There is no record regarding the new rent agreement. 4. Kumudu and Wjaya have withdrawn goods for Rs for their personal use. There is no record regarding goods drawings and have recorded cash drawing of each partners per Rs Saliya was a joint a partnership on 1 st April Partners agreed not to record good will. 7. According to partnership agreement a) Annual interest on capital is 10% b) Old profit and lost sharing ratio among Kumudu and Vijaya was 3:2 c) As at 1 st of April 2011 Vijaya and Kumudu current account balances were Rs.245,000 and Rs.195,000 respectively You are required 1. Net profit correction statement 2. Profit and loss appropriation account (corrected) 3. Partners current account and capital account (B) Multi product commence the new production on 1 st April 2011and the, following information is related to production. Up to 30 th November 2011, every month 2000 units were purchased at each unit per Rs.10 As a result of increased efficiency of production, from December 3000 units where purchased at Rs.10 each. Direct labour cost of production is Rs.10 and royalty of production unit is Rs.6 Overhead cost for the year is Rs Up to November 500 units per each month and from December 1000 units per month were produced. Two material units are required to produce one unit Calculate unit cost of a product 04. (A) Thilanka s business Monthly bank statement for the month of march 2012 is as follows, Bank Account March Date Description Value Date Description Value 3/10 Cheque ( ) 3/1 B/F /15 Cheque ( ) / Insurance 3/18 Cash / Anil 3/20 Cash 3/ Salaries 3/30 Cheque ( ) 3/ Sumith /31 Cheque ( ) /31 B/C

5 Bank Statement March Date Description Debit Credit Balance 3$1 Balance ^ & 3$6 3$9 3$12 3$14 3$16 3$18 3$20 3$25 3$ Cheque ( ) Cheque ( ) Cash Cash Bank charges Dividends(TT ) 1. Correction of Bank Account Balance of March 2. Bank Reconciliation statement for the month of March ^ & ^ & ^ & ^ & ^ & ^ & ^ & ^ & ^ & (B) Young star sports club comprises of 50 members. Annual membership fee is Rs Following information is related tor the year ending 31 st March With the intention of obtaining extra income a musical was held on 1 st July 2011 Rs.5000 is to be paid to Artist as at31st march On 1 st October 2011 a business institution has donated Rs.90,000 valued motor vehicle to society. Motor vehicle is depreciated 10 % per annum cost 3. On 1 st April 2011, Rs.2000 book valued sports equipment has been misplaced no entry has been kept regarding this. Sports equipment is depreciated 10% per annum on reducing balancing method. 4. Society keeps its members subscription records on cash basis. 5. Members can obtain life membership paying 10 years subscription advance 6. Receipt and Payment Account B/F Members subscription for this year for the last year Life membership fee Receipts on Musical show Sponsors Sale of ticket Expenses of Musical show Dancing group Ticket printing cost Stage arrangements Building rent Salaries and Wages Telephone charges Sundry expenses B/C Following Assets and liabilities were there at the end of the year Rs Rs Sports equipment 52,000? Accrued telephone charges Accrued Salaries and wages Income and Expenditure Account for the year ending 31 st March Balance sheet as at 31 st March (Marks 09)

6 05. (A) The details relating to gas burners production business for the month of June 2011 are as follows. Estimated overhead cost Rs. Indirect salary Power to the Machine 11 Lighting and Electricity Rent and rates Machinery depreciation Other information 1 Production (1) Production (2) Service No of employees Machinery values (000) Machine hours Land area ( Sq meters) Service department overhead cost will be apportioned according to machine hours among the production department Prepare a report of destribution of, overhead of service department to prouction department. (B) Salary details of company for the month of June 2011 is as follows (Marks 04) Employee name Worked hours in( week days) Worked hours in( weekends) 1 week 2 week 3 week 4 week 1 week 2 week 3 week 4 week Yapa Mapa Salary ratios are as follows Rs.200 is paid for each hour up to first 40 hours of a week. Over time ratios are as follows in week days Rs.250 per hour in weekends Rs.350 per hour 2. EPF contribution Employee 10 % Employer 15% 3. Festival advace paid will be charged Rs.1000 from each employee 4. Housing loan instalement Mapa Rs Salary advance Mapa Rs EPF is calculated on basic salaries of employees 40 ^1& Pay sheet for the month of June (2) Reqired ledger accounts to record salaries including control account (Marks07& (C) Singha thersa PLC provides following information relating to an inventory item for the month of June Date Description Unit price( Rs) Quantity Balance Purchases Purchases Sales

7 If business apply FIFO 1.The value of Closing stock 2. Cost of goods sold 3. Gross profit If WAC is followed The value of Closing stock (Marks 04) (Total Marks 15) 06. (A) Following information has been extracted from financial statement of Tilakawardana PLC 1. Items Rs '03' '03'31 Property plant and equipment Trade debtors and creditors Trade creditors and Accrued expenses Accrued income tax Long term loans Stated shared capital Retained earnings Rs income tax and land sale profit Rs has been included to annual income statement 3. Bank loan interest is 10% for the loan obtained on 30 th September Annual dividend payment is On 31 st march 2012, Rs.800,000 amounted motor vehicle has been purchased and sold 2 million worth land Cash flow statement for the year ending 31 st March 2012 showing operating activities under indirect method. (Marks 09) (B) Kapugethara PLC book keeper has disclosed the following reasons which affected the a difference between the debit and credit side of trial balance 1. Credit purchases of Rs.5345 has been recorded in personal account as Rs Cash sales Rs.2220 has been recorded only in the cash book. 3. There is no record regarding discount allowed Rs.700 except debiting it to the discount received account 4. Paid cash Rs.5400 to business creditors from personal money of the owner has been completely omitted from books 5. Electricity account balance Rs.6000 has not been recorded in trial balance 6. Machine was purchased on 5 th January 2012 for Rs has been recorded to purchase account; Machines are depreciated 20% per annum on cost. 7. Directly deposited cash by debtor, sarath to bank account Rs has been debited to bank account and credited to suspense account. Suspense Account balance has been taken in to credit side of trial balance. 1. Double entries to correct which do not affect the agreement of trial balance 2. Prepare the suspense account with calculation of difference of trial balance (Marks 06)

8 ^07& (A) Following details has been extracted by analyzing the debtors ledger of a business Name Balance Amila Sunil Kamal Chamila Vipula Sales Cash received Returned inward Bad debt Discount Allowed Debtors list and control account balance were agreed to each of them cost of June 2011 but as at 30 th of June 2011 the total of debtors list Rs.210,000 was not agreed with debtors control account balance. 2. In inspection following details revealed 1. Returned inward journal has been overstated by Rs Receivable cash from Chamila as at 30 th June 2011 has been transferred to his account maintained in creditors ledger but there is no adjustment in the debtors ledger regarding set off. 3. Rs.5000 cash sales has been recorded to Sunil s account as a receipt from Sunil. 4. Written off bad debt from Amila has not been recorded in the General ledger. 5. Discount allowed to Sunil for Rs.4500 has been recorded correctly in the General ledger ^1& Corrected Debtors control Account (2) Debtors subsidiary ledger (recording transaction took place over the month) (30 Debtors list as at 30th June (B)Vindana commented the business on 1st June 2011 following trancactions took place during the month. 1st June 2nd June 6 month building rent was paid at once Rs.5000 Bought goods on credit for Rs rd June Bought furniture for Rs th June Sold Rs worth stock for Rs th June Vindana brought a personal computer valued for Rs.40,000 for business use 30th June Recevied monthly elecricity bill Rs.3000 The effect of transaction that can been made on the equation of Revenue Expense + Capital + Liability = Assets Calculate the Vindana s equity as at 31st June 2012.