2.guess Questions - Problems - Questions

Krishna Korada Classes
Cherish your dreams and vision
Guess Questions
Course CA IPCC
Attempt May 2015
Paper III Cost Accounting and Financial Management (Numericals)
Part I: Cost Accounting

Materials
1. The following are the details of receipts and issues of a material of stores in a manufacturing company for the
period of three months ending 30th June, 2014.
Receipts:
Date
April 10
April 20
May 5
May 17
May 25
June 11
June 24
Quantity (kg.)
1,600
2,400
1,000
1,100
800
900
1,400
Rate per kg ( )
5.00
4.90
5.10
5.20
5.25
5.40
5.50
There was 1,500kg. in stock at April 1, 2014 which was valued at 4.80 per kg.
Issues:
Date
April 4
April 24
May 10
May 26
June 15
June 21
Quantity
1,100
1,600
1,500
1,700
1,500
1,200
Issues are to be priced on the basis of weighted average method. The stock verifier of the company reported
a shortage of 80kgs. on 30th June, 2014. The shortage is treated as inflating the price of remaining material on
account of shortage.
You are required to prepare a Stores Ledger Account.
CA KRISHNA KORADA
GUESS QUESTIONS (NUMERICALS)

Page No-1

2. PQR Ltd. manufactures a special product, which requires ZED. The following particulars were collected for
the year 2013-14:
i)
ii)
iii)
iv)
v)
vi)
vii)
viii)
Monthly demand of Zed:

Cost of placing an order :
Re-order period :
Cost per unit :
Carrying cost p.a :
Normal usage :
Minimum usage :
Maximum usage :
i)
ii)
iii)
iv)
v)
Required:
Re-order quantity.
Re-order level.
Minimum stock level.
Maximum stock level.
Average stock level.
7,500 units
500
5 to 8 weeks
60
10%
500 units per week
250 units per week
750 units per week
3. A company manufactures a product from a raw material, which is purchased at 60 per kg. The company
incurs a handling cost of 360 plus freight of 390 per order. The incremental carrying cost of inventory of
raw material is 0.50 per kg per month. In addition, the cost of working capital finance on the investment in
inventory of raw material is 9 per kg per annum. The annual production of the product is 100000 units and
2.5 units are obtained from one kg of raw material.
i)
ii)
iii)
Required:
Calculate the economic order quantity of raw materials.
Advice, how frequently should orders for procurement is placed.
If the company proposes to rationalize placement of orders on quarterly basis, what percentage of discount in
the price of raw materials should be negotiated?
4. ZED Company supplies plastic crockery to fast food restaurants in metropolitan city. One of its products is a
special bowl, disposable after initial use, for serving soups to its customers. Bowls are sold in pack 10 pieces
at a price of 50 per pack.
The demand for plastic bowl has been forecasted at fairly steady rate of 40,000 packs every year. The
company purchases the bowl direct from manufacturer at 40 per pack within a three days lead time. The
CA KRISHNA KORADA

Page No-2

ordering and related cost is 8 per order. The storage cost is 10% per annum of average inventory
investment.
i)
ii)
iii)
iv)
Required:
Calculate Economic Order Quantity.
Calculate number of orders needed every year.
Calculate the total cost of ordering and storage bowls for the year.
Determine when the next order to be placed should. (Assuming that the company does maintain a safety and
that the present inventory level is 333 packs with a year of 360 working days.
Labour
1. Calculate the earnings of A and B from the following particulars for a month and allocate the labour cost to
each job X,Y and Z:
Basic wages
Dearness allowance
Contribution to provident fund (on basic wages)
Contribution to employees state insurance (on basic wages)
Overtime
A
100
50%
8%
2%
10 hours
B
160
50%
8%
2%
-
The normal working hours for the month are 200. Overtime is paid at double the total of normal wages and
dearness allowance. Employers contribution to state insurance and Provident Fund are at equal rate with
employees contributions. The two workers were employed on jobs X, Y and Z in the following proportions:
Jobs
Jobs
Jobs
X
Y
Z
Worker A
40%
30%
30%
Worker B
50%
20%
30%
Over time was done on job Y.
2. From the following information , calculate Labour turnover rate and labour flux rate:
No. of workers as on 01.01.2013 = 7,600
No. of workers as on 31.12.2013 = 8,400
CA KRISHNA KORADA

Page No-3

During the year, 80 workers left while 320 workers were discharged 1500 workers were recruited during the
year of these, 300 workers were recruited because of exits and the rest were recruited in accordance with
expansion plans.
3. The existing Incentive system of Alpha limited is as under.

Normal working week
Rate of payment
5 days of 8 hours each plus 3 late shifts of 3 hours each

Day work: 160 per hour
Late shift: 225 per hour
Average output per operator for 49-hours week 120 articles i.e. including 3 late shifts
In order to increase output and eliminate overtime, it was decided to switch on to system of payment by
results. The following information is obtained.
Time-rate (as usual)
:
160 per hour
Basic time allowed for 15 articles: 5 hours
Price-work rate
:
add 20% to basic piece rate
Premium bonus
:
add 50% to time.
i)
a)
b)
c)
d)
Required:
Prepare a statement showing hours worked, weekly earnings , number of articles produced and labour cost
per article for one operator under the following systems;
Existing time-rate
Straight price-work
Rowan system
Halsey premium system
Assume that 135 articles are produced in a 40-hour week under straight piece work, Rowan Premium system
and Halsey premium system above and worker earns half the time saved under Halsey premium system.
4. The management of company wants to formulate an incentive plan for the workers with a view to increase
productivity. The following particulars have been extracted from the books of company:
Price Wage rate 10
Weekly working hours 40
Hourly wage rate 40 (guaranteed)
Standard/normal time per unit 15 minutes
Actual output per a week:
Worker A:
176 pieces
Worker B:
140 pieces
CA KRISHNA KORADA

Page No-4

Differential piece rate: 80% of piece rate when output below normal and 120% of piece rate when output
above normal.
Under Halsey scheme, worker gets a bonus equal to 50% of wages of time saved.
Calculate:
Earnings of workers under Halseys and Rowans premium scheme.
Earnings of workers under Taylors differential piece rate system and Emersons efficiency plan.
i)
ii)
Overheads
1.
i)
ii)
iii)
iv)
v)
vi)
A Manufacturing unit has purchased and installed a new machine of 12, 70,000 to its fleet of 7 existing
machines. The new machine has an estimated life of 12 years and is expected to realize 70, 000 as scrap at
the end of its working life. Other relevant data are as follows:
Budgeted working hours are 2,592 based on 8 hours per day for 324 days. This includes 300 hours for plant
maintenance and 92 hours for setting up of plant.
Estimated cost of maintenance of the machine is 25, 000 p.a.
The machine requires a special chemical solution, which is replaced at the end of each week (6days in a week)
at a cost of 400 each time.
Four operators control operation of 8 machines and the average wages per person amounts to 420 per week
plus 15%fringe benefits.
Electricity used by the machine during the production is 16 units per hour at a cost of 3 per unit. No
electricity is consumed during unproductive maintenance and setting up time.
Departmental and general works overhead allocated to the operation during the last year was 50, 000.
During the current year it is estimated to increase by 10% of this amount.
Calculate machine hour rate, if (a) setting up time is unproductive; (b) setting up time is productive.
2. PQR manufacturers a small scale enterprise produces a single product and has adopted a policy to recover
the production overheads of the factory by adopting a single blanket rate based on machine hours are 96,000.
For a period of first six months of the financial year 2013-2014, following information were extracted from
the books:
Actual production overheads
Amount included in the production overheads:
Paid ass per courts order
Expenses of previous year booked in current year
Paid to workers for strike period under an award
Obsolete stores written off
CA KRISHNA KORADA
67, 900
45, 000
10, 000
42, 000
18, 000
Page No-5

Production and sales data of the concern for the first six months as under:
Production:
Finished goods
22,000 units
Works-in-progress
16,000 units
(50% complete in every respect)
Sale:
Finished goods
i)
ii)
iii)
18,000 units
The actual machine hours worked during the period were 48000 hours. It is revealed from the analysis of
information that of the under-absorption was due to defective production policies and the balance was
attributable to increase in costs.
You are required:
To determine the amount of under absorption of production overheads for the period,
To show the accounting treatment of under-absorption of production overheads, and
To apportion the unabsorbed overheads over the items.
3. ABC Ltd.., has three production departments X, Y and Z and two service departments A and B. The
following estimates for a certain period are made available.
Rent and rates
10,000
Lighting and electricity
1,200
Indirect wages
3,000
Power
3,000
Depreciation of machinery
20,000
Other expenses and sundries
20,000
Following further details are available:
Particulars
Total
X
Y
Z
A
B
Space ( Sq. mts)
10,000
2,000
2,500
3,000
2,000
500
Light points ( Nos)
120
20
30
40
20
10
20,000
6,000
4,000
6,000
3,000
1,000
Direct wages ( )
H.P of the machine
310
120
60
100
20
10
Cost of machinery
100,000
24,000
32,000
40,000
2,000
2,000
Working hours
4,760
3,020
3,050
1,000
500
The expenses of the service departments A and B are to be apportioned as follows:
X
Y
Z
A
B
A (%)
20
30
40
10
B (%)
40
20
30
10
a. Calculate the overhead absorption rate per hour in respect of the three production departments using
simultaneous equation method, repeated distribution method, Trail and error method.
b. What will be the total cost of an article with material cost of 80 and direct labour cost of 40 which
passes through X, Y and Z for 2,3 and 4 hours respectively?
CA KRISHNA KORADA

Page No-6

Non-integrated accounting
1. The following figures have been extracted from the cost records of a manufacturing unit:
Stores :Opening balance
Purchase of material
Transfer from work-in-progress
Issue to work in progress
Issue to repairs and maintenance
Deficiencies found in stock taking
Work-in-progress: Opening balance
Direct wages applied
Overheads applied
Closing balance of work-in-progress
32,000
1,58,000
80,000
1,60,000
20,000
6,000
60,000
65,000
2,40,000
45,000
Finished products: Entire output is sold at a profit of 10% on actual cost from work-in-progress. Wages
incurred 70, 000, overhead incurred 2, 50,000.
Items not included in cost records: Income from investment 10, 000, loss on sale of capital assets 20, 000.
Draw up store control account, costing Profit and Loss account, profit and Loss account and Reconciliation
statement.
2. BPR Limited keeps books on integrated accounting system. The following balances appear in the books as on
April 1, 2013.
Dr. ( )
Cr. ( )
Stores control A/c
40,950
Work-in-progress A/C
38,675
Finished Goods A/c
52,325
Bank A/c
22,750
Trade payable A/c
18,200
Non-current assets A/c
1,47,875
Trade receivable A/c
27,300
Share capital A/c
1,82,000
Provision for depreciation
11,375
Provision for doubtful debts
3,725
Factory overheads outstanding
6,250
Pre-paid administration Overheads A/c
9,975
Profit & Loss A/c*
72,800
(*Reserve & Surplus)
3,17,100
3,17,100
The transactions for the year ended March 31, 2014, were as given below:
( )
Direct wages
1,97,925
Indirect wages
11,375
2,09,300
Purchase of materials (on credit)
2,27,500
Materials issued to production
2,50,250
CA KRISHNA KORADA
Page No-7

Materials issued for repairs
Goods finished during the year (at cost)
Credit sales
Cost of goods sold
Production overheads absorbed
Production overheads paid during the year
Production overheads out standing at the end of year
Administration overheads paid during the year
Selling overheads incurred
Payment to trade payables
Payment received from trade receivables
Depreciation of machinery
Administration overheads outstanding at the end of year
Provision for doubtful debts at the end of the year
4,550
4,89,125
6,82,500
5,00,500
1,09,200
91,000
7,775
27,300
31,850
2,29,775
6,59,750
14,789
2,225
4,590
Required:
Write up accounts in the integrated ledger of BPR Limited and prepare a Trial balance.
3. R Ltd showed a net loss of 35,400 as per their cost accounts for the year ended 31 March 2014. However,
the financial accounts disclosed a net profit of 67,800 for the same period. The following information was
revealed as a result of scrutiny of the figures of cost accounts and financial accounts:
()
Administrative overheads under recovered
Factory overhead over recovered
Depreciation under charged in cost accounts
Dividend received
Loss due to obsolescence charged in financial accounts
Income tax provided
Bank interest credited in financial accounts
Value of opening stock
In cost accounts
In Financial accounts
Value of closing stock
In Cost accounts
In financial accounts
Goodwill written off in financial accounts
Notional rent of own premises charged in cost accounts
Provision for doubtful debts in financial accounts
Prepare a reconciliation statement by taking costing net loss as base
25,500
135,000
26,000
20,000
16,800
43,600
13,600
165,000
145,000
125,500
132,000
25,000
60,000
15,000
4. A manufacturing company disclosed a net loss of 347,000 as per their cost accounts for the year ended 31
March, 2014. The financial accounts however disclosed a net loss of 510,000 for the same period. The
following information was revealed as a result of scrutiny of the figures of both the sets of accounts.
Factory overheads under absorbed
Administration overheads over absorbed
CA KRISHNA KORADA
()
40,000
60,000
Page No-8

Depreciation charged in financial accounts
Depreciation charged in cost accounts
Interest on investments not included in cost accounts
Income tax provided
Interest on loan funds in financial accounts
Transfer fees (credit in financial accounts)
Stores adjustment (credit in financial books)
Dividend received
Prepare a memorandum reconciliation statement.
325,000
275,000
96,000
54,000
245,000
24,000
14,000
32,000
Job costing and batch costing

1. A factory incurred the following expenditure during the year 2013:
()
Direct material consumed
Manufacturing Wages
Manufacturing overheads
Fixed
Variable
()
1,200,000
700,000
360,000
250,000
610,000
2,510,000
In the year 2014, following changes are expected in production and cost of production.
(i) Production will increase due to recruitment of 60% more workers in the factory.
(ii) Overall efficiency will decline by 10% on account of recruitment of new workers.
(iii) There will be an increase of 20% in fixed overheads and 60% in variable overheads.
(iv) The cost of direct material will be decreased by 6%
(v) The company desire to earn a profit of 10% on selling price.
Ascertain the cost of production and selling price.
Contract Costing
1. Modem construction ltd obtained a contract No. B-37 for 40 lakhs. The following balances and
information relate to the contract for the year ended 31 March 2014:
CA KRISHNA KORADA

Page No-9

1 4 2013 ( )
Work in progress
Work certified
940,000
Work uncertified
11,200
Materials at site
8,000
Accrued wages
5,000
Additional information relating to the year 2013-14 is:
31 3 2014 ( )
3,000,000
32,000
20,000
3,000
( )
Materials issued from store
400,000
Materials directly purchased
150,000
Wages paid
600,000
Architects fees
51,000
Plant hire charges
50,000
Indirect expenses
10,000
Share of general overheads for B-37
18,000
Materials returned to stores
25,000
Materials returned to supplier
15,000
Fines and penalties paid
12,000
The contractee pays 80% of work certified in cash. You are required to prepare:
(i) Contract account showing clearly the amount of profits transferred to profit and loss account.
(ii) Contractees account
(iii) Balance sheet
2. Arnav construction ltd commenced a contract on November 1, 2012. The total contract was for
3,937,500. It was decided to estimate the total profit on the contract and to take to the credit of costing
P&L account that proportion of estimated profit on cash basis, which work completed bore to the total
contract. Actual expenditure for the period November 1, 2012 to October 31, 2013 and estimated
expenditure for November 1, 2013 to March 31, 2014 are given below:
November 1, 2012 to
October 31 (actual) ( )
Material issued
Labour
Paid
Prepaid
Outstanding
Plant purchased
Expenses
Paid
Outstanding
Plant returned to store (historical cost)
Work certified
Work uncertified
Cash received
Material at site
CA KRISHNA KORADA
675,000
450,000
25,000
375,000
200,000
50,000
75,000 (on March 31,
2013)
2,000,000
75,000
1,750,000
75,000
November 1, 2013 to
March 31, 2014
(estimated) ( )
1,237,500
562,500
2,500
350,000
25,000
300,000 (on March 31,
2014)
Full
37,500

Page No-10

The plant is subject to annual depreciation @ 33.33% on written down value method. The contract is likely to
be completed on March 31, 2014.
Required Prepare the contract A/c. Determine the profit on the contract for the year November, 2012 to
October, 2013 on prudent basis, which has to be credited to Costing P&L A/c
3. Paramount engineers are engaged in construction and erection of a bridge under a long term contract. The
cost incurred up to 31 3 2014 was as under:
Amount in ( ) in lakhs
Fabrication costs
Direct materials
Direct labour
Overheads
280
100
60
440
Erection cost to date
110
550
The contract price if 11 Crs and the cash received on account till 31 3 2014 was 6 Crs. The technical
estimate of the contract indicates the following degree of completion of work. Fabrication- Direct material70%, Direct labour and overheads 60% and erection-40%
You are require to estimate the profit that could be taken to costing P&L a/c against this partly completed
contract as at 31 3 2014
4. from the following particulars compute a conservative estimate of profit by 4 methods on a contract which
has 80% complete:
Total expenditure till date
Estimated further expenditure to complete the contract
Contract price
Work certified
Work uncertified
Cash received
850,000
170,000
1,530,000
1,000,000
85,000
816,000
Operating Costing
1. A mineral is transported from two mines- A and B and unloaded at plots in a railway station. Mine A is
at a distance of 10 km and B is at a distance of 15 km from railhead plots. A fleet of Lorries of 5 tons carrying
capacity is used for the transport of minerals from mines. Records reveal that the Lorries average a speed of
30 km per hour, when running and regularly take 10 minutes to unload at the railhead. At mine A, loading
time averages 30 minutes per load while at mine B loading time averages 20 minutes per load.
Drivers wages, depreciation, insurance and taxes are found to cost 9 per hour operated. Fuel, oil, tyres,
repairs and maintenance cost 1.2 per km. draw up a statement, showing the cost per tonne-kilometer of
carrying mineral from each mine.
CA KRISHNA KORADA

Page No-11

2. A transport company has been given a 40 kilometer long route to run 5 buses. The cost of each bus is
650,000. The buses will make 3 round trips per day carrying on average 80 percent passengers of their
seating capacity. The seating capacity of each bus is 40 passengers. The buses will run on average 25 days in a
month. The other information for the year 2013-14 is given below:
Garage rent
4,000 per month
Annual repairs and maintenance
22,500 each bus
Salaries of 5 drivers
3,000 each per month
Wages of 5 conductors
1,200 each per month
Managers salary
7,500 per month
Road tax, permit fee etc..,
5,000 per quarter
Office premises
2,000 per month
Cost of diesel per liter
33
Kilometer run per liter for each bus
6 kilometers
Annual depreciation
15% of cost
Annual insurance
3% of cost
You are required to calculate the bus fare to be charged from each passenger per kilometer, if the company
wants to earn profits of 33.33 percent on taking (total receipts from passengers).
3. A company runs a holiday home. For this purpose, it has hired a building at a rent of 10,000 per month
along with 5% of total taking. It has three types of suites for its customers, viz.., single rooms, double rooms
and triple rooms.
Following information is given:
Type of Suite
Number
Occupancy percentage
Single room
100
100%
Double room
50
80%
Triple room
30
60%
The rent of double rooms suite to be fixed at 2.5 times of single room suite and that of triple rooms suite as
twice of the double rooms suite.
The other expenses for the year 2013 are as follows:
Staff salaries
1,425,000
Room attendants wages
450,000
Lighting, heating and power
215,000
Repairs and renovation
123,500
Laundry charges
80,500
Interior decoration
74,000
Sundries
153,000
Provide profit @ 20% on total taking and assume 360 days in a year.
You are required to calculate the rent to be charged for each type of suite.
CA KRISHNA KORADA

Page No-12

Process costing
1. A product passes through three processes X, Y and Z. The output of process X and Y is transferred to
next process at cost plus 20% each on transfer price and the output of process Z is transferred to finished
stock at a profit of 25% on transfer price. The following information is available in respect of the year ending
31 March 2014.
Process X
Process Y
Process Z
Finished stock
Opening stock
15,000
27,000
40,000
45,000
Material
80,000
65,000
50,000
Wages
125,000
108,000
92,000
Manufacturing
96,000
72,000
66,500
overheads
Closing stock
20,000
32,000
39,000
50,000
Inter process profit Nil
4,000
10,000
20,000
included in opening
stock
Stock in processes is valued at prime cost. The finished stock is valued at the price at which it is received
from process Z. Sales of the finished stock during the period was 1,400,000. You are required to prepare:
(i) Process accounts and finished stock account showing profit element at each stage.
(ii) Costing profit and loss account
(iii) Show the relevant items in balance sheet.
2. Following details are related to work done in Process A of XYZ Company during the month of March,
2014.
Opening work in progress(2000 units)
Materials
Labour
Overheads
Materials introduced in the process
Direct labour
Overheads
Units scrapped 3,000 units
Degree of completion
Materials
Labour and overheads
Closing work in progress: 2,000 units
Degree of completion
Materials
Labour and overheads
Units finished and transferred to Process B: 35000 units
Normal Loss:
5% of total input including opening work in progress
CA KRISHNA KORADA
80,000
15,000
45,000
1,480,000
359,000
1,077,000
100%
80%
100%
80%

Page No-13

Scrapped units fetch 20 per piece
You are required to prepare:
(i) Statement of equivalent production
(ii) Statement of cost
(iii) Statement of distribution cost; and
(iv) Process A account, normal and abnormal loss accounts.
3. Pharma Limited produces product Gluco-G which passes through two processes before it is completed
and transferred to finished stock. The following data relates to March, 2014:
Process I
Process II
Finished stock
Opening stock
150,000
180,000
450,000
Direct materials
300,000
315,000
Direct wages
224,000
225,000
Factory overheads
210,000
90,000
Closing stock
74,000
90,000
255,000
Inter process profit
Nil
30,000
165,000
included in opening
stock
Output of process I is transferred to process II at 25% profit on the transfer price whereas output of process
II is transferred to finished stock at 20% on transfer price. Stock in processes is valued at prime cost.
Finished stock is valued at the price at which it is received from process II. Sales for the month are
2,800,000. You are required to prepare process I A/c, process II A/c and finished stock A/c showing the
profit element at each stage.
Joint products and By products

1. The sunshine oil company purchases crude vegetables oil. It does refining of the same. The refining
process results in four products at split off point: M, N, O and P.
Product is fully processed at the split off point. Product M, N and P can be individually further refined into
Super M, Super N and Super P. In the most recent month (March, 2014), the output at split off point was:
Product M
300,000 gallons
Product N
100,000 gallons
Product O
50,000 gallons
Product P
50,000 gallons
The joint cost of purchasing the crude vegetables oil and processing it were 4,000,000. Sunshine had no
beginning or ending inventories. Sales of product O in March, 2014 were 2,000,000. Total output of
products M, N and P was further refined and then sold. Data related to March, 2014 are as follows:
CA KRISHNA KORADA

Page No-14

Further processing cost to
Sales
make super products
Super M
8,000,000
12,000,000
Super N
3,200,000
4,000,000
Super P
3,600,000
4,800,000
Sunshine had the option of selling products M, N and P at the split off point. This alternative would have
yielded the following sales for the March, 2014 production:
Product M
Product N
Product P
You are required to answer:
2,000,000
1,200,000
2,800,000
(i) How the joint cost of 4,000,000 would be allocated between each product under each of the following
methods: (a) sales value at split off (b) physical output (gallons) (c) Estimated net realizable value?
(ii) Could sunshine have increased its march, 2014 operating profits by making different decisions about the
further refining of product M, N or P? Show the effect of any change you recommend on operating profits.
2. A company produces two joint products X and Y, from the same basic material. The processing is
completed in three departments.
Materials are mixed in Dept I. At the end of this process X and Y get separated. After separation X is
completed in Dept II and Y is completed in Dept III. During a period, 200,000 kg of material were processed
in Dept I, at a total cost of 875,000 and the resultant 60% becomes X and 30% becomes Y and 10% normal
lost in processing.
In Dept II, 1/6th of the quantity received from Dept I is lost in processing. X is further processed in Dept II
at a cost of 180,000.
In Dept III, further new raw material added to material received from Dept I and weight mixture is doubled,
there is no quantity loss in Dept. Further processing cost (with material cost) in Dept III is 150,000.
The details of the sales during the year are:
Product X
Product Y
Quantity sold (kg)
90,000
115,000
10
4
Sales price per kg ( )
There were no opening stocks. If these products sold at split off point, the selling price of X and Y would be
8 and 4 per kg respectively.
Required:
(i) Prepare a statement showing the apportionment of joint cost to X and Y in proportion of sales value at
split off point.
(ii) Prepare a statement showing the cost per kg of each product indicating joint cost, processing cost and
total cost separately.
(iv) Prepare a statement showing the product wise profit for the year.
CA KRISHNA KORADA

Page No-15

(iv) On the basis of profits before and after further processing of product X and Y, give your comment that
products should be further processed or not.
Standard Costing
1. KPR limited operates a system of standard costing in respect of one of its products which is manufactured
within a single cost centre. The standard cost card of the product is as under:
Standard
Unit Cost ( )
21
Direct material 5 kg @ 4.20
9
Direct labour 3 hours @ 3.00
3.60
Factory Overhead
1.2 per labour hour
Total manufacturing cost
33.60
The production schedule for the month of June, 2013 required completion of 40,000 units. However, 40,960
units were completed during the month without opening and closing work in process inventories.
Purchases during the month of June, 2013 were 225,000kg of material at the rate of 4.5 per kg. Production
and sales records for the month showed the following actual results.
Materials used
205,600 kg
Direct labour 121,200 hours; cost incurred
387,840
Total factory overhead cost incurred
100,000
Sales
40,000 units
Selling price to be so fixed as to allow a markup of 20% on selling price. Required:
(i) Calculate material variances based on consumption of material
(ii) Calculate labour variances and total variance for factory overhead.
(iii) Prepare income statement for June, 2013 showing actual gross margin.
(iv) An incentive scheme is in operation in the company whereby employees are paid a bonus of 50% of
direct labour hour saved at standard direct labour hour rate. Calculate the bonus amount.
2. SJ Ltd has furnished the following information:
Standard overhead absorption rate per unit
20
Standard rate per hour
4
Budgeted production
12,000 units
Actual production
15,560 units
Actual overheads were 295,000 out of which 62,500 fixed.
Actual hours
74,000
Overheads are based on the following flexible budget

Production (units)
8,000
10,000
14,000
180,000
210,000
270,000
Total overheads( )
You are required to calculate the following overhead variances (on hour basis) with appropriate workings:
CA KRISHNA KORADA
Page No-16

(i) Variable overhead efficiency and expenditure variance
(ii) Fixed overhead efficiency and capacity variance.
3. The standard labour employment and the actual labour engaged in a 40 hours week for a job are as under:
Category of
workers
Standard
No of workers
Wage rate per
hour
Skilled
65
45
Semi-skilled
20
30
unskilled
15
15
Standard output: 2,000 units; Actual output: 1,800 units
Actual
No of workers
Wage rate per
hour
50
50
30
35
20
10
Abnormal idle time is 2 hours in the week. Calculate:

(i) Labour cost variance
(ii) Labour efficiency variance
(iii) Labour idle time variance.
4. SP limited produces a product Tempex which is dole in a 10 kg packet. The standard cost card per packet
of Tempex is as follows:
Direct materials 10 kg @ 45 per kg
450
Direct labour 8 hours @ 50 per hour
400
Variable overhead 8 hours @ 10 per hour
80
Fixed overhead
200
Total cost
1 ,130
Budgeted output for the third quarter of a year was 10,000 kg. Actual output is 9,000 kg. Actual cost for the
quarter is as under:
Direct materials 8,900 kg @ 46 per kg
Direct labour 7,000 hours @ 52 per hour
Variable overhead incurred
Fixed overhead incurred
You are required to calculate:
409,400
364,000
72,500
192,000
(i) Material usage variance

(ii) Material price variance
(iii) Material cost variance
(iv) Labour efficiency variance
(v) Labour rate variance
(vi) Labour cost variance
(vii) Variable overhead cost variance
CA KRISHNA KORADA

Page No-17

(viii) Fixed overhead cost variance
5. Answer the following:
(a) Following are the details of the product Phomex for the month of April, 2013:
Standard quantity of material required per unit
5 kg
Actual output
1,000 units
Actual cost of materials used
714,000
Material price variance
51,000 ( Fav)
Actual price per kg of material is found to be less than standard price per kg of material by 10.
(i) Actual quantity and actual price of materials used
(ii) Materials usage variance
(iii) Material cost variance.
Marginal Costing
1. The following particulars are obtained from the records of a company engaged in manufacturing two
products A and B from a certain raw material.
Product A ( Per unit)
Sales
100
20
Material ( 10 Per kg)
30
Wages ( 12 per hour)
Variable overheads
10
Total fixed overhead 10,000. Rank the products when:
Product B ( Per unit)

200
50
48
32
a. There are no key factors

b. Total sales potential in units is limited
c. Total sales potential in value is limited
d. Raw material is short in supply
e. Labour hours are the key factor.
CA KRISHNA KORADA

Page No-18

2. A company produces single product which sells for 20 per unit. Variable cost is 15 per unit and fixed
overhead for the year is 630,000. Required:
(i) Sales value need to earn a profit of 10% on sales.
(ii) Sales price per unit to bring BEP down to 120,000 units
(iii) Margin of safety sales if profit is 60,000.
3. The following figures are related to LM Limited for the year ending 31 March 2014:
Sales- 24,000 units @ 200 per unit.
PV ratio 25% and BEP is 50% of sales.
(i) Fixed cost for year
(ii) Profit earned for the year
(iii) Units to be sold to earn a target net profit of 1,100,000 for a year.
(iv) Number of units to be sold to earn a net income of 25% on cost
(v) Selling price per unit if break-even point is to be brought down by 4,000 units.
4. ABC Ltd can produce 400,000 units of a product per annum at 100% capacity. The variable production
costs are 40 per unit and the variable selling expenses are 12 per sold unit. The budgeted fixed production
expenses were 2,400,000 per annum and the fixed selling expenses were 1,600,000. During the year ended
31 March 2014, the company worked at 80% of its capacity. The operating data for the year is as under:
Production
320,000 units
310,000
units
Sales @ 80 per unit
Opening stock of finished goods
40,000 units
Fixed production expenses are absorbed on the basis of capacity and fixed selling expenses are recovered on
the basis of period.
You are required to prepare statements of cost and profit for the year ending 31 March 2014:
(i) On the basis of marginal costing
(ii) On the basis of absorption costing.
Budgets and budgetary control

CA KRISHNA KORADA

Page No-19

1. Concorde Limited manufactures two products using two types of materials and one grade of labour.
Shown below is an extract from the companys working papers for the next months budget.
Product A
Product B
Budgeted sales (units)
2,400
3,600
Budgeted material consumption per unit (in kg):
Material X
5
3
Material Y
4
6
Standard labour hours allowed per unit of product
3
5
Material X and Material Y cost 4 and 6 per kg and labour are paid 25 per hour. Overtime premium is 50%
and is payable if a worker works for more than 40 hours a week. There are 180 direct workers.
The target productivity ratio (or efficiency ratio) for the productive hours worked by the direct workers in
actually manufacturing the products is 80%. In addition the non-productive down time is budgeted at 20% of
the productive hours worked.
There are four 5-days weeks in the budgeted period and it is anticipated that sales and production will occur
evenly throughout the whole period.
It is anticipated that the stock at the beginning of the period will be:
Product A
400 units
Product B
200 units
Material X
1,000 kg
Material Y
500 kg
The anticipated closing stock for budget period is as follows:
Product A
Product B
Material X
Material Y
Required:
4 days sales
5 days sales
10 days consumption
6 days consumption
Calculate the material purchase budget and the wages budget for the direct workers showing the quantities
and values, for the next month.
2. M/s NNSG ltd specialized in manufacturing of piston rings for motor vehicle. It has prepared budget for
8,000 units per annum at budgeted cost of 2,164,400 as detailed below:
( )
Fixed cost (manufacturing)
Variable costs:
Power
Repairs
Other variable cost
Direct material
Direct Labour
( )
228,000
18,000
16,000
6,400
616,000
1,280,000
1,936,400
2,164,400
Considering the possible impact on sales turnover by market trends, the company decides to prepare flexible
budget with a production target of 4,000 and 6,000 units. On behalf of the company you are required to
prepare a flexible budget for production levels at 50% and 75%.
CA KRISHNA KORADA

Page No-20

Assuming the selling price per unit is maintained at 400 as at present; indicate the effect on net profit.
Administration, selling and distribution overheads continue at 72,000.
3. Calculate efficiency and activity ratio from the following data:
Capacity ratio
Budgeted output
Actual output
Standard time per unit
75%
6,000 units
5,000 units
4 hours
Part II: Financial Management

Time value of Money
1. If the interest is 10% payable quarterly, find the effective rate of interest.
2. A doctor is planning to buy an X ray machine for his hospital. He has two options. He can either purchase
it by making cash payment of 5 lakhs or 615,000 are to be paid in six equal annual installments. Which
option do you suggest to the doctor assuming the rate of return to be 12 percent? Present value of annuity of
Re 1 at 12 percent rate of discount for six years is 4.111.
3. X has invested 240,000 at annual rate of interest of 10 percent. What is the amount after three years if the
compounding is done?
(i) Annually
(ii) Semiannually.
Capital budgeting
1. Following are the data on a capital project being evaluated by the management of X Ltd.
Project M
Annual Cost Saving
Useful life
IRR
Profitability Index
NPV
Cost of capital
Cost of project
CA KRISHNA KORADA
40,000
4 years
15%
1.064
?
?
?
Page No-21

Payback
?
Salvage Value
0
Find the missing values considering the following table of discount factor only:
Discount factor
1 year
2 year
3 year
4 year
PVAF(4 years)
15%
14%
0.869
0.756
0.658
0.572
2.855
13%
0.877
0.769
0.675
0.592
2.913
12%
0.885
0.783
0.693
0.613
2.974
0.893
0.797
0.712
0.636
3.038
2. C ltd is considering investing in a project. The expected original investment in the project will be 200,000;
the life of project will be 5 year with no salvage value. The expected net cash inflows after depreciation but
before tax during the life of the project will be as following:
1
85,000
Year
2
100,000
3
80,000
4
80,000
5
40,000
The project will be depreciated at the rate of 20% on original cost. The company is subjected to 30% tax rate.
Required:
(i) Payback period and average rate of return (ARR)
(ii) Net present value and net present value index, if cost of capital is 10%
(iii) Internal rate of return
3. PQR Ltd is considering selecting a machine out of two mutually exclusive machines. The companys cost
of capital is 12% and corporate tax rate is 30%. Other information relating to two machines is given below:
Machine I
Cost of machine
1,500,000
Expected life
5 years
Annual income(before tax and depreciation)
625,000
Depreciation is to be charged on straight line basis.
Machine II
2,000,000
5 years
875,000

(i) Discounted payback period
(ii) Net present value
(iii) Profitability Index
The present value factors of 1 @ 12% are as follows.
Year
PV factor
1
0.893
CA KRISHNA KORADA
2
0.797
3
0.712
4
0.636
5
0.567

Page No-22

4. Company UVW has to make a choice between two identical machines, in terms of capacity, A and B.
They have been designed differently but do exactly the same job.
Machine A costs 750,000 and will last for three years. It costs 200,000 per year to run.
Machine B is an economy model costing only 500,000, but will last only for two years. It costs 300,000 per
year to run.
The cash flows of machine A and B are real cash flows. The costs are forecasted in rupees of constant
purchasing power. Ignore taxes. The opportunity cost of capital is 9%.
Required:
Which machine the company UVW should buy?
The present value factors at 9% are
Year
PVIF
1
0.9174
2
0.8417
3
0.7722
5. A firm can make investment in either of the following two projects. The firm anticipates its cost of capital
to be 10% and the net (after tax) cash flows of the project for five years are as follows: (figures in 000s)
Year
0
Project A
(500)
85
Project B
(500)
480
The discount factors are as under:
Year
PVF (10%)
PVF (20%)
Required:
0
1
1
2
200
100
0.91
0.83
3
240
70
2
0.83
0.69
4
220
30
3
0.75
0.58
5
70
20
4
0.68
0.48
5
0.62
0.41
(i) Calculate the NPV and IRR of each project

(ii) State with reasons which project would you recommend
Explain the inconsistency in ranking of two projects.
6. WX Ltd has a machine which has been in operation for three years. Its remaining estimated useful life is 8
years with no salvage value in the end. Its current market value is 200,000. The company is considering a
proposal to purchase a new model of machine to replace the existing machine. The relevant information is as
follows:
Cost of machine
Estimated life
Salvage value
Annual output
Selling price per unit
Annual operating hours
CA KRISHNA KORADA
Existing machine
330,000
11 years
Nil
30,000 units
15
3,000
New machine
1,000,000
8 years
40,000
75,000 units
15
3,000

Page No-23

Material cost per unit
4
4
Labour cost per hour
40
70
Indirect cost per annum
50,000
65,000
The company follows the straight line method of depreciation. The corporate tax rate is 30% WX does not
make any investment, if it yields less than 12%. Present value of annuity of Re 1 at 12% rate of discount for 8
years is 4.968. Present value of Re 1 at 12% rate of discount, received at the end of 8th year is 0.404. Ignore
capital gain tax.
Advise WX Ltd, whether the existing machine should be replaced or not
Cost of capital
1. A company issues 1,000,000 12% debentures of 100 each. The debentures are redeemable after the
expiry of fixed period of 7 years. The company is in 35% tax bracket.
Required:
(i) Calculate the cost of debt after tax, if debentures are issued at
a. Par b. 10% discount c. 10% premium
(ii) If brokerage is paid at 2%, what will be the cost of debentures, if issued at par?
2. X Ltd is considering the following two alternate financing plans:
Plan I
Plan II
400,000
400,000
200,000
Nil
Nil
200,000
600,000
600,000
The indifference point between the plans is 240,000. Corporate tax rate is 30%. Calculate the rate of
dividend on preference shares.
Equity shares at 10 each
12% debentures
Preference shares of 100 each
3. ABC Ltd wishes to raise the additional finance of 20 lakhs for meeting its investment plans. The company
has 400,000 in the form of retained earnings available for investment purposes. The following are further
details:
- Debt equity ratio is 25:75
- Cost of debt at the rate of 10 %( before tax) up to 200,000 and 13 %( before tax) beyond that.
- Earnings per share- 12
- Dividend payout 50% of earnings
CA KRISHNA KORADA

Page No-24

- Expected growth rate in dividend 10%
- Current market price per share- 60
Companys tax rate is 30% and shareholders personal tax rate is 20%
Required:
(i) Calculate post tax average cost of additional debt
(ii) Calculate the cost of retained earnings and cost of equity
(iii) Calculate the overall weighted average (after tax) cost of additional finance.
4. The following is capital structure of a company:
Source of capital
Book value
Market value
8,000,000
16,000,000
Equity shares @ 100 each
2,000,000
2,400,000
9 percent cumulative preference shares at 100 each
11 percent debentures
6,000,000
6,600,000
Retained earnings
4,000,000
Total
20,000,000
25,000,000
The current market price of the companys equity share is 200. For the last year the company had paid a
dividend at 25% and its dividend is likely to grow 5% every year. The corporate tax rate is 30% and
shareholders personal tax rate is 20%.
Required to calculate:
(i) Cost of capital for each source of capital
(ii) Weighted average cost of capital on the basis of book value weights
(iii) Weighted average cost of capital on the basis of market value weights
Capital Structure
1. The management of Z company ltd wants to raise its funds from market to meet out the financial demands
of its long term projects. The company has various combinations of proposals to raise its funds. You are
given the following proposals of the company.
Proposals
P
% of equity
100
Q
50
R
50
Cost of debt is 10%
Cost of preference shares is 10%
CA KRISHNA KORADA
% of debt
-
% of preference shares
-
50
-
50

Page No-25

-
Tax rate is 50%

Equity shares of FV 10 each will be issued at a premium of 10 per share
Total investment to be raise is 40,00,000
Expected earnings before interest and tax is 18,00,000
From the above proposals, management wants to take advice from you for appropriate plan after computing
the following:
(a) Earnings per share
(b) Financial break-even point
(c) Compute the EBIT range among the plan for indifference. Also indicate if any of the plans dominate.
2. D Ltd is foreseeing a growth rate of 12% per annum in the next two years. The growth rate is likely to be
10% for the third and fourth year. After that the growth rate is expected to stabilize at 8% per annum. If the
last dividend was 1.50 per share and the investors required rate of return is 16%, determine the current value
of equity share of the company.
The PV factors at 16%
Year
1
2
3
4
PV Factor
0.862
0.743
0.641
0.552
3. There are two firms P and Q which are identical except P does not use any debt in its capital structure
while Q has 800,000, 9% debentures in its capital structure. Both the firms have earnings before interest and
tax of 260,000 p.a. and the capitalization rate is 10%. Assuming corporate tax rate is 30%; calculate the value
of these firms according to MM hypothesis.
Leverages
1. Consider the following information for Omega Ltd:
EBIT
15,750
EBT
7,000
Fixed operating costs
1,575
Calculate percentage change in EPS, if sales increase by 5%
2. Z Ltd is considering the installation of a new project costing 8,000,000. Expected annual sales revenue
from the projects is 9,000,000 and its variable costs are 60% of sales. Expected annual fixed cost other than
interest is 1,000,000. Corporate tax rate is 30%. The company wants to arrange the funds through issuing
400,000 equity shares of 10 each and 12% debentures of 4000, 000
Required:
(i) Calculate operating, financial and combined leverages and EPS
(ii) Determine likely level of EBIT, if EPS is a.4, b.2, c.0
3. The following details of RST Ltd for the year ended 31 March 2006 are given below:
Operating leverage
Combined leverage
Fixed cost(excluding interest)
Sales
CA KRISHNA KORADA
1.4
2.8
2.04 lakhs
30 lakhs
Page No-26

12% debentures of 100 each
Equity share capital of 10 each
Income tax rate
Required:
21.25 lakhs
17 lakhs
30 percent
(i) Calculate financial leverage

(ii) Calculate PV ratio and EPS
(iii) If the company belongs to an industry, whose assets turnover is 1.5, does it have a high or low assets
leverage?
(iv) At what level of sales the EBT of the company will be equal to zero.
4. From the following financial data of Company A and Company B: Prepare their income statements.
Variable Cost
Fixed Cost
Interest Expenses
Financial Leverage
Operating Leverage
Income Tax Rate
Sales
Company A
56,000
20,000
12,000
5:1
30%
-
Company B
60% of sales
9,000
4:1
30%
1,05,000
Working Capital Management

1. Q Ltd sells goods at a uniform rate of gross profit of 20% on sales including depreciation as part of cost of
production. Its annual figures are as under:
Sales (at 2 months credit)

24,00,000
Material consumed (suppliers credit 2 months)
6,00,000
Wages paid (monthly at the beginning at the subsequent month)
4,80,000
Manufacturing expenses (cash expenses are paid-one month in arrear)
6,00,000
Administration expenses (cash expenses are paid-one month in arrear)
1,50,000
Sales promotion expenses(Paid quarterly in advance)
75,000
The company keeps one month stock each of raw materials and finished goods. A minimum cash balance of
80,000 is always kept. The company wants to adopt a 10% safety margin in the maintenance of working
capital.
The company has no work in progress.
Find out the requirements of working capital of the company on cash cost basis.
CA KRISHNA KORADA

Page No-27

2. A proforma cost sheet of a Company provides the following data:
Raw material cost per unit

117
Direct labour cost per unit
49
98
Factory overheads cost per unit (includes depreciation of .18 per unit at budgeted level
of activity.
Total cost per unit
264
Profit
36
Selling price per unit.
300
Following additional information is available:
Average raw material in stock
: 4 weeks
Average work in progress stock
: 2 weeks
(% completion with respect to Materials: 80% Labour and overheads: 60%)
Finished goods in stock
: 3 weeks
Credit period allowed to debtors
: 6 weeks
Credit period availed from suppliers
: 8 weeks
Time lag in payment of wages
: 1 week
Time lag in payment of overheads
: 2 weeks
The company sells one-fifth of the output against cash and maintains cash balance of 2, 50,000.
Required:
Prepare a statement showing estimate of working capital needed to finance a budgeted activity level of
78,000 units of production. You may assume that production is carried on evenly throughout the year and
wages and overheads accrue similarly.
3. Following information is forecasted by CS limited for the year ending 31 March 2010
Balance on 1
April 2009
Raw material
45,000
Work in progress
35,000
Finished goods
60,181
Debtors
112,123
Creditors
50,079
Annual purchase of raw material(all credit)
Annual cost of production
Annual cost of goods sold
Annual operating cost
Annual sales(all credit)
(i) Net operating cycle period
(ii) Number of operating cycles in year
(iii) Amount of working capital required
Balance on 31
March 2010
65,356
51,300
70,175
135,000
70,469
400,000
750,000
915,000
950,000
1,100,000
4. The Trading and Profit and Loss account of Beta Ltd, for the year ended 31st March, 2011 is given below:
Particulars
Amount() Particulars
Amount()
To Opening Stock:
By Sales(Credit)
20,00,000
Raw materials
1,80,000
By Closing Stock:
Raw Materials
2,00,000
Work-in Progress
60,000
Work In Progress
1,00,000
Finished goods
2,60,000
5,00,000 Finished Goods
3,00,000
6,00,000
CA KRISHNA KORADA

Page No-28

To Purchases(credit)
To Wages
To Production expenses
To Gross Profit c/d
To Administration
expenses
To Selling expenses
To Net Profit
11,00,000
3,00,000
2,00,000
5,00,000
26,00,000
1,75,000 By Gross Profit b/s
75,000
2,50,000
5,00,000
26,00,000
5,00,000
5,00,000
The opening and closing stock balances of debtors were 1,50,000 and 2,00,000 respectively whereas
opening and closing creditors were 2,00,000 2,40,000 respectively. You are required to ascertain the
working capital requirement by operating cycle method.
5. The following details are forecasted by a company for the purpose of effective utilization and management
of cash:
(i) Estimated sales and manufacturing costs
Year and
Sales
Materials
Wages
Overheads
month(2014)
April
420,000
200,000
160,000
45,000
May
450,000
210,000
160,000
40,000
June
500,000
260,000
165,000
38,000
July
490,000
282,000
165,000
37,500
August
540,000
280,000
165,000
60,800
September
610,000
310,000
170,000
52,000
(ii) Credit terms:
Sales-20% sales are on cash, 50% of credit sales are collected next month and balance in following month
Credit allowed by suppliers is 2 months
Delay in payment of wages is 0.5 month and of overheads is 1 month
(iii) Interest on 12% debentures of 500,000 is to be paid half yearly in June and December
(iv) Dividends on investments amounting to 25,000 are expected to be received in June, 2014
(v) A new machinery will be installed in June 2014 at a cost of 400,000 which is payable in 20 monthly
installments from July 2014 onwards
(vi) Advance income tax to be paid in august 2014
(vii) Cash balance on 1st June 2014 is expected to be 45,000 and the company wants to keep it at the end of
every month around this figure. The excess cash (in multiple of thousand rupees) is being put in fixed
deposit.
You are required to prepare monthly cash budget on the basis of above information for four months
beginning from June 2014.
6. A firm has total sales of 12, 00,000 and its average collection period is 90days. The past experience
indicates that bad debt losses are 1.5% of sales. The expenditure incurred by the firm in administering
receivable collection efforts are 50,000. A factor is prepared to buy the firms receivables by charging 2%
commission. The factor will pay advance on receivables to the firm at an interest rate of 16% p.a. after
withholding 10% as reserve. Calculate effective cost of factoring to the firm. Assume 360 days in a year.
CA KRISHNA KORADA

Page No-29

Ratio Analysis
1. With the help of following information complete the balance sheet of MNOP Ltd
Equity share capital
The relevant ratios of the company are as follows:
Current debt to total debt
Total debt to owners equity
Fixed assets owners equity
Total assets to turnover
Inventory turnover
100,000
0.40
0.60
0.60
2 times
8 times
2. The following accounting information and financial ratios of PQR Ltd relate to the year ended 31 March
2006
Accounting Information
Gross profit
15% of sales
Net profit
8% of sales
Raw materials consumed
20% of works cost
Direct wages
10% of works cost
Stock of raw materials
3 months usage
Stock of finished goods
6% of works cost
Debt collection period
60 days
All sales are on credit
Financial ratios
Fixed assets to sales
1:3
Fixed assets to current assets
13:11
Current ratio
2:1
Long term loans to current liabilities
2:1
Capital to reserves and surplus
1:4
If value of fixed assets as on 31 Dec 2005 amounted to 26 lakhs, prepare a summarized a Profit and loss
account of the company for the year ended 31 Dec 2006 and also the balance sheet on 31 Dec 2006.
3. The following accounting information and financial ratios of M Limited relate to the year ended 31st
March, 2012:
Inventory Turnover Ratio
6 times
Creditors Turnover Ratio
10 times
Debtors Turnover Ratio
8 times
Current Ratio
2.4
Gross Profit Ratio
25%
CA KRISHNA KORADA

Page No-30

Total Sales 30, 00,000; Cash sales 25% of credit sales; cash purchases 2, 30,000; working capital 2,
80,000; closing inventory is 80,000 more than opening inventory.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)

Average Inventory
Purchases
Average Debtors
Average Creditors
Average Payment Period
Average Collection Period
Current Assets
Current Liabilities
4. The assets of SONA Ltd consist of fixed assets and current assets, while its current liabilities comprise
bank credit in the ratio of 2:1. You are required to prepare the balance sheet of the company as on 31 March
2013 with the help of following information:
Share Capital
575,000
Working capital (CA-CL)
150,000
Gross margin
25%
Inventory turnover
5 times
Average collection period
1.5 months
Current ratio
1.5:1
Quick ratio
0.8:1
Reserves and surplus to bank and cash 4 times
Funds flow statement and cash flow statement

1. Balance Sheets of ABC Ltd as on march 31, 2009 and March 31, 2010 are as under:
Liabilities
31.3.2007 31.3.2008 Assets
31.3.2007 31.3.2008
Share Capital
2,000,000 2,000,000 Land and Building
1,500,000
1,400,000
General Reserve
400,000
450,000 Plant and Machinery
1,800,000
1,750,000
Profit and Loss a/c
250,000
360,000 Investments(long
400,000
372,000
term)
10% Debentures
1,000,000
800,000 Stock
480,000
850,000
Bank Loan(long-term)
500,000
600,000 Debtors
600,000
798,000
Creditors
400,000
580,000 Prepaid Expenses
50,000
40,000
Outstanding Expenses
20,000
25,000 Cash and Bank
140,000
85,000
Proposed Dividend
300,000
360,000
Provision for Taxation
100,000
120,000
4,970,000
(i)
(ii)
(iii)
5,295,000
4,970,000
5,295,000
Additional Information:
New machinery for 300,000 was purchased but an old machinery costing 145,000 was sold for 50,000
and accumulated depreciation thereon was 75,000.
10% debentures were redeemed at 20% premium.
Investments (long term) were sold for 45,000 and its profit was transferred to general reserve.
CA KRISHNA KORADA

Page No-31

(iv)
(v)
(vi)
(vii)
Income tax paid during the year 2009-10 was 80,000.

An interim dividend of 120,000 has been paid during the year 2009-10.
Assume the provision for taxation as current liability and proposed dividend as non-current liability.
Investments (long-term) are non-trade investments.
(i)
(ii)
Required:
Schedule of changes in working capital.
Funds flow statement
2. Balance assets of RST limited as on 31 March, 2008 and 31 March, 2009 are as under:
Liabilities
Equity share capital ( 10
per share)
General reserve
9% preference share
capital
Share premium A/c
Profit and loss A/c
8% debentures
Creditors
Bills payable
Provision for tax
Proposed dividend
Additional information:
31 3 2008
1,000,000
31 3 2009
1,200,000
Assets
Land and building
31 3 2008
600,000
31 3 2009
700,000
350,000
300,000
200,000
500,000
900,000
250,000
1,100,000
250,000
25,000
200,000
300,000
205,000
45,000
70,000
150,000
4,000
300,000
100,000
300,000
81,000
100,000
260,000
Plant & machinery

Investments(long
term)
Stock
Debtors
Cash and Bank
Prepaid expenses
Advance tax payment
Preliminary expenses
360,000
300,000
100,000
15,000
80,000
40,000
350,000
390,000
95,000
20,000
105,000
35,000
a. Depreciation charged on building and plant and machinery during the year 2008-09 were 50,000 and
120,000 respectively
b. During the year an old machine costing 150,000 was sold for 32,000. Its written down value was
40,000 on the date of sale.
c. During the year, income tax for the year 2007-08 was assessed at 76,000. A cheque of 4,000 was received
along with the assessment order towards refund of income tax paid in excess, by way of advance tax in earlier
years.
d. Proposed dividend for 2007-08 was paid during the year 2008-09
e. 9% preference shares of 300,000 which were due for redemption were redeemed during the year 2008-09
at a premium of 5% out of proceeds of fresh issue of 9% preference shares.
f. Bonus shares were issued to the existing equity shareholders at the rate of one share for every five shares
held on 31 3 2008 out of general reserves.
g. Debentures were redeemed at the beginning of the year at the premium of 3%
h. Interim dividend paid during the year 2008-09 was 50,000
Required:
CA KRISHNA KORADA

Page No-32

(i) Schedule of changes in working capital
(ii) Funds flow statement for the year ended 31 March, 2009.
3. The financial statement and operating results of PQR revealed the following position as on 31 March 2006.
Equity share capital(10 fully paid)
2,000,000
Working capital
600,000
Bank overdraft
100,000
Current ratio
2.5:1
Liquidity ratio
1.5:1
Propriety ratio(net fixed assets/propriety fund)
0.75:1
Cost of sales
1,440,000
Debtors velocity
2 months
Stock turnover based on cost of sales
4 times
Gross profit ratio
20% of sales
Net profit ratio
15% of sales
Closing stock was 25% higher than the opening stock. There were also free reserves brought forward from
earlier years. Current assets include stock, debtors and cash only. The current liabilities except bank overdraft
treated as creditors.
Expenses include depreciation of 90,000
The following information was collected from the records for the year ended 31 March 2007:
a. Total sales for the year were 20% higher as compared to previous year.
b. Balances as on 31 March 2007 were: stock 520,000, creditors 415,000, debtors 495,000, and cash
balance 310,000
c. Percentage of gross profit on turnover has gone up from 20% to 25% and ratio of net profit to sales from
15% to 16%
d. A portion of fixed asset was very old (book value 180,000) disposed for 90,000 (No depreciation to be
provided on this item)
e. Long term investments were purchased for 296,600
f. Bank overdraft fully discharged.
g. Percentage of depreciation to fixed assets to be provided at the rate in the previous year.
Required:
(i) Prepare balance sheet as on 31 March 2006 and 31 March 2007
(ii) Prepare the fund flow statement for the year ended 31 March 2007.
4. Balance sheet of a company as on 31 March 2007 and 2008 are as follows:
Liabilities
CA KRISHNA KORADA
31 3 07
31 3 08
Assets
31 3 07
31 3 08
Page No-33

Equity share capital
8% Pref. Share capital
1,000,000
200,000
1,000,000
300,000
General Reserve
120,000
145,000
Securities premium A/c

Profit and Loss A/c
11% debentures
Creditors
Provision for tax
Proposed dividend
210,000
500,000
185,000
80,000
136,000
25,000
300,000
300,000
215,000
105,000
144,000
Goodwill
Land and
building
Plant and
machinery
Investments
Stock
Debtors
Cash and Bank
Prepaid expenses
Premium on
redemption of
debentures
100,000
700,000
80,000
650,000
600,000
660,000
240,000
400,000
288,000
88,000
15,000
-
220,000
385,000
415,000
93,000
11,000
20,000
Additional information:
a. Investments were sold during the year at a profit of 15,000
b. During the year an old machine costing 80,000 was sold for 36,000. Its written down value was 45,000
c. Depreciation charged on plants and machinery at 20% on the opening balance
d. There was no purchase or sale of land and building
e. Provision for tax made during the year was 96,000.
f. Preference shares were issued for consideration of cash during the year.
Required:
(i) Cash flow statement as per AS 3
(ii) Schedule of changes in working capital
CA KRISHNA KORADA

Page No-34

2.guess Questions - Problems - Questions

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

2.guess Questions - Problems - Questions

Transféré par

Droits d'auteur :

Formats disponibles

Krishna Korada Classes

Cherish your dreams and vision

Part I: Cost Accounting

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Monthly demand of Zed:

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

3. The existing Incentive system of Alpha limited is as under.

5 days of 8 hours each plus 3 late shifts of 3 hours each

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Krishna Korada Classes

Krishna Korada Classes

Job costing and batch costing

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Joint products and By products

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Overheads are based on the following flexible budget

Krishna Korada Classes

Abnormal idle time is 2 hours in the week. Calculate:

(i) Material usage variance

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Product B ( Per unit)

a. There are no key factors

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Budgets and budgetary control

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Part II: Financial Management

Krishna Korada Classes

You are required to calculate:

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

(i) Calculate the NPV and IRR of each project

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

GUESS QUESTIONS (NUMERICALS)

Krishna Korada Classes

Tax rate is 50%