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Advanced Financial Accounting-Part 2

Advanced Financial Accounting-Part 2

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Published by gundapola
Question Paper:
...........................................................................................
Advanced Financial Accounting- 2008 (May - June)

Professional Level - II
Question Paper:
...........................................................................................
Advanced Financial Accounting- 2008 (May - June)

Professional Level - II

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Categories:Types, School Work
Published by: gundapola on Dec 27, 2008
Copyright:Attribution Non-commercial

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05/09/2014

 
Advanced Financial Accounting
Time allowed – 3 hoursMaximum marks – 100
 
[N.B. – Questions must be answered in English. Figures in the margin indicate full marks. Allworkings are to be submitted. Examiner will take account of the quality of language and of the manner in which the answers are presented. Different parts, if any of the samequestion must be answered in one place in order of sequence.]
Marks
 
1. (a) The Companies Act 1994, section 135(1) requires that every prospectus issued by a companyshall set out certain reports as specified in part II of schedule III of the said Act. You are requiredto write down the contents of the report(s) as prescribed under (i) para 24(1) and (ii) para 25 and26 of part II of the said schedule III. 6+4(b) The Balance Sheet of X Ltd. as at 31
st
December, 2007 is as under:-Liabilities Tk. Assets Tk.Share Capital: Fixed Assets:30,000 Equity Shares of Goodwill 10,000Tk. 10 each fully paid. 3,00,000 Machinery 2,50,000Furniture5,000 10% Cumulative Current Assets:Preference Shares of Tk. Stock 1,32,00010 each. 50,000 Debtors 40,000Unsecured Loan: Bank 10,00012% Debentures 1,00,000 Misc. ExpenditureInterest Accrued on Debentures 12,000 Preliminary Expenses 10,000Current Liabilities: Profit & Loss A/c 1,00,000Creditors. 1,00,000------------ ------------5,62,000 5,62,000----------- ---------------------- -----------The following scheme is passed and sanctioned by the Court:-(1) A New Company X Y Ltd. is formed with Share Capital of Tk. 5,00,000 divided into50,000 Equity Shares of Tk. 10 each.(2) The New Company will acquire the assets and liabilities of X Ltd. on the following terms:-(a)
 
Old Company’s Debenture holders are satisfied by issuing similar Debentures in NewCompany and for outstanding accrued interest, shares of equal amount are issued atpar.(b)
 
The creditors are paid for every Tk. 100-Tk. 20 in cash and 10 equity shares issued atpar.(c)
 
Preference Shareholders are to get equal number of Equity shares at par. For arreardividend amounting Tk. 15,000, 6 shares are issued at par for each Tk. 100 in fullsatisfaction.(d)
 
Equity Shareholders are issued one share at par for 3 shares held.(e)
 
Expenses Tk. 10,000 are to be borne by the New Company as part of purchaseconsideration.(3) Current assets are to be taken at book value except stock which is to be reduced by Tk.10,000. Goodwill to be eliminated, balance of purchase consideration being attributed toMachinery.
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 2(4) Remaining shares of the New Company are issued at par to the public and are fully paid.Required: Prepare-(a)
 
In the Old Company’s books:(i)
 
New Company’s Account. 2(ii)
 
Realisation and Reconstruction Account (Combined) 5(iii)
 
Equity Shareholders Account 2(b)
 
In the New Company’s books:(i) Bank Account 2(ii) Summarised Balance Sheet 52. Following are the summarized balance sheet of Paragon Ltd. and Perfume Ltd. at 31 December2007.Paragon Ltd. Perfume Ltd.Share capital:10% preference share of Tk.100 each 1,000,000 500,000Ordinary share of Tk.100 each 5,000,000 500,000Profit and loss account 4,000,000 1,000,00010,000,000 2,000,000Unsecured debenture - 2,000,00010,000,000 4,000,000Fixed assets 7,000,000 2,500,000Net current assets 3,000,000 1,500,00010,000,000 4,000,000Following have been extracted from their profit and loss account for the year ended 31 December2007:Paragon Ltd. Perfume Ltd.Balance at 1 January 2007 2,500,000 1,300,000Net profit for the year 3,000,000 700,0005,500,000 2,000,000Dividends:Preference 100,000 50,000Ordinary:InterimFinal700,000700,000700,000250,0001,500,000 1,000,0004,000,000 1,000,000
 
Paragon Ltd. acquired 4,000 preference shares and 4,000 ordinary shares in Perfume Ltd. on 30June 2007 for Tk.1,000,000 and Tk.900,000 respectively. It is estimated that during first half of the year, Perfume Ltd. incurred loss of Tk.450,000 and profit for the second half accrued evenlythroughout the period.You are required to prepare the consolidated financial statements of Paragon Ltd., at 31December 2007 assuming that Paragon credited full amount of interim dividend received fromPerfume Ltd. Before consolidation, the Board wants to put the revalued amounts of Perfume’sfixed assets at Tk.2,00,000. 20
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33. Assume you are the Finance Controller of Federal Telecom Limited. Your assistant calculated“Tax expense” in the following manner:Federal Telecom LimitedIncome tax assessment year 2007-08Income year ended 30 June 2007Manufacturing Trade products TotalSales 60,000,000 40,000,000 100,000,000Accounting profit 3,000,000 1,300,000 4,300,000-Add: Excess perquisites 400,000 400,000Entertainment expenses 90,000 90,000Gratuity expense 350,000 350,000Accounting depreciation 2,340,000 2,340,000Accounting profit on sale of assets 24,500 24,500-Less: Entertainment allowance (first 10 lakh 4%And balance 2%) (80,000) (80,000)Gratuity paid (400,000) (400,000)Tax depreciation allowance (3,580,000) (3,580,000)Tax income on sale of assets (9,000) (9,000)Taxable profit (i) 2,135,500 2,000,000 5,000,000Tax rate 40%Current tax expense 854,200 800,000 1,654,200(i) Taxable profit – trade products:During the year total tax deducted at sources on Trade products were Tk.800,000. He appliedsection 82C of the Income Tax Ordinance 1984 (withholding tax amount is the final discharge of tax liability) and calculated taxable income in the following manner.Taxable profit 800,000 x 100/40 = 2,000,000(ii) He also calculated deferred tax expense in the following manner:Total accounting profit 4,300,000Total income tax expense (Tk.4,300,000 x 40%) 1,720,000Less: Current tax expense 1,654,200Deferred tax expense (balance figure) 65,800(iii) As per your instruction, he calculated following figures:30 June 07 30 June 06Accounting Tax base Accounting Tax baseProperty, plant and equipment 95,300,000 75,650,000 97,664,500 79,239,000Provision for gratuity 4,500,000 - 4,550,000 -
 Required:
 (i) Do you think his calculations are correct? If not, identify his mistakes. 5(ii) Re-calculate current tax and deferred tax expenses for the year ended 30 June 2007. 10(iii) Also, calculate deferred tax liability or asset as at 30 June 2006 and 2007 in compliancewith BAS 12. 5
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