Professional Documents
Culture Documents
CMA Question of ICMAB-April-2012
CMA Question of ICMAB-April-2012
Tk.
40,000
16,500
1,150
1,90,000
950
2,05,000
550
4,54,150
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Page 3 of 49
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x 2 1
x2 +1
[Marks: (6 + 4) = 10]
Q. No. 3.
(a) In an Accounting class there are 60 students, and in a Mathematics class there are 40 students. Find
the number either in Mathematics class or in Accounting class if
(i)
Two classes meet at the same hour.
(ii) If the two classes meet at different hours and 20 students have enrolled in both courses.
(b)
Show that
tan A
cot A
+
= SecA. cos ecA + 1
1 cot A
1 tan A
[Marks: (5 + 5) = 10]
Q. No. 4.
(a)
If A = 3
3
3
0
2
1 , B =
5
9
1
1
4
2
4
0 , then find AB and BA , hence comment
2
1 x
Page 5 of 49
e x dx
e 2 x + 1
(ii)
1
cos dx
x
(b)
A loan of Tk. 5,00,000 is to be paid in 15 equal installments. Interest being at 12% p.a.
compounded and first payment was made after two years. What amount will be paid in each
installment?
[Marks: (3+3+4) = 10]
Q. No. 6.
Let the Cost Function of a firm be given by the following equation:
C=300x 10x2 +
1 3
x , where C stands for cost and x for output. Calculate the output
3
(i)
at which marginal cost is minimum,
(ii) at which average cost is minimum,
(iii) at which average cost is equal to marginal cost.
[Marks: (4+3+3) = 10]
Q. No. 7.
(a) Evaluate
1
(i)
(b)
x 2 + 2x + 5
dx
1
x
(ii)
xe
dx
Page 6 of 49
2530
3035
3540
4045
4550
5055
No. of workers
30
22
27
35
21
18
[Marks: (4+6) = 10]
Q. No. 5.
(a)
Define regression co-efficient. How does if differ from correlation co-efficient?
(b)
Fit a linear regression line to the following data:
X
25
32
40
42
48
105
114
130
125
132
[Marks: (4+6) = 10]
Q. No. 6.
(a) Define probability. Explain addition and multiplication law of probability.
(b) If two dice are thrown, what is the probability that the sum is (a) greater than 8, and (b) neither 7
nor11?
[Marks: (4+6) = 10]
Q. No. 7.
Write short notes on the followings:
(a) Co-efficient of Variation.
(b) Standard deviation.
(c) Conditional probability.
(d) Type-I error and Type-II error.
[Marks: (2.5 x 4) = 10]
= THE END =
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Required: As a professional accountant can you agree with the above report of store manager?
Determine the cost of goods sold and the ending inventory for FIFO, LIFO, Weighted
average and Specific identification.
[Marks: 4 + (4 x 4) = 20]
Q. No. 3.
(a) Cash flow statements are a valuable source of information. However, there may be certain
important non-cash transactions; give 4(four) examples of such transaction.
(b) The following are the Balance Sheets of Moonlight Ltd. as at 30 June 2011 and 2010:
Assets
Cash in Hand
Trade Debtors
Stock in Trade
Fixed Assets
Accumulated
Depreciation
Investment in B Ltd
Loan Receivable
Total
2011
2010
Liabilities and Equity
(Taka)
(Taka)
80,00,000
70,00,000 Accounts Payable
1,12,80,000
1,16,80,000 Income Tax Payable
1,85,00,000
1,71,50,000 Dividend Payable
3,30,70,000
2,96,70,000 Finance Lease Obligations
(1,16,50,000) (1,04,00,000) Share Capital
30,50,000
27,00,000
6,49,50,000
2011
(Taka)
1,01,50,000
3,00,000
8,00,000
40,00,000
50,00,000
2010
(Taka)
95,50,000
5,00,000
9,00,000
50,00,000
1,50,00,000
2,97,00,000
6,49,50,000
1,50,00,000
2,69,00,000
5,78,50,000
Additional Information:
i)
On 30 June 2010, Moonlight Ltd. acquired 25% shares of B Ltd. for Tk.27,50,000. On that date the
carrying value of Bs assets and liabilities, approximately their fair value was Tk.1,10,00,000. B
Ltd. reported income of Tk.12,00,000 for the year ended 30 June 2011.
ii)
During financial year 2011, Moonlight lent Tk.30,00,000 to Sunlight Ltd. Sunlight paid the 1st
installment (including interest) of Tk. 3,00,000 on 1st April 2011.
iii) On 2 July 2010, Moonlight Ltd. sold equipment costing Tk.6,00,000 with a carrying amount of
Tk.3,50,000 for Tk.4,00,000.
iv) On 30 June 2011, Moonlight Ltd entered into finance lease for machinery. The PV of the rental
payment is Tk.40,00,000 which equals the fair value. Moonlight Ltd. made the first rental payment
of Tk.6,00,000 when due on 2 July 2011.
v)
Net Income for the year 2011 was Tk.36,00,000.
vi) Moonlight Ltd. declared and paid cash dividend as follows:
2011
2010
Declared
15 June 2011
15 June 2010
Paid
30 August 2011
30 August 2010
Amount
Tk.8,00,000
Tk.9,00,000
Required:
Prepare the cash flow statement following the IAS-7 (indirect basis). Also show your workings.
[Marks: (4+16) = 20]
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Q. No. 1.
(a) Briefly discuss the impact of automation on application of learning curve.
(b) Standard production in the Buni Food Company is 40 units per hour. For the First week in April, a
workers record shows the following:
Monday (8 hours)
330 units
Tuesday (8 hours)
350 units
Wednesday (8 hours)
310 units
Thursday (8 hours)
320 units
Friday (8 hours)
340 units
Management is considering the adoption of one of two different incentive plans and wants to use
this representative workers record to study earnings using each proposal incentive plan.
With incentive plan A, workers are guaranteed a rate of Tk. 12.40 per hour and a premium of 70%
of the time saved on production in excess of standard.
With incentive plan B, workers are paid Tk. 0.35 per unit when daily output is below standard, Tk.
0.45 per unit when daily output is at standard and up to 5% above standard Tk. 0.50 per unit for all
production when daily output exceeds 5% above standard.
Compute daily earnings and the effective rate per hour for each day using each of the incentive
plans proposed. Critically evaluate both plans from the workers view point.
[Marks: 5+15) = 20]
Q. No. 2.
Satrong Textile Company operates under the weighted average method of processing. It has two
department, Weaving & Finishing, for both department conversion cost added evenly throughout
the process. Direct materials are added at the beginning of the process in the weaving department
and additional direct materials at the end of the Finishing department. The costs and unit
production statistics from October -2011 follow. All unfinished work at the October is 15%
completed to conversion costs. The beginning inventory (October 1) is 80% complete as to
conversion cost to October 1. All completed work is transferred to the next department.
Weaving
Finishing
Beginning Inventory
Weaving Tk. 20,000 direct material, Tk. 5,000 conversion cost.
Tk. 25,000
Finishing Tk. 60,000 Transferred in costs & 24,000 conversion cost.
Tk. 84,000
Costs added during current period
Direct materials
1,00,000
60,000
Conversion costs
60,000
50,000
Physical units
Units in beginning Inventory
1,500
2,000
Units started this month
80,000
70,000
Goods units completed and transferred out
70,000
60,000
Normal Spoilage
3,500
3,000
Abnormal Spoilage
7,000
6,000
Assumption:
(i)
Spoilage is assumed at the end of each two process, when the units are inspected. Spoiled
units are disposed of at zero net disposal value.
(ii) Assume that there is no shrinkage, evaporation or abnormal spoilage other than that indicated
in the information given.
Required: Five Basic steps of process costing for both Departments.
[Marks: 20]
Page 13 of 49
Define product cost. Describe three different purposes for computing product cost.
b)
Brothers Ltd. is a metal and wood manufacturer, selling products to the home construction market.
Consider the following data for the year 2010:
Particulars
Sand paper
Materials- handling costs
Lubricants and coolants
Miscellaneous indirect manufacturing labor
Direct manufacturing labor
Direct materials, Jan.1, 2010
Direct materials, Dec.31, 2010
Finished goods, Jan. 1, 2010
Finished goods, Dec.31, 2010
Work in process, Jan 1, 2010
Work in process, Dec.31, 2010
Plant-leasing costs
Depreciation-plant equipment
Property taxes on plant equipment
Fire insurance on plant equipment
Direct materials purchased
Revenues
Marketing promotions
Marketing salaries
Distribution costs
Customer service costs
Tk.
2,000/70,000/5,000/40,000/300,000/40,000/50,000/100,000/150,000/10,000/14,000/54,000/36,000/4,000/3,000/460,000/1,360,000/60,000/100,000/70,000/100,000/-
Required:
(i)
(ii)
Suppose that both the direct materials and plant-leasing costs are tied to the production of
900,000 units. What is the unit cost for the direct materials assigned to each unit produced?
What is the unit cost of the plant-leasing costs? Assume that the plant-leasing costs are a
fixed cost.
(iii) Repeat the computation in requirement (ii) for direct materials and plat-leasing costs,
assuming that the costs are being predicted for the manufacturing of 1,000,000 units next
year. Assume that the implied cost-behavior patterns persist.
[Marks: 4 + {12+2+2} = 20]
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= THE END =
Page 17 of 49
Full Marks: 80
Q. No. 1.
(a)
What is the difference between fourth generation language and conventional Programming
Languages?
(b)
What is the difference between System software and application software package?
(c)
Q. No. 2.
(a)
(b)
What is called server and POS (Point of Sales) data of a super store?
(c)
How can you reconcile the server and POS data, if difference found?
(d)
Q. No. 3.
(a)
(b)
How can you choose software and programming language for a manufacturing concern?
(c)
(d)
Q. No. 4.
(a)
(b)
(c)
Wifi.
(d)
(e)
ERP
[Marks: (4 x 5) = 20]
= THE END =
Page 18 of 49
Q. No. 1.
You have been appointed by the Management of Moon Incorporation to review their books of Accounts
and to indicate what effect in income tax allocation procedures will have on their statements. The
following reconciliation of book income and taxable income are made available:
Amounts in Taka
2003
2004
Reported Book Income before Tax
Add
Expenses not deductible for tax purposes
Excess of Book depreciation over tax depreciation
Deferred revenue tax in the period of collection
Excess of reported book income on installment sales
over taxable income
Excess of tax depreciation over book depreciation
Taxable Income
2005
180,000
48,000
2,28,000
270,000
90,000
42,000
402,000
360,000
30,000
24,000
414,000
(36,000)
(36,000)
1,56,000
(54,000) (48,000)
(12,000) ___-___
3,36,000 3,66,000
Less
Required:
(a) Assume tax rates as 40% on taxable income for all the three years. Prepare journal entries for three
years to record the income tax liability. Use separate deferred accounts where necessary.
(b) Assume the rate changed in 2005 to 45%. Prepare the journal entries to record the Income Tax
liability of that year.
[Marks: (15+5) = 20]
Q. No. 2.
Barnali Corporation has its Home Office in Dhaka and a Branch in Chittagong. The Following
information was available from the books of Home Office and the Branch as on 31 December 2010.
Inventories as on 1 January 2010
Purchases
Sales
Other Expenses
Inventories as on 31 December 2010
Branch (Tk.)
200,000
2,300,000
4,100,000
304,000
104,000
90,000
3,100,000
124,000
62,000
The Branch books show the Home Office Account at Tk. 180,000 (Cr.) and the Home Office books show
the Branch Account at Tk. 600,000 (Dr.). The Branch receives all its supplies from the Home Office,
which are invoiced at 25% over cost. During the year, the Home Office sent invoices to the Branch to the
tune of Tk. 20,90,000. The Home Office credits its sells account with the invoice price of the goods sent
to the Branch. The Home Office billed the Branch for Tk. 240,000 on 31 December 2010 representing
the Branchs share of expenses incurred by the Home Office. The said expenses had not been recorded in
the books of the Branch.
Page 19 of 49
100,000
40,000
80,000
25 December 2010
28 December 2010
31 December 2010
The expenses of the Branch are met by the Home Office from time to time for which amounts are sent in
advance to the Branch. A sum of Tk. 60,000 sent to the Branch by Home Office on 29 December 2010,
which was received by the Branch on 3 January 2011.
Required: Prepare Income Statement, in columnar form after showing the reconciliation of Branch
Account and Home Office Account Balance.
[Marks: 20]
Q. No. 3.
PQR Corporation, a lessor of office machines, purchased a new machine for Tk. 450,000 on December
31, 2004. The machine was delivered the same day (by prior arrangement) to XYZ Company, the lessee.
The information relating to the lease transactions are as under:
(i)
The leased asset had an estimated useful life of seven years which coincides with the lease term.
(ii)
At the end of lease term, the machine will revert to PQR, at which time it is expected to have a
residual value Tk. 60,000(none of such is guaranteed by XYZ).
(iii) PQRs implicit interest rate (on its net investment) is 12% which is known by XYZ.
(iv) XYZs incremental interest rate is 14% at December 31, 2004.
(v)
Lease rentals consist of seven equal annual payments, the first of which was paid on December 31,
2004.
(vi) The lease is appropriately accounted for as a direct financing lease by PQR and as a capital lease
by XYZ. Both the lessor and lessee follow the Calendar years and depreciate all plant assets on the
straight line basis.
Present value of Taka 1 at 12% for 7 years is 0.4523.
Present value of annuity of Taka 1 in advance for 7 years @ 12% is 5.1114.
Required:
(i)
(ii)
Compute the amounts of the minimum lease payments receivable and unearned interest revenue
that PQR should disclose at the inception of the lease on December 31, 2004.
(iii) What expense should XYZ record for the year ended December 31, 2005?
[Marks: (5+5+5) = 15]
Page 20 of 49
From the following particulars of a Commercial Bank compute the amounts of statutory reserve
required:
Profit before tax
Profit after tax
Balance of statutory reserve fund
Balance of share premium
Paid-up share capital
(b)
Tk. 29,30,507
Tk. 19,62,907
Tk. 5,00,000
Tk. 50,000
Tk. 10,00,000
Redraft the following Balance Sheet of City Bank as on December 31, 2008 as per IAS-30s
format:
Liabilities
Accumulated Depreciation
Borrowings
Provision for Bad Debts
Fixed Deposits
Bills Payable
Current Account
Savings Bank Deposit
Sundry Creditors
Branch Adjustment
Statutory Reserve
New Statutory Reserve
Proposed Dividend
Provision for Taxation
Surplus of profit & loss A/c
Paid-Up share capital
Rebate on Bills discounted
Unclaimed Dividend
Taka Assets
1,65,000
7,00,000
25,000
9,50,000
8,00,000
80,00,000
30,00,000
30,000
50,000
3,50,000
49,000
75,000
1,00,000
1,81,000
5,00,000
5,000
30,000
1,50,10,000
Taka
Investment (cost)
Money at short call notice
Cash in hand
Loans, cash credits and overdrafts
Cash with other Banks
Cash with Bangladesh Bank
Bills discounted and purchased
Premises
Non-Banking assets
30,00,000
3,00,000
60,000
70,00,000
15,00,000
13,00,000
5,00,000
13,00,000
50,000
1,50,10,000
[Marks: (5+15) = 20]
Q. No. 5.
(a)
Mention the two methods of recognizing profit from a long-term construction contract. Under what
circumstances should a company use the completed contract method?
(b)
(c)
Give four different transactions originating with the branch that affect the reciprocal accounts.
(d)
Define Contract as per IAS-11. Under what condition percentage of completion accounting
recommended for construction contractors?
What do you mean by IFRS? What is the relationship of IFRS with the IAS?
[Marks: (5 x 5) = 25]
(e)
= THE END =
Page 21 of 49
Q. No. 1.
The Diagold Cutting Company requires 10 machine hours per unit in the Cutting Department. The
following costs are assumed to be related to the operations of a cutting machine at a normal capacity of
10,000 units per year (with a maximum capacity of 12,000 units per year):
Variable costs:
Electricity (10,000 units x 10 MH*/UNIT x Tk.5/MH
Tk. 500,000
Repairs & maintenance (10,000 UNITS x 10 MH/unit x Tk. 2/MH)
200,000
Fixed costs:
Depreciation (Tk. 2,000,000/5 years)
400,000
Insurance
100,000
Total costs at 10,000 units
Tk. 1,200,000
*MH = machine hours.
Required:
(a) What are the variable, fixed, and total costs per unit if the normal production of 10,000 units per
year is achieved?
(b) What is the variable, fixed, and total cost per unit if only 8,000 units are produced per year?
(c) What is the implication of producing less units (8,000 units) than normal capacity (10,000 units)
for managerial decision making?
(d) Which costs are relevant and which costs are irrelevant to a decision to expand production from
normal capacity (10,000 units) to maximum capacity (12,000 units)?
(e) Suppose a second cutting machine, identical in every respect to the first one, is under consideration
for possible purchase. Total production for the year is still expected to be equal to normal capacity
(10,000 units with the first cutting machine accounting for 6,000 units and the second cutting
machine accounting for 4,000 units).
(i)
What are the total costs of operating each of the two machines?
(ii) What are the variable, fixed, and total costs per unit for each machine?
(iii) What costs are relevant and what costs are irrelevant to the decision to acquire a second
cutting machine?
(f) Under what condition would both the variable costs and fixed costs be relevant in a decision to
acquire a second cutting machine?
[Marks: (2+3+3+3+6+3) = 20]
Q. No. 2.
(a) The following data are available in a manufacturing company for a yearly period:
Fixed expenses
Tk.
Wages and salaries
9,50,000
Rent, rates and taxes
6,60,000
Depreciation
7,40,000
Sundry administrative expenses
6,50,000
Semi-variable expenses (at 50% of capacity)
Maintenance and repairs
3,50,000
Indirect labour
7,90,000
Sales department salaries etc.
3,80,000
Sundry administrative expenses
2,80,000
Variable expenses (at 50% of capacity)
Materials
21,70,000
Labour
20,40,000
Other expenses
7,90,000
98,00,000
Page 22 of 49
Page 23 of 49
Every 4 months 5,000 of dividends from investments are expected. The first dividend
payment was received in January.
(3) Purchases are 60% of sales, 15% of which are paid in cash, 65% are paid 1 month later and
the rest is paid 2 months after purchase.
(4) Tk. 80,000 dividends are paid twice a year in March and September.
(5) Monthly rent is Tk. 20,000.
(6) Taxes are paid Tk. 65,000 payable in December.
(7) A new equipment will be purchased in October for Tk. 23,000.
(8) Tk. 15,000 interest will be paid in November.
(9) Tk. 10,000 loan payments are paid every month.
(10) Wages and salaries are Tk. 10,000+5% of sales in each month.
(11) Augusts ending cash balance is Tk. 30,000.
(12) The company would like to maintain a minimum cash balance of Tk. 1,00,000.
Required: Prepare the cash budget and state if the company will need to invest excess funds or
borrow funds during the months of September, October, November, and December.
[Marks: (8+12) = 20]
Q. No. 5.
(a) A business executive once stated Depreciation is one of our biggest sources of cash. Do you
agree that depreciation is a sources of cash? Explain.
(b) HP Hydroelectric Plant Company Ltd. to supply power, light and heat. It is end of 2011. The All
Fixed Company began operations in January, 2010. The company has no variable costs. All of its
costs are fixed; they do not vary with output.
The all Fixed Company is located on the banks of a river and has its own hydroelectric plant to
supply power, light and heat. The company manufactures a synthetic fertilizer from air and river
water and sells its product at a price which is not expected to change.
It has a small staff, all hired on an annual salary basis. The output of the plant can be increased or
decreased by adjusting dials on a control panel.
The following are data regarding the operations of the All Fixed Company:
2010
2011
Sales
10,000 tones
10,000 tones
Production
20,000 tones
Selling price
Tk. 300.00 per ton
300.00 per ton
Production costs (fixed)
Tk. 28,00,000
Tk. 28,00,000
General and administrative expense
Tk. 4,00,000
Tk. 4,00,000
Required:
(i)
Prepare an income statement for the year using absorption costing method.
(ii) Prepare and income statement for the year using variable costing method.
(iii) What inventory costs would be carried in the balance sheets in December 2010 and 2011
under each method?
[Marks: (4+6+6+4) = 20]
= THE END =
Page 24 of 49
Page 25 of 49
Page 26 of 49
Q. No. 1.
(a) Taxation is a way to transfer the resources from private sector to government sector in order to
accelerate economic and other development. Explain the statement in the light of purposes of
taxation.
(b) According to the Income Tax Ordinance 1984, differentiate between the following:
(i)
Income year and Accounting year.
(ii) Universal self-assessment and Assessment after hearing.
[Marks: (4+4) = 8]
Q. No. 2.
Ms. Afsana Hoque is the Head of Accounts of a multinational company in Bangladesh. She has joined
the company on July 01, 2010. She has received the following income for the year ended on 30th June,
2011:
(a) Basic pay Tk. 1,50,000 per month.
(b) Rent-free accommodation fully furnished by the company, the annual rental value of the
house is Tk. 5,00,000;
(c) Full-time company car for her own office use and for her family;
(d) Company pays Tk. 20,000 per month for her two school going children which is paid to the
school authority directly;
(e) She received two festival bonuses each equivalent to basic pay during the Eid time which she
spent partly for her family and partly for the poor people in her village;
(f) Drivers salary of the full-time car Tk. 10,000 per month paid to her drivers bank account as
he is the companys employee;
(g) Company paid Tk. 2,00,000 to her during the year being the reimbursement of various utility
bills of her house.;
(h) Personal mobile bill paid by the company Tk. 5,000 per month;
(i)
She was paid Tk. 2,00,000 for her overseas travels for the official trip out of which she saved
25% during the year;
(j)
Bill paid by the company for the membership of an international club Tk. 2,50,000;
(k) Medical allowance Tk. 10,000 per month during the year; actual medical expense was Tk.
1,00,000;
(l)
Entertainment allowance Tk. 10,000 per month; actual expense in this regard Tk. 1,50,000;
(m) She has contributed 10% of her basic salary to a recognized provident fund. Her employer
also contributed the same amount. Interest on the said fund @ 18% is Tk. 1,800 during the
period;
(n) She has contributed 2% of her basic pay to a group insurance scheme.
The employer of Ms. Afsana Hoque has deducted tax at source at the rate of Tk. 60,670 per month. She
also received pretax interest on savings certificate Tk. 80,000 and an amount of Tk. 8,000 was deducted
at source. She sold a land (purchased 3 years ago) at a price of Tk. 20,00,000 and Tk. 40,000 was paid as
tax on transfer of property.
Page 27 of 49
Page 28 of 49
The company have had export quota for exporting garments to EU countries. As the company has
recently changed the line of operation (switched from garments manufacturing to pharmaceuticals),
it transferred the export quota to another garments manufacturer for an annual sum of Tk. 70,000.
The export value of such quota is Tk. 25,00,000. Such income is not reported at all.
(i)
Bonus and commission to the field representatives amounted to Tk. 3,00,000 at the rate of 5
months pay including 1 months pay as festival bonus. But the general practice of bonus and
commission for the similar business is two months pay as commission plus 1 months pay as
festival bonus.
(j)
Sum of Tk. 1,20,000 paid to an institution for scientific research, which is not approved by NBR.
(k) Sum of Tk. 5,00,000 expended for establishing a hospital for the benefit of employees without any
charge. The company has charged it in the profit & loss account as hospital expenditure and not
claimed any other deduction or allowance.
(l)
Salary of Tk. 5,00,000 and rent of Tk. 80,000 were paid without deduction at source.
(m) Payment of brokerage and commission of Tk. 60,000 made to a non-resident without deducting tax
at source.
(n) Annual perquisites enjoyed equally by the MD, the Chairman and 5 Members of Board of
Directors amount to Tk. 25,50,000.
(o) Accounting depreciation charged to the amount is Tk. 2,50,000 but tax depreciation amounts to Tk.
3,00,000.
(p) Value of the free sample distributed was Tk. 3,00,000. Annual turnover during the year was Tk.
1,30,00,000.
(q) Expenditure on foreign travels for holidaying and recreation of the employees and their dependants
to the extent of the amount equivalent to three months basic salary of Tk. 3,60,000; actual
expenditure being Tk. 4,00,000 and that the travel was not oftener than once in two years.
(r) Sum of Tk. 50,000 expended to train employees (Bangladeshi citizen) in connection with a scheme
approved by the NBR and shown in profit & loss account.
(s) The company charged a sum of Tk. 2,00,000 for visits abroad as a member of trade delegation
sponsored by the government in the profit & loss account.
(t)
Annual membership fee of Tk. 1,50,000 is paid to Bangladesh Pharmaceutical Society, which is a
professional institution, recognized by the NBR and charged in profit & loss account.
(u) Expenditure on publicity and advertisement amounting to Tk. 3,00,000 charged in profit & loss
account was accepted by the NBR.
(v) Entertainment expenditure, Tk. 1,50,000.
Required: Compute the taxable income of the company.
[Marks: 30]
Q. No. 5.
(a) Define prohibited goods as per the Customs Act 1969. What are the consequences of importing
prohibited goods as per the Act?
(b) Mr. Anwar imported some processed mushrooms from Thailand. C&F value of the goods were
US$ 5,000 with an exchange rate of US$1 = Tk. 82.50. Insurance cost was 1% of C&F value.
Border taxes on this import were as follows: Customs duty @ 25%, Supplementary duty @ 20%,
Value added tax (VAT) @ 15%, Advance income tax (AIT) @ 5%, Regulatory duty @ 5% and
Advance trade VAT (ATV) @ 3%. Compute the amount of Customs duty, Supplementary duty,
VAT, AIT, Regulatory duty and ATV. Also compute the total tax incidence as a percent of
assessable value.
(c) Critically evaluate the necessity of gift tax in terms of revenue generated from such tax to
Government exchequer. Mention the gifts which are exempted from gift tax.
(d) Under what situations, Input Tax Credit is not allowed under the Value Added Tax Act, 1991?
[Marks: (4+8+3+5) = 20]
= THE END =
Page 29 of 49
12,000
24,750
4,000
250
20,000
Total
Equity:
Ordinary shares of Tk. 1 each
Retained Earnings
Non current liabilities
Interest bearing borrowings
Current liabilities:
Trade payables
Interest payables
Current a/c with X
O/D
18,000
21,000
0
0
0
61,000
1,11,000
39,000
65,800
40,000
21,000
61,000
8,000
11,000
19,000
30,000
20,000
20,000
0
0
0
18,300
500
2,000
6,000
20,000
26,800
Total
1,11,000
65,800
Notes:
(1) X acquired 6,000 ordinary shares in Y on 1/1/2007. The price paid was Tk. 11,000. The
balance on Ys retained earnings at the date of acquisition by X was Tk. 5,000.This
included an intangible asset of Tk. 1,000 (see note 4 below). Goodwill on consolidation is
retained at cost in the group statement of financial position. There has been no evidence of
impairment since acquisition. X made a long term loan of Tk. 10,000 to Y on the same
date.
(2) On 31stst December, 2010 there was cash in transit from Y to X of Tk. 2,000.
(3) On 31 December, 2010 the inventory of Y included Tk. 4,800 of goods purchased from
X. X had invoiced these goods at cost plus 25%.
(4) The intangible asset of Y does not satisfy the recognition criteria laid down in IAS -38.
IAS -38 is to be followed in preparing the consolidated accounts.
(5) It is the groups policy to value non-controlling interests as it proportionate share of the
fair value of the subsidiarys identifiable net assets.
Required: Prepare a consolidated statement of financial position for the X group as at 31st
December, 2010.
[Marks : 20]
Page 30 of 49
April-1
July-1
6,00,000
(4,00,000)
Page 32 of 49
Q.No.1.
(a) Theres no reason for me to get excited about the choice between the weighted-average and FIFO
methods in my process-cost system. I have long-term contracts with materials suppliers at fixed
prices. Do you agree with this statement made by a plant controller? Explain.
(b)
M/s. Zaber and Zaker Manufacturing Company makes three joint products, ZA, ZK and ZZ.
Material enters Process I and after a time it emerges in two different forms. One of these forms
enters Process X, where it is transformed into Product ZA and the other enters Process II. From
Process II, come Product ZK, ready for sale and a residue which is sent trough Process III, from
which Product ZZ emerges.
During a past period, the statistical records show that costs were incurred in the several processes
as follows:
Process I (including material)
Taka 365,800
Process II
130,000
Process III
89,600
Process X
20,000
Total costs of all products
605,400
During the same period the production and sales records were as follows (there were no beginning
inventories):
Production
Sales
Product ZA 2,800 kg
2000 kg brought Tk. 100,000
Product ZK 20,000 kg
15,000 kg brought Tk. 300,000
Product ZZ 42,000 kg
40,000 kg brought Tk. 400,000
At the end of the period, the market prices of the inventories were:
Product ZA
Tk. 40 a kilogram
Product ZK
Tk. 30 a kilogram
Product ZZ
Tk. 8 a kilogram
The accountant was instructed to treat ZK and ZZ as joint products and ZA as a by product in the
allocation of costs. He was also instructed to assume a profit or loss margin of 25 percent and an
estimated selling expense of 10 percent, both on sales value, for product ZA.
Required:
Show the allocation of cost to products, to goods sold and to the end-of-the-period inventories.
[Marks: (4+16) = 20]
Q. No. 2.
(a) Define Service Cost. To what industries is this method of costing applicable?
(b) M/s. Emerging Consulting Ltd. has been asked to provide the services of two consultants to a
government department for the coming fiscal year. The consultants will still be in the employ of
the company, who will invoice the government department on a quarterly basis for their services.
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= THE END =
Page 37 of 49
Q. No. 1.
(a) What do you mean auditors integrity, objective and independence as general principles of an audit?
(b) What are the key threats to independence of auditor?
(c) As an auditor of a company what step will you take to overcome and reduce the threats during the
course of your audit?
[Marks: (5 x 3) = 15]
Q. No. 2.
(a) Define internal control system?
(b) Who is responsible for implementation of internal control system? An effective internal control can
reduce the risk of auditor Explain.
(c) How does an auditor need to study and evaluate the internal control system of an organization?
(d) Is it possible to remove an auditor before expiry of his term? What are the rights of auditor who is
sought to be removed?
[Marks: (5 x 4) = 20]
Q. No. 3.
(a) You were informed that no provision has been made in accounts for depreciation of plant and
machinery since the directors consider that:
(i)
Depreciation already written off earlier years has been excessive;
(ii) Market value of such assets is much higher of its present book value;
(iii) Current years profit is insufficient to cover provision for further depreciation.
As an auditor draft a letter to the Board of Directors of the company giving your views on each
point.
(b) What do you mean by post balance sheet events? Cite 2(two) examples. How are such events dealt
with by the auditors?
[Marks: {(3x3)+6}= 15]
Q. No. 4.
(a) Should the auditor give an unqualified opinion on Financial Statement in case of following:
(i)
Stocks record were not properly kept by the management.
(ii) Auditors are appointed after stock taking program but management representation letter were
provided by the management at the time of audit.
(b) What are the factors that should be consisted in determining the use of CAAT?
[Marks: (5+5) = 10]
Page 38 of 49
Q. No. 5.
(a) BSA 315: Identifying and assessing the risks of material misstatement through understanding the
entity and its environment requires auditors to understand the entitys internal control. An entitys
internal control is made up of several components- State FIVE components of an entitys internal
control and give brief explanation of each component.
(b) BSA 320 Materiality in Planning and Performing an Audit provides guidance on the concept of
materiality in planning and performing an audit. Define materiality and determine how the level of
materiality is assessed.
[Marks: (5+5) = 10]
Q. No. 6.
(a) State the purpose of an engagement letter.
(b) List SIX matters that should be included in an audit engagement letter.
(c) How many parties are involved in an assurance engagement?
[Marks: (2+4+4) = 10]
Q. No. 7.
(a) Discuss the importance of assessing risks at the planning stage of an audit.
(b) Describe THREE substantive procedures an auditor should perform at the year end in confirming
each of the following:
(i)
The valuation of inventory;
(ii) The completeness of provisions or contingent liabilities.
[Marks: (4+3+3) = 10]
Q. No. 8.
(a) ISA 500 Audit Evidence explains types of audit evidence that the auditor can obtain. State and
briefly explain, four types of audit evidence that can be obtained by the auditor.
(b) Explain the responsibility of an auditor regarding Going Concern. Mention any four financial
indications which may indicate the risk that continuance as a going concern may be questionable.
[Marks: (5+5) = 10]
= THE END =
Page 39 of 49
Q. No. 1.
Lancaster Engineering Inc.(LEI) has the following capital structure, which it considers to be optimal:
Debt
25%
Preferred Stock
15%
Common Equity
60%
100%
LEIs expected net income this year is Tk. 34,285.72; its established dividend payout ratio is 30 percent;
its marginal tax rate is 40 percent; and investors expect earnings and dividend to grow at constant rate
nine percent in the future. LEI paid a dividend of Tk. 3.60 per share last year, and its stock currently sells
at a price Tk. 60 per share.
LEI can obtain new capital in the following ways:
Common : New Common stock has a floatation cost of 10 percent for up to Tk. 12,000 of new stock and
20 percent for all common stock over Tk. 12,000.
Preferred : New Preferred stock with a dividend of Tk. 11 can be sold to the public at a price of Tk. 100
per share. However, floatation cost of Tk. 5 per share will be incurred for up to Tk. 7,500 of
preferred stock, floatation cost will rise to Tk. 10 per share, or 10%, on all preferred stock
over Tk. 7,500.
Debt:
Up to Tk. 5000 of debt can be sold at an interest rate of 12 percent; debt in the range of Tk.
5,001 to Tk. 10,000 must carry an interest rate of 16 percent.
LEI has the following independent investment opportunities:
Project
Cost
Annual Net Cash
Project Life
IRR
AT t= 0
Flow
A
Tk. 10,000
Tk. 2,191.20
7 years
12.0%
B
Tk. 10,000
Tk. 3,154.42
5 years
17.4%
C
Tk. 10,000
Tk. 2,170.18
8 years
14.2%
D
Tk. 20,000
Tk. 3,789.48
10 years
13.7%
E
Tk. 20,000
Tk. 5,427.84
6 years
?
a. Find the break points in the MCC schedule
b. Determine the cost of each capital structure component.
c. Calculate the weighted average cost of capital in the internal between each break in the MCC
schedule.
d. Calculate the IRR for Project E.
e. Which project should LEI accept?
[Marks: (5+5+5+3+2) = 20]
Q. No. 2.
SC Co is evaluating the purchase of a new machine to produce product P, which has a short product lifecycle due to rapidly changing technology. The machine is expected to cost Tk. 10,00,000. Production and
sales of product P are forecasted to be as follows:
Year
1
2
3
4
Production and sales (units/year)
35,000
53,000
75,000
36,000
The selling price of product P (in current price terms) will be Tk. 20 per unit, while the variable cost of
the product (in current price terms) will be Tk.12 per unit. Selling price inflation is expected to be 4% per
year and variable cost inflation is expected to be 5% per year. No increase in existing fixed costs is
expected since SC Co has spare capacity in both space and labour terms.
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Black Cat Ltd. is considering diversifying its operations away from its main area of business (food
manufacturing) in to the plastic business. It wishes to evaluate an investment project, which
involves the purchase of a moulding machine that Cost Tk. 450,000. The project is expected to
produce net annual operating cash flows of Tk. 2,20,000 for each of the three years of its life. At
the end of this time its scarp value will be zero.
The asset of the project will support debt finance of 40% of its initial cost (including issue cost).
The loan to be repaid in three equal annual installments. The balance of finance will be provided
by a placing of new equity issue. Cost will be 5% of fund raised for the equity placing and 2% for
the loan. The issue costs are allowable for corporate income tax.
The plastic business industry has an average equity beta of 1.368 and an average debt equity ratio
of 1:5 at market values. Black Cats current equity beta is 1.8, and 20% of its long term capital is
represented by debt which is generally regarded as to be risk free. The risk free is 10% p.a. and the
expected return on an average market portfolio is 15%. Corporate income tax rate is 30%, payable
one year in arrears. The machine will attract a 70% initial capital allowance and the balance is to be
written off evenly over the three years and is allowable against tax. The firm is certain that it will
earn sufficient profits against which to offset these allowances.
Required:
(i)
Calculate the adjusted present value (APV) and determine whether the project is worthwhile.
(ii) Explain why the adjusted present value technique is sometimes advocated as being a more
appropriate way of evaluating a project than net present value.
[Marks: (4+6+7+3) = 20]
Q. No. 5.
(a) Why must the market port folio be a consideration of all securities, each in proportion to market
value outstanding?
(b) ECRI Corporation is a holding company with four main subsidiaries. The percentage of its
business coming from each of the subsidiaries and their respective betas are as follows:
Subsidiary
Percentage of business
Beta
Electric Utility
60%
0.70
Cable Company
25%
0.90
Real estate
10%
1.30
International / Special projects
5%
1.50
(i)
What is the holding companys beta?
(ii) Assume that the risk free rate is 6 percent and the market risk premium is 5 percent. What is
the holding companys required rate of return?
(iii) ECRI is considering a change in its strategic focus, it will reduce its reliance on the electric
utility subsidiary. So the percentage of its business from this subsidiary will be 50 percent.
At the same time, ECRI will increase it reliance on the international/special projects division.
So the percentage of its business from that subsidiary will rise to 15 percent. What will be the
shareholders required rte of return if they adopt these change?
[Marks: (7+4+4+5) = 20]
= THE END =
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Recommend the prices that should be quoted by Division O for Awaysafe, in respect of
Quotations 1 and 2, which will ensure that the profitability of the NAW Group as a whole is not
adversely affected by the decision of the management of Division L.
(iii) Discuss the proposition that transfer prices should be based on opportunity costs.
(iv) After much internal discussion concerning Quotation 2 by the management of the NAW Group,
Division O is not prepared to supply nine million packs of Awaysafe to Division L at a price
lower than market price less 30%. All profits earned in Farland are subject to taxation at a rate of
20%. Division O pays tax in Homeland at a rate of 40% on all profits.
Advise the management of the NAW Group whether the management of Division L should be
directed to purchase Awaysafe from Division O, or purchase a similar product from a local
supplier. Supporting calculations should be provided.
[Marks: (5+6+6+10) =27]
Q. No.4.
Following a strategy of product differentiation, Garnier Inc. makes a high-end consumer appliance P440.
Following are the data relating to the years 2009 and 2010 for Garnier Inc.
2009
2010
Units of P440 produced and sold
40,000
42,000
Selling price in Tk.
100
110
Direct Materials in Kgs
1,20,000
1,23,000
Direct material cost per kg in Tk.
10
11
Manufacturing capacity for P440 in unit
50,000
50,000
Conversion costs in Tk.
10,00,000
11,00,000
Selling and customer-service capacity (customer)
30
29
Selling and customers service costs in Tk.
7,20,000
7,25,000
Garnier Inc. produced no defective units and reduced direct material usage per unit of P440 in 2010.
Conversion costs in each year are tied to manufacturing capacity. Selling and customers-service costs are
related to the number of customers that the selling and service functions are designed to support.
Required:
(i)
Describe briefly the elements you would include in Garnier Inc.s balanced scorecard.
(ii) Calculate the growth, price-recovery and productivity components that explain the change in
operating income from 2009 to 2010.
(iii) How successful has Garnier Inc. been in implementing its strategy? Explain.
[Marks: (6+14+5) =25]
= THE END =
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