East West University

Course: Financial Accounting (MBA501), Section -1

Second Mid Term Examination, Full Marks: 20, Time: 1.00 Hours,
(Answer any two questions),
Question-01: 5+5=10
A) Chittagong Motel opened for business on July 01, 2019. The trail balance as on Dec’ 31 as under:
Name of account Debit Credit
1. Cash 45,000 1. Capital -------------------------- 3, 50,000
2. Supplies 18,000 2. Accounts payable -------- 1, 63,000
3. Prepaid insurance 24,000 3. Unearned Rent ------- ---- 35,000
4. Building ----------- 5, 00,000 4. Mortgage payable ------- 2, 40,000
5. Furniture------- 2, 68,000 5. Rent revenue -------- --- 1, 02,000
6. Advertising expenses 5,000
7. Salary -------- 20,000
8. Utilities expenses ----- 10,000
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8, 90,000 8,90,000
The following adjusting entries are consists:
1. Insurance expenses TK= 2000 per month. 3. Annual depreciation on furniture TK=24000.
2. Supplies= 5000 as unused on Dec, 2019. 4. Unearned Rent TK=10000 has been earned.
Required: 1. Prepare work sheet showing adjusted Trail Balance on Dec, 31.
2. Prepare income & expenditure account and Balance Sheet on Dec’ 30,
Question: 02
A} what is credit term? Explain the meaning of the following credit terms: 3+7=10
1. 2/10, n/30
2. 2/10, EOM
B) What are the recording entries of given transaction in the books of Alien & co under perpetual inventory
system?
1. On July 2, Alien & co sold TK=55,000 of merchandise to world mate on credit terms 2/10, n/30. Alien
originally paid TK=50,000 for the merchandise.
2. On July 5, world mate returned TK=5000 of defective merchandise to Alien & co for July, 2 sale. The cost for
this merchandise was TK=3,000
3. On July 6, Alien & co sold TK=40,000 of merchandise to world mate on credit with terms of 2/10, n/EOM.
The cost of the merchandiser was TK=35,000
4. On July 15, Alien & co receives the full amount due from world mate from the sale on July 6.
5. On July 20, Alien & co received the full amount due from world mate from the sale of July 2.
6. On July 31, Alien & co counts the inventory. An Inventory shortage of TK=3000 is discovered.

Question-03
A) Write short notes: 5+5=10
1. Inventory shrinkage. 2. FOB. 3. Merchandiser. 4) Inventory systems 5. Sales discount.
B) Rains Supply uses a perpetual inventory system. On the January 1, its account had a beginning balance of
TK=74, 00,000. Rains engaged in the following transaction during the year.
 
1. Purchase merchandising inventory for TK=1, 05, 00,000.
2. Generated net sales of TK=3, 30, 00,000.
 

3. Recorded inventory shrinkage of 20,000 after taking a physical inventory at year-end.

 
4. Reported Gross-profit for the year of 200, 00,000 in its income statement.
Required: 
a) At what amount was cost of goods sold reported in the company’s year-end income statement?
b) At what amount was merchandise Inventory reported in the company’s year-end balance sheet? 
C) Immediately prior to recording inventory shrinkage at the end of year, what was the balance of the cost of
goods sold account? What was the balance of the merchandising inventory account?
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Question 02. 3+7=10
A) Define the various methods of Inventory valuation? Which method you will suggest considering the liquidity of firm?

B) Calculate value of ending inventory and cost of goods sold under FIFO and LIFO method from the following:
1. July 01: Beginning inventory1800 units @ TK=20.00
2. July 05: Purchased 2000 Units @ TK=25.00
3. July 09: Goods sold 1700 Units
4. July 15: Goods sold 1900 Units
5. July 21: Purchased 2400 units @ TK=35.00
6. July 26: Goods sold 1200 Units
7. July 30: Goods sold 900 Units
Question-03. 5+5 10

Bangla Food limited opened for business on Jan 01, 2019. The trial balance before adjustments as on Dec 31, is as follow:

Serial No Name of account LF debit Credit

1. Cash account 20,000
2. Furniture 33,000
3. Account receivable 50,000
4. Accounts payable 17,000
5. Mortgage payable (1.01.19) 20,000
6. Capital 38,000
7. Rent revenue 45,000
8. Advertising expenses 5,000
9. Salary 10,000
10. Utilities expenses 2,000
-------------- -------------
1,20,000 1,20,000

The following adjusting entries are consists:

a. Annual Insurance expenses TK=2000 which is due but not recorded in the book.
b. Annual depreciation on furniture @ 15%
c. Bad debt TK=1500 against account receivable.
d. Salary TK=900 is accrued but unpaid.
e. Interest on mortgage to be charged @ 9% PA.
Prepare: 1. Profit & loss account for the year ended Dec 31, 2019
2. Balance sheet as on Dec, 31, 2019

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