2 FINANCIAL ACCOUNTING [M4] @ICMA nccounring na] AS FALL 2018 EXAMINATIONS Pakistan Tuesday, the 19th February 2019 Extra Reading 75 Minutes Writing Time: 02 Hours 50 Minutes (Attempt all questions. (i) Write your Roll No, in the space provided above. Gil) Answers must be neat, relevant and brief. Itis not necessary to maintain the sequence. (iv) Use of non-programmable scientific calculators of any model is allowed. (v) Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper. (vi) In marking the question paper, the examiners take into account clarity of exposition, logic of arguments, effective presentation, language and use of clear diagrany chart, where appropriate. (vil) DO NOT write your Name, Reg. No. or Roll No., or any irrelevant information inside the answer script (vii) Question No. 1 - "Multiple Choice Questions" printed separately, is an integral part of this question paper. (x)_Question Paper must be returned to invigilator before leaving the examination hall. DURING EXTRA READING TIME, WRITING IS STRICTLY PROHIBITED IN THE ANSWER SCRIPT EXAMINEES ARE ADVISED TO MANAGE SOLUTIONS/ ANSWERS WITHIN PROPOSED TIME Marks Question No. 2 Proposed Time: 34 Min. | Total Marks : 18 Flower Limited is a public listed limited company engaged in manufacturing of spare parts, which are supplied in local and intemational markets. The accountant of the company has produced the following trial balance as at December 31, 2018: Rs. ‘000° Sales revenue 18,000 Trade and other receivables 2,145 Allowance for doubtful debts 60 ‘Administrative expenses 3,450 Selling and distribution costs 1,350 Purchases 8,700 Plant and machinery — at cost 3,800 ‘Accumulated depreciation — plant and machinery 450 Share capital (Rs. 10 each) 150 Trade and other payables 870 Stock-in-trade — at January 01, 2018 690 Retained earnings 1,305 8% Loan 3,000 Cash and bank balances 3,900 23,835 The following information is available to the finance team for consideration while preparing financial statements for the year ended December 31, 2018: () Goods amounting to Rs. 15,000 purchased on December 10, 2018 by a customer on credit were retumed on December 31, 2018. No entries have been posted for this return (ii) Plant and machinery is depreciated at 20% per annum on reducing-balance basis. (ii) It is estimated that receivables amounting to Rs. 30,000 are irrecoverable. No adjustment is required to the allowance for doubtful debts. (iv) Closing inventory has been valued at Rs. 900,000. (v) The current year tax has been estimated at Rs. 180,000. (vl) An ex-employee who was unfairly dismissed by the company, had sued the company and the legal adviser of the company think that it is probable that the company will lose the case and that they will have to pay damages of Rs. 150,000 in 2019. Legal costs are charged to administrative expenses. (vii) 8% loan was obtained on February 01, 2018. No interest has been accrued. Farol 2018 10f4 PTOMarks Required: Prepare the following financial statements: {a) Statement of Profit or Loss for the year ended December 31, 2018 09 (b) Statement of Financial Position as at December 31, 2018 09 Question No. 3 Proposed Time: 42 Min. | Total Marks : 22 Modem Garments Limited is a public limited company (listed), which imports ladies and gents stitched garments from abroad to cater the needs of local market in Pakistan. Following is the statement of financial position of the company as at December 31, 2018: Modern Garments Limited ‘Statement of Financial Position as at December 31, 2018 Rs, 000" 2018 2017 ASSETS Non-current Assets Property, plant and equipment 90,000 80,000 Current Assets Stock-in-trade 33,250] [38,500 Trade and other receivables 41,750 | 47,500 Cash and bank balances 3,000 - Total Assets 168,000 _ 166,000 EQUITY AND LIABILITIES Equity ‘Share capital (Rs. 10 each) 40,000] [ 32,000 Revaluation reserve 3,000 - Retained earnings 60,875 | | 66,500 103,875 98,500 Non-current Liabilities 10% Loan notes 25,000 20,000 Current Liabilities Trade and other payables 35,625 | [ 39,000 Income tax payable 3,500 4,000 Bank overdraft - 4,500 39,125 __ 47,500 Total Equity and Liabilities 168,000 166,000 Additional Information: (An equipment was sold for Rs. 2 million, the book value of which was Rs. 1.5 million (ii) Land and buildings were revalued during the year. (ii) An item of plant was purchased for Rs. 21 million during the year. The cost of the plant was settled by paying Rs. 16 million in cash and by issuing 500,000 ordinary shares in Modem Garments Limited at par. (iv) Trade and other payables include accrued amounts of interest of Rs. 625,000 and Rs. 500,000 for the years of 2018 and 2017 respectively. () Finance costs and income tax expense amounting to Rs.2.4 million and Rs.3.5 million respectively, were charged to the profit or loss during the year. (vi) Profit before tax for the year was Rs. 18 milion. Required: Prepare Statement of Cash Flows for the year ended December 31, 2018 using ‘indirect method’ under IAS 7 — Statement of Cash Flows. 22 FAFal 2016 20f4