Afa 1 Icmab Questions

CMA SPECIAL EXAMINATION-2021(NOVEMBER)
PROFESSIONAL LEVEL-II
SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I
Time: Three hours Full Marks: 100

 All questions are to be attempted.
 Show computations, where necessary.
 Answer must be brief, relevant, neat and clean.
 Start answering each question from a fresh sheet.
Q. No. 1
(a) What are the provisions with regard to “Loan Loss Provision” and “Interest Suspense” of a
banking company as per IAS/BAS-30?
(b) What is the accounting treatment for abnormal loss in consignment? Explain the difference
between the accounting procedures for normal and abnormal losses as applied for
consignment business.
(c) Ziba Enterprise sent 1200 bags of sugar to Miga Agency on consignment at cost of Tk.100
each. Ziba Enterprise paid freight charge Tk.6,000; insurance Tk.3,000 and loading Tk.2,400.
Miga Agency received the goods from ship and paid Tk.1,800 for unloading; carrying cost to
warehouse Tk.3,000 and warehouse rent for one month Tk.2,000. Just after unloading, 150
bags were destroyed by rain. 800 bags were sold @Tk.150. It was observed that the
remaining stock could be sold @ Tk.120. The consignee is entitled to a commission of 10%
on all sales.
Required: Prepare a Consignment Account in the books of Ziba Enterprise.
[Marks: (5+5+10) = 20]
Q. No. 2
(a) A capitalized lease should be amortized in accordance with the lessee’s normal depreciation
policy. What lives should be used for lease amortization in different situations?
(b) Don Transportation Company leases a vehicle to John Inc for 3 years against which the
lessor receives annual rental of Tk.4,000 payable at beginning of each year. The lessee
agrees to guaranteed residual value of Tk.3,500 at the end of economic life i.e. after third
year. The cash price of the vehicle is Tk.13,251. The implicit interest rate is 12% which is
known to the lessee and the lessee’s incremental borrowing rate is 14%. Lessee estimates
the residual value at the end of the lease to be Tk.4,200 and depreciates on a straight line
basis.
Required:
(i) Entries on the lessee’s books for the first year of lease. What would be the amount of
lease obligation in the Balance Sheet at the end of first year?
(ii) Assume that the vehicle is sold by the lessee for Tk.3,200. Prepare the entries to
record the sale and settlement with the lessor.
[Marks: 5+ (10+5) = 20]
Q. No. 3
(a) Discuss the rules regarding receiver’s fees and priority of debts for distribution as per
Bankruptcy Act 1997.
(b) Holtzman Company is in the process of preparing its financial statements for 2015. Assume
that no entries for depreciation have been recorded in 2015. The following information
related to depreciation of fixed assets is provided to you.
(i) Holtzman purchased equipment on January 2, 2012, for Tk.85,000. At that time, the
equipment had an estimated useful life of 10 years with a Tk.5,000 residual value. The
equipment is depreciated on a straight-line basis. On January 2, 2015, as a result of
additional information, the company determined that the equipment has a remaining
useful life of 4 years with a Tk.3,000 residual value.
Page 1 of 4
Q. No. 3(cont’d...)
(ii) Holtzman purchased a machine on July 1, 2013, at a cost of Tk.120,000. The machine
has a residual value of Tk.16,000 and a useful life of 8 years. Holtzman’s bookkeeper
recorded straight-line depreciation in 2013 and 2014 but failed to consider the residual
value.
(iii) During 2015, Holtzman changed from the double-declining-balance method for its
building to the straight-line method. The building originally cost Tk.300,000. It had a
useful life of 10 years and a residual value of Tk.30,000. The following computations
present depreciation on both bases for 2013 and 2014.
2014 2013
Straight-line Tk.27,000 Tk.27,000
Declining-balance 48,000 60,000
Required:
Prepare the journal entries to record depreciation expense for 2015 and correct any errors
made to date related to the information provided.
(c) Listed below are various types of accountingchanges and errors.

(i) Change from FIFO to average-cost inventory method.
(ii) Change due to overstatement of inventory.
(iii) Change from an accelerated to straight-line method of depreciation.
(iv) Change from average-cost to FIFO inventory method.
(v) Change in the rate used to compute warranty costs.
(vi) Change from an unacceptable accounting policy to an acceptable accounting policy.
(vii) Change in a patent’s amortization period.
(viii) Change from cost-recovery to percentage-of-completion method on construction
contracts.
(ix) Change in a plant asset’s residual value.
Required:
For each change or error, indicate how it would be accounted for using the following code
letters: (a) Accounted for prospectively; (b) Accounted for retrospectively; (c) Neither of the
above.
[Marks: (5+10+5) = 20]
Q. No. 4
(a) P construction company enters into a contract with a customer to build a warehouse for
Tk.100,000, with a performance bonus of Tk.50,000 that will be paid based on the timing of
completion. The amount of the performance bonus decreases by 10% per week for every
week beyond the agreed-upon completion date. The contract requirements are similar to
contracts that P has performed previously, and management believes that such experience
is predictive for this contract. Management estimates that there is a 60% probability that the
contract will be completed by the agreed-upon completion date, a 30% probability that it will
be completed 1 week late, and only a 10% probability that it will be completed 2 weeks late.
How should P account for this revenue arrangement?
(b) 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
2016.
Home Office (Taka) Branch (Taka)
Inventories as on 1 January 2016 200,000 90,000
Purchases 2,300,000 -
Sales 4,100,000 3,100,000
Other Expenses 304,000 124,000
Inventories as on 31 December 2016 104,000 62,000
Page 2 of 4
The Branch book show the Home Office Account at Taka 180,000 (Cr.) and the Home Office books
show the Branch Account at Taka 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 Taka 2,090,000. 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 Taka 240,000 on 31 December
2016 representing the Branch’s share of expenses incurred by the Home Office. The said expenses had
not been recorded in the books of the Branch.
All cash collection made by the Branch is deposited in a local bank in the account of Home Office
as follows:
Amount (Taka) Date of deposit by Branch Date of Receipt by Home Office
100,000 25 December 2016 31 December 2016
40,000 28 December 2016 02 January 2017
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 Taka 60,000 sent to the Branch by Home Office on 29
December 2016, which was received by the Branch on 3 January 2017.
Required:
Prepare the Income Statement, in columnar form after showing the reconciliation of Branch
Account and Home Office Account Balance.
[Marks: 5+15=20]
Q. No. 5
(a) Roth Inc. has a deferred tax liability of Tk.68,000 at the beginning of 2015. At the end of
2015, it reports accounts receivable on the books at Tk.90,000 and the tax basis at zero (its
only temporary difference). If the enacted tax rate is 34% for all periods and income taxes
payable for the period is Tk.230,000, determine the amount of total income tax expense to
report for 2015.
(b) The managing committee of the ‘XYZ Club’ is concerned about the club financial position
following the sudden disappearance of the treasurer on 31 December 2016, the annual
accounting date. At 31 December 2015, the club balance sheet had shown the following
position:
Liabilities Taka Assets Taka

Capital fund 120,490 Furniture and Equipment
Creditors for provisions 20,600 Cost 60,000
Subscriptions in advance 1,000 (-)Accumulated Depreciation 30,000
30,000
Subscription due 2,000
Stock of provisions 25,000
Balance with bank 83,000
Cash in hand 2,090
Total 142,090 Total 142,090
You also obtain the following information:

(1) Members pay an annual subscriptions of Taka 100. An examination of duplicate receipt
book showed that during the year ended 31 December 2016, 480 members had paid
the current year’s subscription, 5 members had paid of arrears of previous year and 10
members had paid in advance for 2017. 5 Members had resigned without paying the
previous year’s subscriptions and at the end of the year there were 500 members on
the register.
Page 3 of 4
(2) The cash book has not been written up but an analysis of petty cash vouchers for the
year showed the following expenditures:
Purchase of provisions-Taka 59,400; Salaries Taka 36,000; Stationery and postage
Taka 2,000; Repairs Taka 3,600; Miscellaneous expenses Taka 3,400.
(3) The Refreshment room in-charge had handed over the takings the daily to the treasure
with till rolls which cannot be found. However he states that average gross profit on
sales would be 40%. The stock of provisions at 31 December 2016 was Taka 28,400
and cash in hand Taka 4,360.
(4) A summary of bank statement for the year had showed the following
Particulars Taka Particulars Taka

Opening balance 83,000 Payments for provisions 260,000
Deposits 415,780 Salaries 106,500
Rents and Rates 60,000
Light and power 20,000
Telephone 2,900
Repairs 18,600
Balance c/d 30,780
498,780 498,780
(5) A bundle of unpaid bills have been found in the treasure’s desk which has been
summarized as follows: Purchase of provisions Taka 64,600; Electric bills Taka 1,600;
Printing and stationery Taka 2,100; Telephone Taka 600.
(6) Depreciation is to be provided on furniture and equipments @ 20% on cost.
Required:
(i) Cash account for the year ended 31 December 2016;
(ii) An Income and Expenditure account for the year ended 31 December 2016 and
(iii) Balance sheet on that date.
[Marks: 5+ (3+6+6) = 20]
= THE END =
Page 4 of 4
CMA JUNE, 2021 EXAMINATION

Q. No.1
(a) Explain the distinguishing of features between branch accounts and departmental
accounts.
(b) In the context of accounting for deferred tax what are:
(i) Permanent differences,
(ii) Timing Differences,
(iii) Short-term differences, and
(iv) Long-term differences.
[Marks: (10+10) = 20]
Q. No. 2
A and B Carrying in business in partnership share profits and losses in the partnership of two-
thirds and one-third. They file their petition in bankruptcy on September 30, 2020, when their
Balance sheet showed in following position.
Liabilities Tk. Assets Tk.
Bank overdraft secured by a Machinery 18,000
charge on Machinery 30,000 Furniture 2,500
Sundry Creditors 64,500 Stock 14,200
Bills Payable 5,000 Debtors (including Tk. 3000 for 29,500
dishonored bill and Tk. 2000
doubtful recovery)
A’s Capital 12,400 Investments 12,800
B’s 4,200 A’s drawings 6,200
B’s drawings 3,000
Speculation losses carried for ward 20,300
Cash 14,000
Profit and Loss A/C 8,200
Total: Tk.1,16,100 Total: 1,16,0100
(i) The assets of the firm are estimated to realize as under:

Machinery Tk. 12,000; furniture Tk. 2,000; investments Tk. 16,500 and Stock Tk. 12,000.
Some goods left for safe custody with the firm by X of the book value of Tk. 4,000 were
estimated to be worth Tk. 1,000.
(ii) The bank overdraft was further secured by a charge on B’s cottage. Creditors include Tk.
1200 due to preferential creditors and Tk. 5,400 in respect of a claim against the firm
which is not expected to rank.
(iii) It is expected that A’s private estate would show a deficit of Tk. 4,100. B had no personal
properly other than the cottage which is expected to realize Tk. 8,000.
Required:
(1) Prepare the Statement of Affairs of A and B as on 30, 9, 2020.
(2) Prepare Deficiency Account of the firm.
[Marks: (10+10) = 20]
Page 1 of 4
Q. No. 3
The trial balance of Howells Ltd. As at December 2018 is as follows:
Particulars Tk. Tk.
Share Capital
Tk. 1 Ordinary shares 100,000
Tk. 1 5% preference share (irredeemable) 50,000
Retained earnings 56,015
General reserve as at 31, December 2018 20,000
Intangible assets 20,500
Land and Buildings 4,50,000
Accumulated depreciation 81,000
Plant and Machinery cost 82,000
Accumulation depreciation 18,000
Inventories at 1st January 2018 58,045
Sundry net current assets 2,61,349
Revenue 16,00,047
Purchase 9,07,989
Debenture interest paid 6,260
Royalties received 14,005
Administrative salaries 1,26,232
Sales men’s salaries and commission 24,291
Factory wages 54,117
Operating lease rental 6,002
Gain on sale of property 25,040
Administrative expenses 18,822
Selling and distribution express 9,600
Dividend received from Morgams Ltd. 11,000
10% Debenture (issued and redeemable at par) 62,600
2017 final dividend paid 12,500
Tk. 20,37,707 Tk. 20,37,707
You are provided with the following information in respect of 2018.
(1) The gain on sale of the property is not expected to recur.
(2) Depreciation is to be provided on the basis of the following policies.
Building: straight line over 50 years
Plant and Machinery: straight line over 10 years.
The land cost originally was Tk. 1,15,000. In previous years the policy in respect of plant
and Machinery had been to depreciate on a reducing balance basis. All the plant was
acquired on 1st January 2015 with the exception of a machine acquire for Tk. 22,000 at
the start of 2018.
(3) The intangible asset is a brand arising on the purchase of a sole trader which is held in
the books at original cost. Following on impairment review, fair value less costs to sell has
been estimated at Tk. 10,000 and value in use at Tk. 12,000.
(4) Howells Ltd. wishes to propose an ordinary dividend of Tk. 25,000 which will be paid on
25 March 2019. The 2018 preference dividends have been declared but not yet paid.
(5) Tax of Tk. 22,500 is to be charged for the current year.
(6) During the year the directors transferred Tk. 10,000 to the general reserve.
Page 2 of 4
(7) Inventories held at 31, December 2018 are valued at cost of Tk. 68,000. Which this
amount there are 1000 units of finished goods valued at Tk. 20 each. These units are now
expected to sell at a discounted price of Tk. 18 each and incur Tk. 1 selling cost per unit.
Required:
(1) Prepare the income statement for the year ended 31, December 2018, you should
classify expenses by function.
(2) Prepare statement of change in equity and notes there to for the year ended 31,
December 2018.
[Marks: (8+12) = 20]
Q. No. 4
The following Trial Balance was extracted from the books of the Popular Life Assurance
Company as on December 31, 2020:
Accounts Titles Dr. (Tk.) Cr. (Tk.)

Issued and Subscribed Capital: 10,000 shares of Tk.15 1,00,000
each, Tk.10 called
Life Assurance Fund on 01.01.2020 29,00,300
Dividend Paid 16,000
Bonus to policy-holders 30,500
Premium received 2,33,500
Claims paid 1,97,000
Commission paid 9,300
Management expenses 32,300
Mortgage in Bangladesh 4,92,200
Interest and Dividend received 1,12,700
Agent’s Balances 9,300
Freehold premises 40,000
Investments 23,00,000
Loan on company’s policies 1,78,600
Cash Deposits 27,000
Cash in hand 7,300
Surrenders 7,000 …...
Total 33,46,500 33,46,500
Adjustments:
(i) Claims admitted but not paid Tk.10,000;
(ii) Management expenses due Tk. 1,200;
(iii) Interest accrued Tk.21,300;
(iv) Premiums outstanding Tk.10,000;
(v) Bonus utilized in reduction of premium Tk.6,000; and
(vi) Claims covered under re-insurance Tk.2,300.
Required: (a) Revenue Account and (b) Balance Sheet.
[Marks: (10+10) = 20]
Page 3 of 4
Q. No. 5
(a) As per IAS-31, what do you mean by Jointly Controlled Operations?
(b) Vijay and Arun entered into a joint venture for purchase and sale of cotton. They agreed
to share profits in the proportion of 2:1 and also to be entitled to an interest of 12% per
annum (on monthly basis) on moneys invested as well as received. The following
transactions took place in between themselves:
(i) On 1st January 2021, Vijay purchased 1,000 bales of cotton @ Tk.500 per bale, the
brokerage being Tk.10 per bale.
(ii) On 1st February 2021, Arun purchased 500 bales of cotton @ Tk.520 per bale, the
brokerage being Tk.10 per bale.
(iii) On 29th February 2021, Vijay sold 800 bales of cotton @ Tk.572 per bale, the
brokerage being Tk.12 per bale and took the proceeds to himself.
(iv) On 1st April 2021, Arun sold 600 bales of cotton @ Tk.580 per bale, the brokerage
being Tk.10 per bale and took the proceeds to himself.
It was also agreed that each co-venture will at first sell from his own purchase and then, if
need be, from the goods purchased by other co-venture. The balance stock left unsold
was taken by Vijay at cost on 30th April, 2021 when accounts were settled between the
co-ventures.
Required:
Prepare the Accounts of co-ventures and the joint venture Account as would appear when
maintained in separate set of books.
[Marks: (5+15) = 20]
= THE END =
Page 4 of 4
CMA DECEMBER, 2020 EXAMINATION

Q. No. 1
(a) Briefly explain how and when revenues and expenses are recognized in construction
contract as per IAS-II.
(b) Miracle Construct Inc. is executing a gigantic project of constructing the tallest building in the
country. The project is expected to take three years to complete.
The company has signed a fixed price contract of Tk. 12,000,000 for the construction of this
prestigious tower.
The details of the costs incurred to date in the first year are:
Site labor costs Tk. 10,00,000
Cost of construction materials 30,00,000
Depreciation of special plant equipment used in 5,00,000
contracting to build the tallest building
Marketing and selling costs to get the tallest building in 10,00,000
the country the right exposure
Total: Tk. 45,00,000
Total contract cost estimate to complete Tk. 55,00,000
Required:
Calculate the percentage of completion and the amounts of revenue, costs and profits to be
recognized under IAS-11.
[Marks: (5+12) = 17]
Q. No. 2
(a) What do you understand by a statement of affairs and a Deficiency account? How are these
prepared?
(b) A field his petition for bankruptcy on 31, December 2018. His books showed that he owed
Tk. 50,000 to trade creditors, Tk. 30,000 to creditors holding lien on stock-in-trade for Tk.
8,000; Tk. 10,000 mortgage on works; and Tk. 1,000 for salaries, wages and rates. Bills for
exchange for Tk. 10,000 had been discounted with his bankers; and it was estimated that
there was a liability of Tk. 3,000 in respect of them.
A’s assets were:
Consignment Tk. 20,000 estimated to realise Tk. 2,000; Good book debts Tk. 18,000;
Doubtful debts Tk. 6,000 estimated to realise Tk.3000. Bad debts Tk. 15,650. Work cost Tk.
100,000 (depreciated out of profit and loss to Tk. 75,000) estimated to realize Tk. 50,000.
Furniture and fittings Tk. 2000 estimated to realise Tk. 1,000; Stock-in-trade Tk. 25,000
estimated realize Tk. 8,000; cash Tk. 1,350. He commenced business 1 st January 2014 with
a capital of Tk. 90,000. After charging annually Tk. 5,000 for depreciation on works and Tk.
5,500 for interest on capital, the trading shows a profit Tk. 6,500 in 2014. Tk. 5,000 in 2015
and loses of Tk. 6,000 in 2016 Tk. 7,000 in 2017 and Tk. 9,500 in 2018. He lost Tk. 14,500 in
speculation while his drawings averaged Tk. 4,000 a year.
Required:
(i) Prepare statement of affairs based on the above information.
(ii) Draw up his Deficiency Account.
[Marks: (5+10+8) = 23]
Page 1 of 4
Q. No. 3
(a) State the provision with regard to “Loan Loss Provision” and “Interest Suspense” in a banking
company financial statements
(b) The following is the Trial Balance of City Bank Ltd. As on 31st December 2019:
Particulars Debit Rs. Credit Rs.
Share Capital (3,000 share of Tk.10 each) 300,000
Statutory Reserve 400,000
Deposits - Fixed 278,000
Saving 450,000
Current 374,000
Cash in Hand 290,000
Cash with RBI 420,000
Interest and Discount 300,000
Commission and Brokerage 50,000
Interest on Fixed Deposit 30,000
Interest on Saving Deposit 20,000
Interest on Current Deposit 12,500
Salaries (including Tk. 12,000 to Manager) 131,000
Rent, Insurance and Taxes 4,000
Postages and Telegrams 900
Printing and Stationery 7,000
Audit Fees 4,000
Depreciation 3,300
Investment on Shares 84,000
Loans, Cash Credit and Overdrafts 490,000
Bills Discounted and Purchased 180,000
Governments Bonds 160,000
Furniture 40,000
Premises 300,000
Branch Adjustment Account 24,700
2,176,700 2,176,700
Additional Information:
(1) Rebate on Bills discounted Tk. 27,000
(2) Create Contingency of Tk. 11,000
(3) Acceptances on behalf of customers Tk. 80,000
You are required to prepare Profit and Loss Account for the year ended 31st December 2019
and a unformal Balance Sheet as at December 31, 2019.
[Marks: (5+8+7) = 20]
Page 2 of 4
Q. No. 4
Venus Ltd. a manufacturing business, exports some of its products through its overseas branch
whose currency is' Florins'. The branch carries out the final assembly operations before selling the
goods. The trial balance of the head office and the branch as on 30th June, 2006 were as under.
Particulars Head Office Branch Office

Dr. (Tk.) Cr. (Tk.) Dr.( Tk.) Cr.( Tk.)
Freehold building at cost 14,000 63,000
Debtors/ Creditors 8,900 9,500 36,000 1,560
Sales 1,04,000 4,3,2000
Authorized and issued capital 40,000
Components sent to branch 35,000
Head office / Branch 60,100 5,04,260
Branch - cost of sales 3,60,000
Provision for depreciation on machinery 1,500 56,700
Head office cost of sales
(including goods sent to br.) 59,000
Administration cost 15,200 18,000
Stock on 30th June ,2006 28,900 11,520
Profit and loss account 2,000
Machinery at cost 6,000 1,26,000
Remittances 28,000 2,72,000
Balance at bank 4,600 79,200
Selling and distribution cost 23,300 28,800
2,20,000 2,20,000 9,94,520 9,94,520
The following adjustments are to be made:
(1) The cost of sales figures include a depreciation charge of 10% per annum on the cost of
machinery
(2) A provision of Tk. 300 for unrealized profit in branch stock is to made.
(3) On 26th June, 2005 the branch remitted 16000 Florins. This amount was received by the
head office on 4th July, 2005 and realized Tk. 1,990.
(4) During May, 2005 a branch customer, paid in error the head office for goods supplied. The
amount due was 320 Florins which realized Rs.36. It has been correctly dealt with by the
head office but not yet entered in the branch accounts
(5) A provision has to be made for a commission of 5% of the net profit of the branch after
charging such commission which is due to the branch manager.
(6) The currency rates of exchange were:
(a) At 1st July, 2004 10 Florins = 1 Taka
(b) At 30th June, 2005 8 Florins = 1 Taka
(c) Average for the year 9 Florins = 1 Taka
(d) On the date of purchase of building and 7 Florins = 1 Taka
You are required to prepare the following:
(i) Branch Trial Balance in Head Office currency
(ii) Trading and Profit & Loss Account of the Head Office and that of the branch for the
year ended 30 June 2006
(iii) Combined Balance Sheet of the Head Office and that of the branch as on 30 June 2006
[Marks: (6+7+7) = 20]
Page 3 of 4
Q. No. 5
Trial Balance for the general fund of DSCC as of December 31, 2019 is presented below:
The General Fund
Trial Balance
as at December 31, 2019
Accounts Title Debit Credit
Tk. Tk.
Cash 830,000
Property Tax Receivable 45,000
Estimated uncollectible Taxes 20,000
Due from Trust Fund 50,000
Vouchers Payable 460,000
Reserve for encumbrances 30,000
Unreserved Fund Balance 415,000
925,000 925,000
Transactions for the year ended December 31, 2020, are summarized as follows:
1. The council adopted a budget for the year with estimated revenue of Tk. 735,000 and
appropriation of Tk. 700,000.
2. Property Taxes in the amount of Tk. 590,000 were levied for the current year. It is
estimated that Tk. 24,000 of the taxes levied will prove to be uncollectible.
3. Proceeds from the sale of equipment is the amount of Tk. 35,000 were received by the
General Fund
4. License and fees in the amount of Tk.110,000 were collected.
5. The total amount of encumbrances against fund resources for the year was Tk.
642,500.
6. An amount of Tk. 28,000 was received for goods ordered in 2019. The invoice was
approved for payment.
7. Property taxes amounted to Tk.570,000 were collected
8. Vouchers in the amount of Tk. 475,000 were paid.
9. Tk. 50,000 was transferred to the general fund from the trust fund.
10. The DSCC authorized to write off of Tk. 30,000 uncollectible property taxes
Required:
(i) Prepare Journal entries to record the transactions for the year ended December 31,
2019
(ii) Prepare the closing Trial Balance for the general fund as of December 31, 2019
(iii) Prepare necessary closing entries for the year ended December 31, 2019
(iv) Prepare a Balance Sheet as at December 31, 2019
[Marks: (4 x 5) = 20]
= THE END =
Page 4 of 4
Q. No. 1
(a) “Single entry in fact is an admixture of single entry, Double entry and no entry” – Explain the
statement.
(b) Mr. Khan desires you to prepare accounts for the year ended 31st March 2020, no books
have been kept but the following facts are ascertained:
(i) The bank Pass-book showed lodgments during the year of Tk.60,100 and withdrawals
of Tk.59,250.
(ii) Tk.5,000 had been placed on deposit account on 31st December 2018 at 8% per
annum and withdrawn with interest on 30th June 2019.
(iii) 3.50% National Defense Certificate of Tk. 10,000 (interest due dates 31st March and
30th September each year) had been purchased on 1st April 2019. Interest was
collected on due dates.
(iv) The foreign transactions and all payments for business purchases were passed through
the bank account. The takings were banked after meeting business expenses Tk.3,500
and personal expenses Tk.4,000.
(v) The Assets and Liabilities on 31st March 2020 were:
Taka
Stock 5,500
Book Debts 5,750
Bank Balance 1,600
Freehold Cottage 10,000
Trade Creditors 2,000
st
(vi) On 1 April 2019 the balance were:
Taka
Stock 5,000
Book Debts 5,250
Trade Creditors 1,000
Required:
From the above information, Mr. Khan requests you to help him Prepare his Profit and Loss
Account for the year ended 31st March 2020 and a Balance Sheet on that date.
[Marks: {5+(10+5)} = 20]
Q. No. 2
(a) Define and distinguish the following:
(i) Principal and Agent in consignment business, and
(ii) Consignment and Joint Venture.
(b) Hannan and Mannan are involved in a consignment business where Hannan sends goods as
consignor from Narayangonj to Mannan of Barishal for retail sale. The goods are sent by barge.
Following are the transactions relating to consignment business:
500 units were sent @ Tk.1,000 each Tk.500,000
Fright charge paid by consignor Tk.150,000
Loading charge paid by consignor Tk. 50,000
Unloading charge paid by consignee Tk. 24,000
Insurance charge paid by consignor Tk. 10,000
Carrying charge to warehouse paid by consignee Tk. 16,000
Warehouse rent paid by consignee Tk. 20,000
Page 1 of 3
100 units were lost by fire in transit by barge and remaining goods were unloaded from
barge. Insurance claim received Tk.120,000. They arranged for remaining 400 units to carry
from barge to warehouse and paid carrying charges. But 350 units were receiver at the
warehouse in good condition with no trace of the remaining. 300 units were sold (@
Tk.2,000) at Tk.600,000 and 50 units were left in warehouse.
10% of good units received at warehouse are considered normal loss.
Due to decrease in market price, sales price of stock estimated to be @ Tk.1,400.
Commission is paid to the consignee @ 5% on sales.
Required:
Draw a consignment account in the books of Hannan.
[Marks: (6+14) = 20]
Q. No. 3
Following is the Receipt & Payment Account of Chittagong Club for the year ending 31st December
2019:
Receipts Taka Payments Taka
Balance at Bank and in hand 2,000 Salaries 5,600
Subscriptions, Arrears 200 Printing and Stationary 1,750
Subscriptions, Current year 7,500 Investments (at par) 4,000
Subscriptions, Next year 400 Expenditure on Refreshments 3,200
Sale of Furniture at book value 200 Expensed of last year 200
Donation for a stage 4,000 Improvements to Buildings 3,000
Interest on Investments 900 Cost of Gold Medal 350
Charges for Refreshments 4,300 Balance at Bank and in hand 1,400
Total 19,500 Total 19,500
In addition to the above, the following further information is available from the accounts of the
club:-
(i) The assets on 1st January 2019 include Building Tk.20,000, 6% Investments Tk.10,000 at par
(including Prize Fund) and Furniture Tk.1,000. Liabilities as on 1st January 2019 include an
account styled “Prizes Fund Account” Tk.8,000.
(ii) Of salaries Tk.400 pertains to last year and Tk.500 still owes. As regards subscriptions in
arrears of Tk.200 received during the year, a provision of Tk.150 was made in the accounts
last year. Tk.400 subscriptions for 2019 are outstanding.
(iii) Stock of Refreshments at the end of the year was valued at Tk.100.
(iv) Sports Equipment worth Tk.1,000 was donated during the year by a member.
(v) Printers bill Tk.100 is outstanding on 31-12-2019.
(vi) A bill for Tk.500 for purchase of furniture is outstanding.
(vii) The investments (6%) were purchased during the second half and the interest has not been
collected.
(viii) The opening balance of general fund on 1st January 2019 was Tk.24,850.
Required:
(a) An Income and Expenditure Account for the year ending 31st December 2019.
(b) A Balance Sheet as at 31st December 2019.
[Marks: (10+10) = 20]
Page 2 of 3
Q. No. 4
(a) What are the provision with regard to “Loan Loss Provision” and “Interest Suspense” of a
Banking Company as per IAS/BAS-30?
(b) From the following figures taken from the books of New Asia Insurance Co. Ltd. doing fire
underwriting business, prepare the set of final accounts as on 30 June 2020:
Taka Taka
Fire Fund (as on 1-7-2019) 11,80,000 Commission on Direct Business 2,99,777
General Reserve 4,50,000 Commission on reinsurance accepted 60,038
Investments 36,00,000 Outstanding Premium 22,300
Premium 26,01,533 Claims intimated but not paid (1.7.2019) 60,000
Claims Paid 6,02,815 Expenses on Management 4,31,947
Share Capital-Dividend into Equity
10,00,000 Audit Fees 36,000
Shares of BDT 100 each
Profit 0and Loss Account (Cr.) 25,000 Rates & Taxes 5,804
Reinsurance Premium 1,12,525 Rents 67,500
Claim Recovered from re-insurers 21,119 Income from Investments 1,53,000
Commissions on reinsurance
48,016 Sundry Creditors 22,500
ceded
Advance Income Tax paid 2,50,000 Agent Balances (Dr. ) 20,000
Cash in Hand and Bank Balance 1,32,462
The following further information may also be noted:
(a) Expenses of management include survey fees and legal expenses of Tk. 36,000 and Tk.
20,000 relating to claims,
(b) Claims intimated but not paid on 30 June 2020,Tk. 1,04,000.
(c) Income-tax to be provided at 40%.
(d) Transfer of Tk. 2,19,000 to be made from current profit to General Reserve.
(e) The company maintains a reserve for unexpired risk @ 50% of net premium income.
(f) The directors propose a dividend @ 30 %. Dividend distribution tax is payable @ 17%.
Required:
(i) Revenue Account
(ii) Balance Sheet
[Marks: 4+(8+8) = 20]
Q. No. 5
(a) What is the difference between Joint venture and partnership?
(b) Explain the difference between joint venture and consignment.
(c) Adroit and Brown were partners in a joint venture sharing profits and losses in the proportion
of four-fifth and one-fifth respectively. Adroit supplies goods to the value of Taka 50,000 and
incurs expenses amounting to Taka 5,400. Brown supplies goods to the value of Tk 14,000
and his expenses amount to Tk 800. Brown sells goods on behalf of the joint venture and
realizes Tk. 92,000. Brown is entitled to a commission of 5 per cent on sales. Brown settles
his account by bank draft.
Give the journal entries and the necessary accounts in the books of Adroit and only the
important ledger accounts in the books of Brown.
[Marks: 2+2+(8+8) = 20]
= THE END =
Page 3 of 3
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Q. No. 1
(a) Differentiate between “loss carry back” and “loss carry forward”. Which can be accounted for
with the greater certainty when it arises? Why? Explain.
(b) Listed below the items that are commonly accounted for differently for financial reporting
purposes than they are for tax purposes.
Requirements:
For each item below, indicate whether it involves:
(1) A temporary difference that will result in future deductible amounts and therefore will
usually give rise to a deferred income tax asset.
(2) A temporary difference that will result in future taxable amounts and therefore will
usually give rise to a deferred income tax liability.
(3) A permanent difference.
Use the appropriate number to indicate your answer for each.
(i) An accelerated depreciation system is used for tax purposes, and the straight-line
depreciation method is used for financial reporting purposes for some plant assets.
(ii) A landlord collects some rents in advance. Rents received are taxable in the period
when they are received.
(iii) Expenses are incurred in obtaining tax-exempt income.
(iv) Costs of guarantees and warranties are estimated and accrued for financial reporting
purposes.
(c) The following information is available for Remmers Corporation for 2015.
(1) Depreciation reported on the tax return exceeded depreciation reported on the income
statement by $120,000. This difference will reverse in equal amounts of $30,000 over
the years 2016–2019.
(2) Interest received on governmental bonds was $10,000.
(3) Rent collected in advance on January 1, 2015, totaled $60,000 for a 3-year period. Of
this amount, $40,000 was reported as unearned at December 31 for book purposes.
(4) The tax rates are 40% for 2015 and 35% for 2016 and subsequent years.
(5) Income taxes of $320,000 are due per the tax return for 2015.
(6) No deferred taxes existed at the beginning of 2015.
Requirements:
(i) Compute taxable income for 2015.
(ii) Compute pretax financial income for 2015.
(iii) Prepare the journal entries to record income tax expense, deferred income taxes, and
income taxes payable for 2015 and 2016. Assume taxable income was $980,000 in
2016.
(iv) Prepare the income tax expense section of the income statement for 2015, beginning
with “Income before income taxes.”
[Marks: 4+2+(2+3+6+3) = 20]
Page 1 of 4
Q. No. 2
(a) Explain the distinction between a direct-financing lease and a sales-type lease for a lessor.
(b) What disclosures should be made by lessees and lessors related to future lease payments?
(c) The following facts pertain to a non-cancelable lease agreement between K Leasing
Company and Sreepur Company, a lessee.
Inception date January 1, 2015

Annual lease payment due at the beginning of each year, €124,798
beginning with January 1, 2015
Residual value of equipment at end of lease term, guaranteed €50,000
by the lessee
Lease term 6 years
Economic life of leased equipment 6 years
Fair value of asset at January 1, 2015 €600,000
Lessor’s implicit rate 12%
Lessee’s incremental borrowing rate 12%
The lessee assumes responsibility for all executory costs, which are expected to amount to
€5,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee
has guaranteed the lessor a residual value of €50,000. The lessee uses the straight-line
depreciation method for all equipment.
Requirements:
(i) Discuss the nature of lease for the lessee.
(ii) Compute the present value of minimum lease payments.
(iii) Prepare an amortization schedule that would be suitable for the lessee for the lease
term.
(iv) Prepare all journal entries for the lessee for the years 2015 and 2016. Assumes the
lessee’s annual accounting period ends on December 31.
[Marks: 3+3+(2+3+4+5) = 20]
Q. No. 3
(a) Discuss the rules regarding receiver’s fees and priority of debts for distribution as per
Bankruptcy Act 1997.
(b) Define Jointly Controlled operation. What are the disclosures required in Joint Venture
according to IAS 31? (4)
(c) An office building is being constructed by A Ltd and B Ltd under a contractual agreement
which results in the activity being classified as a jointly controlled operation. Each party is to
record its own transactions and to be entitled to a half share in the profits.
At the end of the accounting period, the following information is recorded in accounting
records of the two companies.
A Ltd (Taka) B Ltd (Taka)
Amount invoiced to and cash received from customers 300,000 500,000
Costs incurred and paid 280,000 420,000
Requirement:
How should A Ltd account for this joint venture?
[Marks: (5+5+10) = 20]
Page 2 of 4
Q. No. 4
(a) On May 3, 2015, Eisler Company consigned 80 freezers, costing Tk.500 each, to Remmers
Company. The cost of shipping the freezers amounted to Tk.840 and was paid by Eisler
Company. On December 30, 2015, a report was received from the consignee, indicating that
40 freezers had been sold for Tk.750 each. Remittance was made by the consignee for the
amount due after deducting a commission of 60%, advertising of Tk.200, and total
installation costs of Tk.320 on the freezers sold.
Requirements:
(i) Compute the inventory value of the units unsold in the hands of the consignee.
(ii) Compute the profit for the consignor for the units sold.
(iii) Compute the amount of cash that will be remitted by the consignee.
(b) The Following information was extracted from the books of X limited company on 31-12-2016
on which a winding up order was made:
Particulars Taka
Ordinary Share Capital (2000 shares of Tk. 100 each) 2,00,000
6% Preference Share Capital (3000 share of Tk. 100 each) 3,00,000
Calls in arrear (Estimated to realize Tk. 2,000) 4,000
Creditors having a mortgage on the freehold land and building 85,000
Creditors having a second charge on a freehold land and building 90,000
Trade Creditors 2,70,000
5% mortgage debenture, secured by a floating charge on the whole of the 2,00,000
assets of the company (interest paid to date)
Debtors: Good tk. 60,000; Doubtful Tk. 15,000 (estimated to realize Tk. 5,000) 90,000
and Bad: remaining portion
Unclaimed Dividend 6,000
Bills Payable 10,000
Income Tax due 25,000
Salaries and wages (20 Workers) 40,000
Bills discounted (Tk. 15,000 expected to be dishonored) 40,000
Bank overdraft, secured by a second charge on the whole assets of the 20,000
company
Cash in hand 2,000
Bill of exchange (considered good) 35,000
Freehold land buildings (estimated to realize Tk. 1,65,000) 2,10,000
Plant and machinery (estimated to produce Tk.90,000) 1,20,000
Fixture and Fittings (estimated to produce Tk. 8,000) 12,000
Stock in trade (estimated to produce Tk. 25% less) 80,000
Patents (estimate to produce Tk. 45,000) 70,000
Profit and loss (debit) 6,23,000
Requirements:
Prepare the Statement of affairs and Deficiency Account following the bankruptcy act 1997.
[Marks: {(3+3+3)+(7+4)} = 20]
Page 3 of 4
Q. No. 5
(a) In recent years, the financial press indicated that many companies have changed their
accounting policies. What are the major reasons why companies change accounting
policies?
(b) Discuss briefly the three approaches that have been suggested for reporting changes in
accounting policy.
(c) EEE Corporation failed to record accrued salaries for 2015, Tk.2,000; 2016, Tk.2,100 and
2017, Tk.3,900. What is the amount of the overstatement or understatement of Retained
Earnings at December 31, 2018?
(d) In January 2017, installation costs of Tk.6,000 on new equipment were charged to
Maintenance and Repair Expenses. Other costs of this equipment of Tk.30,000 were
correctly recorded and have been depreciated using the straight-line method with an
estimated life of 10 years and no residual value. At December 31, 2018, it is decided that the
equipment has a remaining useful life of 20 years, starting with January 1, 2018. What
entry(ies) should be made in 2018 to correctly record transactions related to equipment
assuming the equipment has no residual value? The books have not been closed for 2018
and depreciation expense has not yet been recorded for 2018.
(e) FFF Industries changed from the double–declining balance to the straight-line method in
2015 on all its plant assets. There was no change in the assets’ residual values or useful
lives. Plant assets, acquired on January 2, 2012, had an original cost of Tk.2,400,000, with a
Tk.100,000 residual value and an 8 year estimated useful life. Income before depreciation
expense was Tk.370,000 in 2014 and Tk.300,000 in 2015.
Requirements:
(i) Prepare the journal entry (ies) to reflect the change in depreciation method in 2015.
(ii) Starting with income before depreciation expense, prepare the remaining portion of the
income statement for 2014 and 2015.
[Marks: (3+3+3+6+5) = 20]
= THE END =
Page 4 of 4

Q. No. 1
(a) MM Corporation had income before income taxes of Tk.195,000 in 2015. MM’s current
income tax expense is Tk.48,000, and deferred income tax expense is Tk.30,000. Prepare
MM’s 2015 income statement, beginning with income before income taxes.
(b) CCC Corporation has a cumulative temporary difference related to depreciation of
Tk.580,000 at December 31, 2014. This difference will reverse as follows: 2015, Tk.42,000;
2016, Tk.244,000; and 2017, Tk.284,000. Enacted tax rates are 34% for 2015 and 2016, and
40% for 2017. Compute the amount CCC should report as a deferred tax liability at
December 31, 2014.
(c) The accounting records of Shinault Inc. show the following data for 2015.
1. Equipment was acquired in early January for Tk.300,000. Straight-line depreciation
over a 5 year life is used, with no residual value. For tax purposes, Shinault used a
30% rate to calculate depreciation.
2. Interest revenue on governmental bonds totaled Tk.4,000.
3. Product warranties were estimated to be Tk.50,000 in 2015. Actual repair and labor
costs related to the warranties in 2015 were Tk.10,000. The remainder is estimated to
be paid evenly in 2016 and 2017.
4. Sales on an accrual basis were Tk.100,000. For tax purposes, Tk.75,000 was recorded
on the installment sales method.
5. Fines incurred for pollution violations were Tk.4,200.
6. Pretax financial income was Tk.750,000. The tax rate is 30%.
Required:
(i) Prepare a schedule starting with pretax financial income in 2015 and ending with taxable
income in 2015.
(ii) Prepare the journal entry for 2015 to record income taxes payable, income tax expense, and
deferred income taxes.
[Marks: (5+5+5+5) = 20]
Q. No. 2
(a) BBB Co. is expanding its operations and is in the process of selecting the method of
financing this program. After some investigation, the company determines that it may (1)
issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a
long-term basis. Without knowing the comparative costs involved, answer these questions:
(i) What might be the advantages of leasing the assets instead of owning them?
(ii) What might be the disadvantages of leasing the assets instead of owning them?
(iii) In what way will the statement of financial position be differently affected by leasing the
assets as opposed to issuing bonds and purchasing the assets?
(b) Buzz Lightyear Corporation manufactures replicators. On January 1, 2015, it leased to
BoPeep Company a replicator that had cost Tk.110,000 to manufacture. The lease
agreement covers the 5 year useful life of the replicator and requires 5 equal annual rentals
of Tk.40,800 payable each January 1, beginning January 1, 2015. An interest rate of 12% is
implicit in the lease agreement. Prepare Lightyear’s January 1, 2015, journal entries.
Page 1 of 4
Q. No. 2(cont’d)
(c) Jennifer Brent Corporation owns equipment that cost Tk.80,000 and has a useful life of 8
years with no residual value. On January 1, 2015, Jennifer Brent leases the equipment to
Lopez Inc. for one year with one rental payment of Tk.15,000 on January 1. Prepare Jennifer
Brent Corporation’s 2015 Journal entries.
[Marks: (8+7+5) = 20]
Q. No. 3
The following are the balances extracted from the books of the Sadharan Bima Corporation:
Accounts Title Debit (Tk.) Credit (Tk.)
Claims Paid (F) 56,000
Claims Paid (M) 53,700
Commission and Organizer’s Remuneration (F) 54,800
Commission and Organizer’s Remuneration (M) 44,700
Expenses of Management (F) 36,600
Expenses of Management (M) 14,200
Income Tax on Investment 1,900
Directors’ Sitting Fees and Traveling Expenses 5,800
Depreciation on Furniture 400
Contribution to Staff Provident Fund 1,500
Deposit with Bangladesh Bank in Treasury Bills 2,59,100
Co-Operative Land Mortgage Bank Debentures 2,93,500
Municipal Loans 52,000
National Savings Certificates 1,00,000
Shares in Companies 30,000
Outstanding Premiums (F) 70,400
Outstanding Premiums (M) 59,600
Interest Accrued 3,600
Sundry Debtors 7,300
Fixed Deposit (Staff Security) 6,500
Fixed Deposit (Employees Provident Fund Investment) 6,800
Cash and Bank Balances 65,400
Furniture less depreciation 3,200
Library Books 1,000
Reserve for Unexpired Risk (F) 1,22,000
Reserve for Unexpired Risk (M) 65,100
Additional Reserve (F) 71,400
Additional Reserve (M) 7,500
Premiums less Reinsurance (F) 1,65,300
Premiums less Reinsurance (M) 1,11,800
Claims Outstanding, 1st January, 2015 (F) 1,900
Claims Outstanding, 1st January, 2015 (M) 100
Interest on Investments 19,700
Miscellaneous Receipts 100
Share Capital, 35000 shares of Tk. 10 each 3,50,000
General Reserve 1,27,800
Staff Security Deposit 6,500
Staff Provident Fund 6,800
Sundry Creditors 1,38,000
Contingency Reserve 28,000
Investment Fluctuation Reserve 6,000
Total 12,28,000 12,28,000
Page 2 of 4
Q. No. 3(cont’d)
(a) Estimated liability in respect of claims outstanding at 31st December, 2015 was fire – Tk. 300
and Marine – Tk. 6,700.
(b) Provide Tk. 10,000 for reserve for taxes.
(c) Provide for additional reserve for unexpired risks at 10% of the Net Premium in addition to
the Opening Balance.
Prepare Fire and Marine Revenue Account, Profit and Loss Account and the Balance Sheet.
[Marks: (4+4+4+8) = 20]
Q. No. 4
(a) What is the nature of a sale on consignment? When is revenue recognized from a
consignment sale?
(b) A consigned to B 5,000 kg of tea costing Tk. 40 per Kg. A incurred Tk. 3,000 on freight and
Tk. 2,000 on insurance. 500 kg of tea were lost in transit. The insurance company admitted
the claim for Tk. 15,000. After receiving the goods, B spent Tk. 1,000 on carriage, Tk. 500 on
selling and Tk. 500 on godown rent. B was allowed a commission of 5% on sales. 3,000 kg
of tea were sold at Tk. 64 per Kg. 25Kg of tea were lost due to breakage of a chest which
was considered to be normal.
Required:
(i) Compute the abnormal loss and closing stock.
(ii) Compute the necessary ledger account in the books of the consignor.
(iii) Compute the abnormal loss and closing stock (assume abnormal loss of 500 kg took place in
the consignee’s godown by theft other things remaining the same)
[Marks: (5+15) = 20]
Q. No. 5
(a) Identify and describe the approach the IASB requires for reporting changes in accounting
policies.
(b) PPP Co. is evaluating the appropriate accounting for the following items.
(1) The vice president of sales had indicated that one product line has lost its customer
appeal and will be phased out over the next 3 years. Therefore, a decision has been
made to lower the estimated lives on related production equipment from the remaining
5 years to 3 years.
(2) Management has decided to switch from the FIFO inventory valuation method to the
average-cost inventory valuation method for all inventories.
(3) When the year-end physical inventory adjustment was made for the current year, the
controller discovered that the prior year’s physical inventory sheets for an entire
warehouse were mislaid and excluded from last year’s count.
(4) PPP’s Custom Division manufactures large-scale, custom-designed machinery on a
contract basis. Management decided to switch from the cost-recovery method to the
percentage-completion method of accounting for long-term contracts.
Required: Identify and explain whether each of the above times is change in accounting policy, a
change in estimate, or an error.
(c) Holtzman Company is in the process of preparing its financial statements for 2015. Assume
that no entries for depreciation have been recorded in 2015. The following information
related to depreciation of fixed assets is provided to you.
(i) Holtzman purchased equipment on January 2, 2012, for Tk.85,000. At that time, the
equipment had an estimated useful life of 10 years with a Tk.5,000 residual value. The
equipment is depreciated on a straight-line basis. On January 2, 2015, as a result of
additional information, the company determined that the equipment has a remaining
useful life of 4 years with a Tk.3,000 residual value.
Page 3 of 4
Q. No. 5(cont’d)
(ii) Holtzman purchased a machine on July 1, 2013, at a cost of Tk.120,000. The machine
has a residual value of Tk.16,000 and a useful life of 8 years. Holtzman’s bookkeeper
recorded straight-line depreciation in 2013 and 2014 but failed to consider the residual
value.
(iii) During 2015, Holtzman changed from the double-declining-balance method for its
building to the straight-line method. The building originally cost Tk.300,000. It had a
useful life of 10 years and a residual value of Tk.30,000. The following computations
present depreciation on both bases for 2013 and 2014.
2014(Tk.) 2013(Tk.)
Straight-line 27,000 27,000
Declining-balance 48,000 60,000
Required:
Prepare the journal entries to record depreciation expense for 2015 and correct any errors made
to date related to the information provided.
[Marks: (5+5+10) = 20]
= THE END =
Page 4 of 4
CMA APRIL, 2019 SPECIAL EXAMINATION

Q. No. 1
(a) TXY Company is a manufacturer and lessor of computer equipment. What should be the
nature of its lease arrangements with lessees if the company wishes to account for its lease
transactions as sales-type leases?
(b) SMX Leasing Company signs an agreement on January 1, 2015, to lease equipment to AXY.
The following information relates to this agreement.
(1) The term of the non-cancelable lease is 5 years with no renewal option. The equipment
has an estimated economic life of 5 years.
(2) The fair value of the asset at January 1, 2015 is Tk.90,000.
(3) The asset will revert to the lessor at the end of the lease term, at which time the asset
is expected to have a residual value of Tk.7,000, none of which is guaranteed.
(4) AXY Company assumes direct responsibility for all executory costs, which include the
following annual amounts: (1) Tk.900 to Frontier Insurance Company for insurance and
(2) Tk.1,600 for property taxes.
(5) The agreement requires equal annual rental payments of Tk.20,541.11 to the lessor,
beginning on January 1, 2015.
(6) The lessee’s incremental borrowing rate is 12%. The lessor’s implicit rate is 10% and is
known to the lessee.
(7) AXY Company uses the straight-line depreciation method for all equipment.
(8) AXY uses reversing entries when appropriate.
Required:
(i) Prepare an amortization schedule that would be suitable for the lessee for the lease term.
(ii) Prepare all of the journal entries for the lessee for 2015 and 2016 to record the lease
agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s
annual accounting period ends on December 31.
[Marks: 5+(7+8) = 20]
Q. No. 2
The first audit of the books of Bruce Gingrich Company was made for the year ended December
31, 2015. In examining the books, the auditor found that certain items had been overlooked or
incorrectly handled in the last 3 years. These items are:
(1) At the beginning of 2013, the company purchase a machine for $ 510,000 (salvage value of
$51,000) that had a useful life of 6 years. The bookkeeper used straight- line depreciation,
but failed to deduct the salvage value in computing the depreciation base for the 3 years.
(2) At the end of 2014, the company failed to accrue sales salaries of $45,000.
(3) A tax lawsuit that involved the year 2013 was settled late in 2015. It was determined that the
company owed an additional $85,000 in taxes related to 2013. The company did not record a
liability in 2013 or 2014 because the possibility of loss was considered remote, and changed
the $85,000 to a loss account in 2015.
(4) Gingrich Company purchased a copyright from another company early in 2013 for $45,000.
Gingrich had not authorized the copyright because its value had not diminished. The
copyright has a useful life at purchase of 20 years.
(5) In 2015, the company changed its basis of inventory pricing from FIFO to LIFO. The
cumulative effect of this change was to decrease net income by $71,000. The company
debited this cumulative effect to Retained Earnings. LIFO was used in computing income for
2015.
Page 1 of 3
(6) In 2015, the company wrote off $87,000 of inventory considered to be obsolete; the loss was
charged directly to Retained Earnings.
Required:
Prepare the journal entries necessary in 2015 to correct the books, assuming that the books have
not been closed. Disregard effect of correction on income tax.
[Marks: 20]
Q. No. 3
(a) Discuss and illustrate how a correction of an error in previously issued financial statements
should be handled.
(b) State how each of the following items is reflected in the financial statements.
 Change from FIFO to average-cost method for inventory valuation purposes.
 Charge for failure to record depreciation in a previous period.
 Litigation won in current year, related to prior period.
 Change in realizability of certain receivables.
 Write-off of receivables.
(c) Byrant Construction Company changed from the cost recovery to the percentage-of-
completion method of accounting for long-term construction contracts during 2015. For tax
purposes, the company employs the cost-recovery method and will continue this approach in
the future. The information related to this change is as follows.
Pretax income from

Year
Percentage of Completion Cost-Recovery Difference
2014 Tk.980,000 Tk.730,000 Tk.250,000
2015 900,000 480,000 420,000
Required:
(i) Assuming that the tax rate is 40%, what is the amount of net income that would be reported
in 2015?
(ii) What entry (ies) are necessary to adjust the accounting records for the change in accounting
policy?
[Marks: 4+5+(6+5) = 20]
Q. No. 4
(a) What is the nature of a sale on consignment? When is revenue recognized from a
consignment sale?
(b) OMX Inc. started a four-year contract to build a dam. Activities commenced on February 1,
2010. The total contract price amounted to Tk.12,000,000, and it was estimated that the work
would be completed at a total cost of Tk.9,500,000. In the construction agreement the
customer agreed to accept increases in wage tariffs additional to the contract price.
The following information refers to contract activities for the financial year ending December
31, 2010:
1. Costs for the year:
Items Taka
Material 1,400,000
Labor 800,000
Operating overhead 150,000
Subcontractors 180,000
Page 2 of 3
2. Current estimate of total contract costs indicates the following:

 Materials will be Tk.180,000 higher than expected.
 Total labor costs will be Tk.300,000 higher than expected. Of this amount, only
Tk.240,000 will be the result of increased wage tariffs. The remainder will be
caused by inefficiencies.
 A savings of Tk.30,000 is expected on operating overhead.
3. During the current financial year the customer requested a variation to the original
contract, and it was agreed that the contract price would be increased by Tk.900,000.
The total estimated cost of this extra work is Tk.750,000.
4. By the end of 2010, certificates issued by quantity surveyors indicated a 25% stage of
completion.
Required: Determine the profit to date, based on:

(i) Option 1- contract costs in proportion to estimated contract costs.
(ii) Option 2- Percentage of the work certified.
[Marks: (5+15) = 20]
Q. No. 5
The following information is available for Swanson Corporation for 2013.
(1) Depreciation reported on the tax return exceeded depreciation reported on the income
statement by $100,000. This difference will reverse in equal amounts of $25,000 over the
years 2014-2017.
(2) Interest received on municipal bonds was $10,000
(3) Rent collected in advance on January 1, 2013, totaled $60,000 for a 3-year period. Of this
amount, $40,000 was reported as unearned at December 31, for book purpose.
(4) The tax rates are 40% for 2013 and 35% for 2014 and subsequent years.
(5) Income taxes of $360,000 are due per the tax return for 2013.
(6) No deferred taxes existed at the beginning of 2013.
Required:
(i) Compute taxable income for 2013
(ii) Compute pretax financial income for 2013.
(iii) Prepare the journal entries to record income tax expense, deferred income taxes, and
income taxes payable for 2013 and 2014. Assume taxable income was $980,000 in 2014.
(iv) Prepare the income tax expense section of the income statement for 2013, beginning with
“Income before income taxes.”
[Marks: (3+5+7+5) = 20]
= THE END =
Page 3 of 3

Q. No. 1
The following Trial Balance was extracted from the books of Popular Life Assurance Company
as on December 31, 2017:
Accounts Titles Dr. (Tk.) Cr. (Tk.)

Issued and Subscribed Capital: 10,000 shares of Tk.15 1,00,000
each, Tk.10 called
Life Assurance Fund on 01.01.2017 29,00,300
Dividend Paid 16,000
Bonus to policy-holders 30,500
Premium received 2,33,500
Claims paid 1,97,000
Commission paid 9,300
Management expenses 32,300
Mortgage in Bangladesh 4,92,200
Interest and Dividend received 1,12,700
Agent’s Balances 9,300
Freehold premises 40,000
Investments 23,00,000
Loan on company’s policies 1,78,600
Cash Deposits 27,000
Cash in hand 7,300
Surrenders 7,000 …...
Total 33,46,500 33,46,500
Adjustments:
(1) Claims admitted but not paid Tk. 10,000;
(2) Management expenses due Tk. 1,200;
(3) Interest accrued Tk. 21,300;
(4) Premiums outstanding Tk. 10,000;
(5) Bonus utilized in reduction of premium Tk. 6,000; and
(6) Claims covered under re-insurance Tk. 2,300.
Required:
(i) Revenue Account; and
(ii) Balance Sheet.
[Marks: (10+10) = 20]
Page 1 of 4
Q. No. 2
(a) In the context of accounting for deferred tax what are:
(i) Permanent differences;
(ii) Timing Differences;
(iii) Short-term differences; and
(iv) Long-term differences.
(b) A Ltd. maintains deferred taxation account under liability method since 2016 and at the
year end the account shows a balance of Tk. 20 million.
Accounts for the year to 31 December 2017 have now been prepared and the following
taxation information compiled:
(i) Tax rates applicable to the company are:
2016 35.00%
2017 35.00%
(ii) Accounting depreciation charged in 2017 has been Tk.60 million but taxation laws
would allow Tk.100 million as depreciation for the year.
(iii) Besides, non-admissible items have been charged in accounts amounting to
Tk. 2.50 million.
(iv) Accounts show a profit of Tk. 90 million for the year 2017.
Tax liability of 2016 has been recently settled at an excess of Tk.0.50 million provided in
the year.
Required:
Prepare the current and deferred taxation accounts of the company for the year ended 31
December 2017.
[Marks: (8+12) = 20]
Q. No. 3
(a) Holder-Webb Company began operations on January 1, 2002 and uses the average cost
method of pricing inventory. Management is contemplating a change in inventory methods
for 2005. The following information is available for the years 2002-2004:
Net income computed using
Average Cost Method FIFO Method LIFO Method
2002 15,000 19,000 12,000
2003 18,000 23,000 14,000
2004 20,000 25,000 17,000
Required:
(i) Prepare the journal entry necessary to record a change from the average cost method to
the FIFO method in 2005.
(ii) Show the comparative income statements for 2004 and 2005 starting with income before
the cumulative effect of change in accounting principle. Assume net income for 2005 was
32,000.
(iii) Assume Holder-Webb Company used the LIFO method instead of the average cost
method during the years 2002-2004. In 2005, Holder-Webb changed to the FIFO method.
Prepare the journal entry necessary to record the change in accounting principle.
Page 2 of 4
Q. No. 3 (cont’d...)
(b) At the end of fiscal 2005, management of Carol Dilbeck Manufacturing Company has
decided to charge its depreciation method from the double-declining balance method to
straight-line method for financial reporting purposes. For federal income taxes the
company will continue to use the MACRS method. The income tax rate for all year is 30%.
At the end of fiscal 2005, the company has 200,000 common shares issued and
outstanding. Information regarding depreciation expense and income after income taxes
are as follows.
Depreciation expense to date under:
MACRS Straight-line Double-Declining Balance
Pre 2004 Tk. 1,000,000 Tk. 400,000 Tk. 950,000
2004 300,000 150,000 260,000
2005 280,000 140,000 250,000
Reported income after income taxes:
2004 Tk. 1,200,000
2005 1,400,000
Instructions:
(i) Prepare the journal entries to record the change in accounting method in 2005 and
indicate how the change in depreciation method would be reported in the income
statement of 2005. Also indicate how earnings per share would be disclosed. (Hints:
Adjust Deferred tax liability Account.)
(ii) Show the amount of depreciation expense to be reported in 2005.
[Marks: (10+10) = 20]
Q. No. 4
(a) “The substance rather than the legal form of the lease contract is indicative of the
classification of lease as finance or operating.” Do you agree? Why?
(b) SMX Leasing Company agrees to lease machinery to PMX Corporation on January 1,
2010. The following information relates to the lease agreement.
(1) The term of the lease is 7 years with no renewal option, and the machinery has an
estimated economic life of 9 years.
(2) The cost of the machinery is Tk. 420,000, and the fair value of the asset on January
1, 2010, is Tk.560,000.
(3) At the end of the lease term the asset reverts to the lessor. At the end to the lease
term the asset is expected to have a guaranteed residual value of Tk. 80,000. PMX
depreciates all of its equipment on a straight-line basis.
(4) The lease agreement requires equal annual rental payments, beginning on January
1, 2010.
(5) The collectability of the lease payments is reasonably predictable, and there are no
important uncertainties surrounding the amounts of costs yet to be incurred by the
lessor.
(6) SMX desires a 10% rate of return on its investments. PMX’s incremental borrowing
rate is 11%.
* Present value of Tk.1 at 10% for 7 years is 0.51316 and 11% for 7 years is
0.48166
* Present value of an annuity due at 10% for 7 years is 5.35526 and 11% for
7years is 5.23054.
Page 3 of 4
Q. No. 4 (cont’d...)
Instructions:
(i) Discuss the nature of this lease for both the lessee and the lessor, according to IAS-17
Leases.
(ii) Calculate the amount of the annual rental payment required.
(iii) Compute the present value of the minimum lease payments.
(iv) Prepare the journal entries PMX would make in 2010 and 2011 related to the lease
arrangement.
[Marks: 5+(4+3+3+5) = 20]
Q. No. 5
(a) The OMX Company signs a contract on March 1, 2010 with the MXY Company to share
control over the process of jointly constructing a new bridge. Each company is responsible
for providing its own assets and employees in relation to the project.
The contract is for an agreed fee of Tk. 3,600,000, with revenues to be shared in 60:40
ratios in favor of OMX. Each company is to be responsible for certain expenses (‘own
expenses’), while expenses incurred in common are to be shared in 50:50 ratios. Work on
the projects is to be completed on 31 December, 2010.
At 31 December 2010 the income received and expenses incurred by the two companies
are as follows:
Items OMX (Taka) MXY (Taka)
Revenues received from customer 2,600,000 1,000,000
Own expenses 300,000 400,000
Common expenses 800,000 500,000
Required:
Under IAS 31 Interest in Joint Ventures, what is the sum owing between the two ventures at 31
December 2010.
(b) The TMX Company is organized into a number of divisions operating in different sectors.
The accounting policies applied in two of its divisions prior to the introduction of IFRS 4
Insurance Contracts are as follows:
Accounting policy (1) In its car breakdown division, TMX offers unlimited amounts
of roadside assistance in exchange for an annual
subscription. Although it has always accepted that this
activity is in the nature of offering insurance against
breakdown, it accounts for these subscriptions by using the
stage of completion method under IAS 18 Revenue, and
making relevant provisions for fulfillment costs under IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
Accounting policy (2) In its property structures insurance division, TMX makes a
detailed estimate for the cost of each outstanding claim but
adopts the practice of adding another 20% to the total on a
‘just in case’ basis.
Required:
Which of these accounting policies is TMX permitted to continue to use under IFRS 4 Insurance
contracts?
[Marks: (10+10) = 20]
= THE END =
Page 4 of 4
THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH
Q. No. 1
(a) Define deferred tax asset (DTA) and deferred tax liability (DTL) with suitable example.
(b) Why modern corporate houses are interested in leasing asset than buying?
(c) Explain lease capitalization criteria.
(d) Peter M. Dell Co. purchased equipment for BDT 510,000 which was estimated to have a
useful life of 10 years with a salvage value of BDT 10,000 at the end of that time.
Depreciation has been entered for 7 years on a straight-line basis. In 2005, it is
determined that the total estimated life should be 15 years with a salvage value of BDT
5,000 at the end of that time.
Required:
(i) Prepare the entry (if any) to correct the prior years’ depreciation.
(ii) Prepare the entry to record depreciation for 2005.
(iii) Compute the carrying value of the equipment to be shown in the statement of financial
position as at December 31, 2005.
[Marks: (4+4+4+8) = 20]
Q. No. 2.
(a) Define and distinguish the following:
(i) Principal and Agent in consignment business, and
(ii) Consignment and Joint Venture.
(b) Hannan and Mannan are involved in a consignment business where Hannan sends goods
as consignor from Narayangonj to Mannan of Barishal for retail sale. The goods are sent
by barge.
Following are the transactions relating to consignment business:
500 units were sent @ Tk.1,000 each Tk.500,000
Fright charge paid by consignor Tk.150,000
Loading charge paid by consignor Tk. 50,000
Unloading charge paid by consignee Tk. 24,000
Insurance charge paid by consignor Tk. 10,000
Carrying charge to warehouse paid by consignee Tk. 16,000
Warehouse rent paid by consignee Tk. 20,000
100 units were lost by fire in transit by barge and remaining goods were unloaded from barge.
Insurance claim received Tk.120,000. They arranged for remaining 400 units to carry from
barge to warehouse and paid carrying charges. But 350 units were received at the warehouse
in good condition with no trace of the remaining. 300 units were sold (@ Tk.2,000) at
Tk.600,000 and 50 units were left in warehouse.
10% of good units received at warehouse are considered normal loss.
Due to decrease in market price, sales price of stock estimated to be @ Tk.1,400. Commission
is paid to the consignee @ 5% on sales.
Required:
Draw a consignment account in the books of Hannan.
[Marks: (6+14) = 20]
Page 1 of 3
SUBJECT : 201. ADVANCED FINANCIAL ACCOUNTING-I
Q. No. 3
(a) What are the provisions with regard to “Loan Loss Provision” and “Interest Suspense” of a
banking company as per IAS/BAS-30?
(b) From the following details of Western Bank Ltd prepare Profit and Loss Account for the
year ended 31st December, 2017:
Taka
Interest paid on Deposits, Borrowings etc. 1,30,00,000
Interest and Discount Income 3,10,00,000
Rent Received 1,20,000
Net profit on sale of Investments 1,000
Salaries, Allowances and Provident Fund 1,25,00,000
Commission, Exchange and Brokerage 18,00,000
Law charges 20,000
Rent & Taxes 3,00,000
Postage and Telegrams 1,10,000
Auditors’ Fees 50,000
Directors’ Fees 25,000
Printing and Stationery 2,20,000
Depreciation on Property 1,90,000
Miscellaneous Receipts 85,000
Miscellaneous Expenditure 2,60,000
Repairs to Property 40,000
Telephone and Stamps 1,50,000
Advertisement 35,000
Bad Debts 50,000
Insurance and Lighting 2,00,000
The Chairman is paid salary @Tk.4,000 p.m. and allowances at Tk.1,000 per month. 8% is
contributed to Provident Fund on the basis of basic salary. No sitting fees nor any bonus has
been paid to him. Perquisite for free quarters and motor car is valued at Tk.6,000.
Opening balances of Unexpired Discount, Reserve for Bad Debts and Reserve for taxation
were Tk.10,00,000, Tk.6,00,000 and Tk.30,00,000 respectively. Closing balance required in
Unexpired Discount Account and Bad Debts Reserve Account are Tk.8,60,000 and Tk.7,50,000
respectively. Tk.25,00,000 Income Tax has been adjusted against Advance Payment of tax
amounting to Tk.30,00,000 and Tk.35,00,000 provision at the end of the year is required.
[Marks: (5+15) = 20]
Q. No. 4
(a) Under what general conditions is the installment sales method of accounting preferred to
the full accrual method?
(b) What special recognition problems arise in accounting for franchise fees?
(c) On January 1, 2015 Bapa Company Ltd. sold property for Tk.4,00,000. The note will be
collected as follows:
Year 2015 Tk. 2,00,000

Year 2016 Tk. 1,20,000
Year 2017 Tk. 80,000
The property had cost Bapa Co. Ltd. Tk. 3,00,000 when it was purchased in 2014.
Page 2 of 3
SUBJECT : 201. ADVANCED FINANCIAL ACCOUNTING-I
Q. No. 4 (cont’d…)
Required:
(i) Compute the amount of gross profit realized in each year, assuming Bapa Company uses
the Cost Recovery method.
(ii) Compute the amount of gross profit realized in each year, assuming Bapa Company uses
the Installment Sales method.
(iii) Show the journal entries for the year 2015 under both the methods inscribed above.
[Marks: {2+3+(5X3)} = 20]

Q. No. 5
Hilary Brennan Steel Company as lessee signed a lease agreement for equipment for 5 years,
beginning December 31, 2004. Annual rental payments of $32,000 are to be made at the
beginning of each lease year (December 31). The taxes, insurances and the maintenance costs
are the obligation of the lessee. The interest rate used by the lessor in setting the payment
schedule is 10%; Brennan’s incremental borrowing rate is 12% Brennan is unaware of the rate
being used by the lessor. At the end of the lease, Brennan has the option to buy the equipment
for $1, considerably below its estimated fair value at that time. The equipment has an estimated
useful life of 7 years, with no salvage value. Brennan uses the straight line method of
depreciation on similar owned equipment.
Required:
(i) Prepare the journal entry or entries, with explanations, that should be recorded on
December 31, 2004, By Brennan. (Assume no residual value)
(ii) Prepare the journal entry or entries, with explanations, that should be recorded on
December 31, 2005, By Brennan. (Prepare the lease amortization schedule for all five
payments.)
(iii) Prepare the journal entry or entries, with explanations, that should be recorded on
December 31, 2006, By Brennan.
(iv) What amounts would appear on Brennan’s December 31, 2006, balance sheet relative to
the lease arrangement?
[Marks: 20]
= THE END =
Page 3 of 3
SUBJECT : 201. ADVANCED FINANCIAL ACCOUNTING-I.
❖ All questions are to be attempted.
❖ Show computations, where necessary.
❖ Answer must be brief, relevant, neat and clean.
❖ Start answering each question from a fresh sheet.
Q. No. 1
The following information was disclosed during the audit of Zheng Inc.
1.
Year Amount Due per
Tax Return
2014 130,000,000
2015 104,000,000
2. On January 1, 2014, equipment costing Tk. 600,000,000 is purchased. For financial
reporting purposes, the company uses straight-line depreciation over a 5 year life. For tax
purposes, the company uses the double-declining balance method over 5 years.
3. In January 2015, Tk. 225,000,000 is collected in advance rental of a building for a 3 year
period. The entire Tk. 225,000,000 is reported as taxable income in 2015, but Tk.
150,000,000 of the Tk. 225,000,000 is reported as unearned revenue in 2015 for financial
reporting purposes. The remaining amount of unearned revenue is to be recognized
equally in 2016 and 2017.
4. The tax rate is 40% in 2014 and all subsequent periods (Hint: To find taxable income in
2014 and 2015, the related income taxes payable amounts will have to be “grossed up.”)
5. No temporary differences existed at the end of 2013. Zheng expects to report taxable
income in each of the next 5 years.
Instructions:
(i) Determine the amount to report for deferred income taxes at the end of 2014, and indicate
how it should be classified on the statement of financial position.
(ii) Prepare the journal entry to record income taxes for 2014.
(iii) Draft the income tax section of the income statement for 2014, beginning with “Income
before income taxes.” (Hint: You must compute taxable income and then combine that
with changes in cumulative temporary differences to arrive at pretax financial income.)
(iv) Determine the deferred income taxes at the end of 2015, and indicate how they should be
classified on the statement of financial position.
(v) Prepare the journal entry to record income taxes for 2015.
(vi) Draft the income tax section of the income statement for 2015, beginning with “Income
before income taxes.”
[Marks: (2+3+4+4+3+4) = 20]
Q. No. 2
(a) How should changes in the estimated unguaranteed residual value be handled by lessor?
(b) Identify the two recognized lease accounting methods for leases and distinguish between
them.
(c) Chemical Financial Corporation signs an agreement on January 1, 2014, to lease
equipment to Chells, Inc. The following information relates to this agreement.
(1) The term of the non-cancelable lease is 6 years with no renewal option. The
equipment has an estimated economic life of 7 years.
(2) The fair value of the asset at January 1, 2014, is Tk. 460,000.
Page 1 of 4
Q. No. 2(cont’d……..)
(3) The asset will revert to the lessor at the end of the lease term, at which time the
asset is expected to have a residual value of Tk. 20,000, none of which is
guaranteed.
(4) Chells assumes direct responsibility for all executor costs, which include Tk. 2,000
for insurance and Tk. 850 for property taxes.
(5) The agreement requires equal annual rental payments of Tk. 91,637.36 to the
lessor, beginning on January 1, 2014.
(6) The lessee’s incremental borrowing rate is 10%. The lessor’s implicit rate is 9% and
is known to the lessee.
(7) Chells uses the straight-line depreciation method for all equipment.
(8) Chells uses reversing entries when appropriate.
Required:
(Round all numbers to two decimal places)
(i) Prepare an amortization schedule that would be suitable for the lessee for the lease term.
(ii) Prepare the entire journal entries for the lessee for 2014 and 2015 to record the lease
agreement, the lease payments, and all expenses related to this lease. Assume the
lessee’s annual accounting period ends on December 31.
[Marks: (4+4+12) = 20]
Q. No. 3
(a) Compare the accounts of a non-trading concern with those of a trading concern. Why do
the two sets differ?
(b) AB LTD is an entity engages in construction business & prepares its financial records to
31 December every year. In the current year ended 31 December 2013 the company
started two contracts expected to take more than one year. Following are the extracts
relating to each contract at 31 December 2013:
Contract 1 2
Tk'000 Tk'000
Total contract price 11,000 2,400
Estimated total cost of contract at 01 Jan 2013 8,000 1,800
Estimated total cost at 31 Dec 2013 8,000 2,500
Agreed work completed at 31 Dec 2013 6,600 1,680
Progress billings invoiced 31 Dec 2013 6,000 1,760
Costs incurred to 31 December 2013 7,800 1,440
The entity calculates the percentage of completion as the agreed value of work completed
to date, to the total contract price.
Required:
Prepare extracts of financial statements for the year ended 31 December 2013.
(c) AB LTD is an entity engages in construction business. It started a contract for the
construction of a school building for one of its client, spanning 2 years. The price of the
contract was agreed to be Tk. 4 million.
The contract was started on 01 January 2013 but unfortunately construction material
prices started increasing materially from last few months after the start of the contract,
due to unforeseen reason.
Page 2 of 4
Q. No. 3(cont’d……..)
AB LTD has intimated the customer for the increase in material price and requested for compensation
of additional costs, but yet, the entity is unsure about the compensation of the additional
costs. Therefore, outcome of the contract is not reliably measurable at the end of the first accounting
period 31-12-2013, as to whether the contract will be profitable or not.
Following extracts are available from the records of AB LTD related to this contract at the first
year ended 31-12-2013:
Tk’000
Contract Price 4,000
Cost incurred to Date 2,400
Cost likely to be recoverable 2,000
Progress billings to customer 1,800
Required:
Prepare extracts of financial statements for the year ended 31-12-2013.
[Marks: (5+8+7) = 20]
Q. No. 4
(a) What are the salient features of bankruptcy act 1997? Explain.
(b) What is winding up? What are the different methods of winding up? Explain.
(c) The Following information was extracted from the books of X limited company on 31-12-
2016 on which a winding up order was made:
Particulars Taka
Ordinary Share Capital (2000 shares of Tk. 100 each) 2,00,000
6% Preference Share Capital (3000 shares of Tk. 100 each) 3,00,000
Calls in arrear (Estimated to realize Tk. 2,000) 4,000
Creditors having a mortgage on the freehold land and building 85,000
Creditors having a second charge on freehold land and building 90,000
Trade Creditors 2,70,000
5% mortgage debenture, secured by a floating charge on the whole of the assets 2,00,000
of the company (interest paid to date)
Debtors: Good Tk. 60,000; Doubtful Tk. 15,000 (estimated to realize Tk. 5,000) 90,000
and Bad : remaining portion
Unclaimed Dividend 6,000
Bills Payable 10,000
Income Tax due 25,000
Salaries and wages (20 workers) 40,000
Bill discounted (Tk. 15,000 expected to be dishonored) 40,000
Bank Overdraft, secured by a second charge on the whole assets of the company 20,000
Cash in hand 2,000
Bills of exchange (considered good) 35,000
Freehold land and Buildings (estimated to realize Tk. 1,65,000) 2,10,000
Plant and machinery (estimated to produce Tk. 90,000) 1,20,000
Fixture and Fittings (estimated to produce Tk. 8000) 12,000
Stock in trade ( estimated to produce Tk. 25% less) 80,000
Patents (estimated to produce Tk. 45,000) 70,000
Profit and loss (debit) 6,23,000
Required:
Prepare the Statement of affairs and Deficiency Account following the bankruptcy act 1997.
[Marks: {4+4+(8+4)} = 20]
Page 3 of 4
Q. No. 5
(a) What do you mean by surrender value in case of insurance company? How is it
accounted for?
(b) The following are the balances in the books of Sonar Bangla Insurance Co. Ltd. as on 31st
December, 2014, in respect of Fire Insurance business carried on by them:
Premium less reinsurance 37,50,000 Amount due to other persons 6,00,000

Reserve for unexpired risks as on 31-12- 15,00,000 carrying on insurance business
2013
Claims less reinsurance 20,62,500 Amount due from other persons 30,00,000
Claims outstanding as on 31-12-2013 5,62,500 carrying on insurance business
Commission on direct business 2,25,000 Cash in hand 19,500
Commission on re-insurance ceded 1,50,000 Cash at bank 9,10,500
Commission on re-insurance accepted 75,000 Deposit with Bangladesh Bank 15,00,000
Bad debts 11,250 Investment in Govt. securities 18,75,000
Foreign taxes 7,500 Investment in shares of 7,50,000
companies
Rent, rates and taxes 90,000 Interest and dividend received 1,12,500
(net)
Establishment charges 3,75,000 Directors fees 15,000
Audit fees 15,000 Minimum remuneration of MD 1,35,000
Postage and telegram 11,250 Sundry debtors 3,75,000
Printing and stationary 18,750 Sundry creditors 1,50,000
Depreciation 30,000 Investment reserve as on 31- 4,50,000
12-2013
Policy stamps 3,750 Motor car furniture etc 4,20,000
Share capital(equity shares of $100) each 37,50,000 General reserve 7,50,000
Profit and loss appropriation account 1,50,000
balance as on 31-12-2013 (credit)
Other Information:
(1) Outstanding claims as on 31-12-2014 were Tk. 3,75,000.
(2) Reserve for unexpired risks to be kept at 50% of the premium income.
(3) Market value of investments as on 31-12-2014 were Tk. 21,00,000.
(4) Provision for taxation is required to be made of Tk. 2,92,500.
Required:
Prepare the Revenue Account, Profit and Loss Account and Profit and Loss Appropriation
Account for the year ended on 31-12-2014 and the Balance Sheet on that date.
[Marks: (5+15) = 20]
= THE END =
Page 4 of 4
Reading Time: 15 minutes
❖ All questions are to be attempted.
❖ Show computations, where necessary.
❖ Answer must be brief, relevant, neat and clean.
❖ Start answering each question from a fresh sheet.
Q. No. 1
(a) What are the disclosures required in Joint Venture according to IAS 31?
(b) United Leasing Company and Square Textiles Limited sign a lease agreement for
Equipment on 01 May, 2011 with the following terms and provisions:
• The term of the lease is 5 (five) years and the lease agreement is non-cancellable.
• Annual lease payment of Taka 84,910.60.
• Economic life of the leased equipment is 10 (ten) years.
• Bargain purchase option price of Taka 16,000.00 at the end of lease term.
• Fair value of the leased equipment is Taka 3,64,000.00 at 01 May, 2011.
• United Leasing Company pays executory costs directly to third parties for property
taxes of Taka 5,000.00 per year which are not included in annual lease payment.
• Cost of the leased equipment is Taka 2,60,000.00 to United Leasing Company.
• Incremental borrowing rate is 10% to Square Textiles Limited.
The collectability of the lease payments is reasonably predictable and there are no important
uncertainties surrounding the costs yet to be incurred by the United Leasing Company. It is
assumed that annual lease payment is due at the inception of the lease agreement and implicit
rate for United Leasing Company is also the same as assumed by Square Textiles Limited.
[Present Value of Taka 1 for n=5, i=10% is 0.62092, Present Value of Annuity Due of Taka 1 for
n=5, i=10% is 4.16986].
Required:
(i) Discuss the nature of the lease to Square Textiles Limited and United Leasing Company.
(ii) Prepare a lease amortization schedule for Square Textiles Limited for 5 years lease term.
(iii)Prepare journal entries in the books of Square Textiles Limited to reflect the signing of the
lease agreement and to record the payments and expenses related to lease for 2011 and
2012 assuming accounting year ends on 31 December.
[Marks: 5+(5+5+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
2016.
Home Office (Taka) Branch (Taka)

Inventories as on 1 January 2016 200,000 90,000
Purchases 2,300,000 -
Sales 4,100,000 3,100,000
Other Expenses 304,000 124,000
Inventories as on 31 December 2016 104,000 62,000
Page 1 of 4
Q. No. 2 (cont’d…….)
The Branch book show the Home Office Account at Taka 180,000 (Cr.) and the Home Office books
show the Branch Account at Taka 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 Taka 2,090,000. 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 Taka 240,000 on 31
December 2016 representing the Branch’s share of expenses incurred by the Home Office. The said
expenses had not been recorded in the books of the Branch.
All cash collection made by the Branch is deposited in a local bank in the account of Home
Office as follows:
Amount (Taka) Date of deposit by Branch Date of Receipt by Home Office
100,000 25 December 2016 31 December 2016
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 Taka 60,000 sent to the Branch by Home Office on
29 December 2016, which was received by the Branch on 3 January 2017.
Required:
Prepare the Income Statement, in columnar form after showing the reconciliation of Branch
Account and Home Office Account Balance.
[Marks: 20]
Q. No. 3
Martha king company began operations at the beginning of 2015. The following information
pertains to this company,
(a) Pretax financial income for 2015 is Taka 100,000.
(b) The tax rate enacted for 2015 and future years is 40%
(c) Differences between the 2015 income statement and tax return are listed below:
(1) Warranty expense accrued for financial reporting purposes amounts to Taka 5000.
Warranty deductions per tax return amount to Taka 2000.
(2) Gross profit on construction contracts using the percentage of completion method
for books amounts to Taka 92,000. Gross profit on construction contracts for tax
purpose amounts to Taka 62,000.
(3) Depreciation of property, plant, and equipment for financial reporting purposes amounts to
Taka 60,000. Depreciation of these assets amounts to Taka 80,000 for the tax return.
(4) A Taka 3,500 fine paid for violation of pollution laws was deducted in computing
pretax financial income.
(5) Interest revenue earned on an investment in tax exempt municipal bonds amounts
to Taka 1,400.
(assume (1) is short term in nature; assume (2) & (3) are long term in nature.
(d) Taxable income is expected for the next few years.
Required:
(i) Compute taxable income for 2015
(ii) Compute the deferred taxes at December 31, 2015, that relate to the temporary
differences described above. Clearly level them as deferred tax asset or liability.
(iii) Prepare the journal entry to record income tax expense, deferred taxes, and income taxes
payable for 2015.
(iv) Draft the income tax expense section of the income statement ‘beginning with income
before income taxes’.
[Marks: (5+5+7+3) = 20]
Page 2 of 4
Q. No. 4
(a) XYZ Gas Company Ltd. incurred an expenditure of Taka 2310,000 to rebuild a part of
their works. The relevant part of the old works had originally cost Taka 900,000. A sum of
Taka 180,000 is realized by the sale of old materials and old materials of the value of
Taka 90,000 are further used in the construction of new works. The cost of materials and
labor had gone up by 30% and 20% respectively since the old works were built. The cost
was 3/5 for materials & the balance for labor.
Required:
Give the journal entries to record the above transaction. [Show the necessary workings]
(b) From the years ended 31 December 2013 to 31 December 2015 M Ltd capitalized Taka
10,000 of finance costs in relation to self constructed plant. By 31 December 2015 these
costs had been 50% depreciated. During 2016 M Ltd capitalized a further Taka 2,000 of
such costs. On the last day of the year, just prior to calculating the annual depreciation
charge, when the carrying amount of plant stood at Taka 250,000. M Ltd decided to
change its accounting policy to write off such finance costs as incurred. Retained
earnings at 1 January 2016 were Taka 350,000. Draft profit for 2016 was Taka 45,000
after charging the correct figure for depreciation of Taka 30,000.
In accordance with BAS -8 Accounting policies, changes in accounting estimates and
errors, calculate the profit for the year, retained earnings brought forward and carrying
amount of plant for the year ended 31 December 2016? [Show the necessary workings]
[Marks: (10+10) = 20]
Q. No. 5
The managing committee of the ‘XYZ Club’ is concerned about the club financial position
following the sudden disappearance of the treasurer on 31 December 2016, the annual
accounting date. At 31 December 2015, the club balance sheet had shown the following
position:
Liabilities Taka Assets Taka

Capital fund 120,490 Furniture and Equipments
Creditors for provisions 20,600 Cost 60,000
Subscriptions in advance 1,000 (-)Accumulated Depreciation 30,000
30,000
Subscription due 2,000
Stock of provisions 25,000
Balance with bank 83,000
Cash in hand 2,090
Total 142,090 Total 142,090
You also obtain the following information:
(1) Members pay an annual subscriptions of Taka 100. An examination of duplicate receipt
book showed that during the year ended 31 December 2016, 480 members had paid the
current year’s subscription, 5 members had paid of arrears of previous year and 10
members had paid in advance for 2017. 5 Members had resigned without paying the
previous year’s subscriptions and at the end of the year there were 500 members on the
register.
Page 3 of 4
Q. No. 5 (cont’d……..)
(2) The cash book has not been written up but an analysis of petty cash vouchers for the year
showed the following expenditures:
Purchase of provisions-Taka 59,400; Salaries Taka 36,000; Stationery and postage Taka
2,000; Repairs Taka 3,600; Miscellaneous expenses Taka 3,400.
(3) The Refreshment room in-charge had handed over the takings the daily to the treasure
with till rolls which cannot be found. However he states that average gross profit on sales
would be 40%. The stock of provisions at 31 December 2016 was Taka 28,400 and cash
in hand Taka 4,360.
(4) A summary of bank statement for the year had showed the following
Particulars Taka Particulars Taka

Opening balance 83,000 Payments for provisions 260,000
Deposits 415,780 Salaries 106,500
Rents and Rates 60,000
Light and power 20,000
Telephone 2,900
Repairs 18,600
Balance c/d 30,780
498,780 498,780
(5) A bundle of unpaid bills have been found in the treasure’s desk which has been
summarized as follows: Purchase of provisions Taka 64,600; Electric bills Taka 1,600;
Printing and stationery Taka 2,100; Telephone Taka 600.
(6) Depreciation is to be provided on furniture and equipments @ 20% on cost.
Required:
(i) Cash account for the year ended 31 December 2016;
(ii) An Income and Expenditure account for the year ended 31 December 2016 and
(iii) Balance sheet on that date.
[Marks: 20]
= THE END =
Page 4 of 4

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CMA SPECIAL EXAMINATION-2021(NOVEMBER)

Time: Three hours Full Marks: 100

(c) Listed below are various types of accountingchanges and errors.

Liabilities Taka Assets Taka

You also obtain the following information:

Particulars Taka Particulars Taka

Time: Three hours Full Marks: 100

(i) The assets of the firm are estimated to realize as under:

Accounts Titles Dr. (Tk.) Cr. (Tk.)

Required: (a) Revenue Account and (b) Balance Sheet.

[Marks: (10+10) = 20]

Time: Three hours Full Marks: 100

[Marks: (5+8+7) = 20]

Particulars Head Office Branch Office

Time: Three hours Full Marks: 100

Inception date January 1, 2015

[Marks: {(3+3+3)+(7+4)} = 20]

Time: Three hours Full Marks: 100

Time: Three hours Full Marks: 100

Pretax income from

1. Costs for the year:

2. Current estimate of total contract costs indicates the following:

Required: Determine the profit to date, based on:

Time: Three hours Full Marks: 100

Accounts Titles Dr. (Tk.) Cr. (Tk.)

Year 2015 Tk. 2,00,000

[Marks: {2+3+(5X3)} = 20]

Premium less reinsurance 37,50,000 Amount due to other persons 6,00,000

Home Office (Taka) Branch (Taka)

Liabilities Taka Assets Taka

You also obtain the following information:

Particulars Taka Particulars Taka

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