SPRING 2019 EXAMINATIONS me Pakistan Monday, the 19th August 2019 Extra Reading Time: 15 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 diagram/ 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 2. FINANCIAL ACCOUNTING [M4] @ICMA seco imum Marks: 90 Roll No. Question No. 2 Proposed Time : 28 Min. | Total Marks : 15 (a) Tasneem Mills Limited (TML) is one of the most popular, largest and vertically integrated textile companies of Pakistan, having five operating segments. Following information pertains to the financial year ended June 30, 2019: Rs. ‘000° ‘Operating Internal External Total Profit vabaiti Segments Revenue Revenue Revenue (Loss) _—'SSetS_ Liabilities Spinning 285,000 5,267,500 5,572,500 1,455,000 1,500,000 975,000 Weaving - 615,000 615,000 (165,000) 330,000 300,000 Dyeing = 2,280,000 2,250,000 607,500 1,545,000 987,500 Home textile 262,500 — 262500 75,000 ‘562,500 450,000 Garments _285,000 960,000 _(472,500) Required In the light of IFRS 8— Operating Segments, identify which of the operating segments of Tasneem Mills Limited (TML) should be and should not be treated as ‘reportable segments’ Explain with reasons. 07 (b) The financial statements of Al-Jawda Limited (AJL), a pharmaceutical company, is in the process of finalization. The profit before adjustments amounted to Rs. 1.25 billion for the financial year ended June 30, 2019. The authorization date for issue of financial statements is ‘August 15, 2019. The company has identified the following problems that require necessary adjustments as mentioned below: + The tax rate applicable to the company has been changed from 30% to 29% on July 15, 2019. * Major fire broke out in the factory on July 15,2019 and destroyed the stock valuing Rs. 5,000,000. The sale value of which is now nil. * A debtor, from whom Rs. 2,250,000 were due, went bankrupt due to a severe fire broke out in his factory on August 02, 2019. * Mr. Rashid, a regular customer of AJL, lodged a claim for Rs. 2,000,000 against the company for loss of his health as a result of taking a particular medicine marketed by the company on July 15, 2019. The Legal Advisor of AJL is of the view that there is no chance of acceptance of claim * On August 08, 2019, the auditor of the company detected a fraud committed by the accountant of the company, who resigned in July 2019. The financial impact of which is Rs. 15,000,000. The amount defraud prior to year-end was Rs. 5,000,000. Required Calculate the revised profit for AlJawda Limited (AJL) for the financial year ended June 30, 2019, taking into account the impact of above events after the reporting date. 08 FacSpring 2019 10f5 PTOMarks Question No. 3 Proposed Time : 38 Min. | Total Marks : 20 Shaheer Limited (SL) was established by Mr. Shaheer in 1977, having several branches of business in different cities of Pakistan, United Arab Emirates (UAE) and State of Qatar. Following are the company’s financial information for the year ended December 31, 2018: Shaheer Limited Statement of Financial Position as at December 31, Rupees 2018 2017 Assets Non-Current Assets Property, plant and equipment 4,275,000 3,075,000 Total non-current assets 4,275,000 3,075,000 Current Assets Inventories 870,000 | | 900,000 Trade and other receivables 630,000} | 450,000 Cash and cash equivalents 45,000 75,000 Total current assets 1,545,000 _1,425,000 Total assets 5,820,000 4,500,000 Equity and Liabilities Equity Share capital (Rs. 10 each) 1,650,000 | | 1,350,000 ‘Share premium 300,000 150,000 Retained earnings 1,470,000 | | 915,000 Revaluation surplus 450,000 150,000 Total equity 3,870,000 _2,565,000 Liabilities Non-current liabilities Long-term loan 1,425,000 _1,200,000 Total non-current liabilities 1,425,000 1,200,000 Current Liabilities Trade and other payables 435,000 | | 480,000 Running finance 30,000 180,000 Current tax liabilities 60,000 75,000 Total current liabilities 525,000 735,000 Total equity and ies 5,820,000 Shaheer Limited Statement of Profit or Loss [Extract] for the year ended December 31, 2018 Rupees, Revenue 17,550,000 Cost of sales (15,600,000) Gross profit 1,950,000 Distribution costs (780,000) ‘Administrative expenses (375,000) Finance costs (75,000) Profit before tax (PBT) 720,000 FA-Spring 2019 20f5Additional Information: During the year ended December 31, 2018, property, plant and equipment, with a carrying value of Rs. 420,000 was sold for Rs. 435,000, Its original cost was Rs. 675,000. Depreciation of property, plant and equipment, during the year, amounted to Rs. 600,000. ‘Tax paid for the year amounted Rs. 105,000. Dividends amounting Rs. 75,000 were paid during the year. Gain on property revaluation amounted to Rs. 300,000. Required: Prepare Statement of Cash Flows of Shaheer Limited (SL) for the year ended December 31, 2018, sing indirect method, in accordance with IAS 7 - Statement of Cash Flows, Question No. 4 Proposed Time : 48 Min. | Total Marks : 25 Professional Books (Pvt) Limited (PBL) started its entrepreneur journey in 1985 with a small street-side book stall. It opened its first formal retail store in 1992, By 2011, it successfully established its stores in different cities of the country. PBL has become one of the largest owned and operated bookstores chain in Pakistan with more than twenty stores including an online store. The following trial balance was extracted from the books of PBL as at December 31, 2018: Professional Books (Pvt.) Limited Trial Balance as at December 31, 2018 Rupees Debit Credit Cash and bank balance 36,190 Trade receivables 4,870,500 Allowance for doubtful debts 186,870 Motor vehicle - Cost 1,020,000 Accumulated depreciation — Motor vehicle 368,400 Furniture and fixtures 3,223,500 Accumulated depreciation — Furiture and fixtures 2,186,760 Premises - Cost 12,675,000 Accumulated depreciation — Premises 5,812,500 Intangible assets - Cost 3,000,000 Accumulated amortization — Intangible assets 600,000 Investments (6%) 1,500,000 Investment income 72,000 Share capital (Rs. 100 each) 1,950,000 Share premium account 300,000 Revaluation surplus 157,800 Retained earings 7,233,330 Long-term loan 1,871,250 Trade payables 3,702,110 Current tax liability 18,000 Revenue 26,313,130 Purchases 13,463,120 Opening inventory ~ as at January 01, 2018 1,179,810 ‘Administrative expenses 4,888,300 Distribution costs 3,988,110 49,808,340 49,808,340 FacSpring 2019 30f5 Marks 20 PTOAdditional Information: The following information is available to the Finance Department for consideration for preparing financial statements of PBL for the financial year: + PBL's closing inventory, amounting Rs. 1,336,810, valued at cost. This amount includes a part of inventory, which has been damaged and is non-repairable. The cost of this damaged inventory is Rs. 49,000. PBL can sell it at 70% of the selling price and normally makes a mark-up of 40% on cost. * PBL purchased some fumiture and fixtures on April 01, 2018 for Rs. 900,000 plus import duties ‘of Rs. 43,500, which were included in the administrative expenses and credited to the bank upon payment. * Depreciation charged on non-current assets for the year is as follows: — Motor vehicle — Rs. 130,320 — Fumiture and fixtures — Rs. 253,500 — Premises — Rs. 625,650 + All of the relevant expenses of statement of profit or loss are to be split evenly between administrative expenses and distribution costs * PBL issued 6,000 shares for Rs. 1,103,815 and deposited it into the bank + The intangible asset has a finite useful life and was reviewed on January 01, 2018. From the review, it was identified that the intangible asset's useful economic life is now 10 years from the date of the review. + Income tax expense for the year was estimated at Rs. 581,820. The company paid Rs. 401,820 ‘on December 30, 2018 for this purpose + The allowance for bad debts at the end of the year would be Rs. 194,830. + The balance of interest income, that was due on the investments, was received at the end of the year. Required: Prepare the following financial statements of Professional Books (Pvt) Limited (PBL) in accordance with IAS 1 - Presentation of Financial Statements: (a) Statement of Profit or Loss for the year ended December 31, 2018 (b) Statement of Financial Position (Balance Sheet) as at December 31, 2018 Question No. 5 Proposed Time : 28 Min. | Total Marks : 15 (a) AlSaif Petroleum Pakistan Limited (APPL) is one of Pakistan's leading energy companies, engaged in the businesses of oil refining, and petroleum marketing and logistics. APPL is located in Karachi and its mission is to meet its customers’ energy needs all over Pakistan. The company explores, extracts and refines a wide range of petroleum products with a vision to achieve sustainable efficiency and profitability while upholding high standards to address environmental, health and safety requirements. Recently, APPL has a drilling platform in the Arabian Sea, where it extracts natural gas and crude oil. As per the requirements of legislation, the company has to remove and dismantle the platform at the end of its useful life. Accordingly, the company has included an amount in its accounts for removal and dismantling costs and is depreciating this amount over the platform's expected life. In order to determine the impairment of platform for the financial year ended June 30, 2019, the company is performing an exercise, with the help of below available information: * The carrying value of the platform in the statement of financial position is Rs. 840 million. * Another oil company has offered Rs. 784 million for the purchase of platform. The buyer has offered to own the overall responsibility for dismantling and removing the platform at the end of its life. FA-Spring 2019 4of5 Marks 09 16(b) (c) * The present value of the estimated cash flows from the continued working of platform is Rs, 924 million (before adjusting for dismantling costs) * The carrying value, in the statement of financial position, for the provision for dismantling and removal is currently Rs. 168 million. Required Determine the value of the drilling platform that should be included in the Statement of Financial Position of APPL as at June 30, 2019 and calculate the impairment loss, if any. Mr. Shahwez, Inventory Manager of Al-Ghazi Poultry (Pvt) Limited, has received a number of queries in relation to IAS 2 — Inventories by the General Manager. The company has three types of inventories with following relevant costs and net realizable values (NRV): Rupees Types of Inventories NRV Table eggs 260,000 Day old chicks 156,000 Chickens 312,000 Required In the context of IAS 2 — Inventories, Mr. Shahwez has been asked to answer the following: {i) Calculate total value of closing inventory of Al-Ghazi Poultry (Pvt) Limited as at June 30, 2019. (ii) Briefly discuss the situations in which net realizable value (NRV) is likely to be less than the cost of inventory, ALHikmat (Pvt) Limited's closing inventory, before adjustments, as at June 30, 2019 is Rs, 1,130,482, which includes Rs. 150,800 for the items accidentally destroyed on June 30, 2019, after the count was completed, It also includes Rs. 96,850, which relates to the cost of an inventory damaged in April 2019 and can be reprocessed, at a cost of Rs. 22,090, and then can be sold for Rs. 78,330. Required Calculate the value of closing inventory of Al-Hikmat (Pvt) Limited as at June 30, 2019, Question No. 6 Proposed Time : 28 Min. | Total Marks : 15 (a) (b) Conceptual framework defines the interrelated elements that most directly relate to measuring the performance and financial status of a business enterprise. Enlist and explain those elements. A temporary difference is the difference between the carrying amount of an asset or liability in the statement of financial position and its tax base. A temporary difference can be either ‘deductible’ or ‘taxable’ Required: In the light of JAS 12 — Income Taxes, explain the following with examples: (i) Taxable Temporary Differences (ii) Deductible Temporary Differences THE END FacSpring 2019 5 ofS Marks 06 03 02 04 05 05 05