FEDERAL PUBLIC SERVICE COMMISSION
COMPETITIVE
EXAMINATION FOR RECRUITMENT TO POSTS
IN BS-17
UNDER
THE FEDERAL GOVERNMENT, 2012 CSS
Past Paper of ACCOUNTANCY AND AUDITING, PAPER-I
2012
PART-II
COMPULSORY QUESTION
Q.
2. At the beginning of 2000, Mr. Saadiq decided to
open an advertising agency called The Best Agency. During 2000 the following
transactions occurred.
Saadiq
invested Rs. 300,000 cash in the business. In addition, the local bank lent the
firm Rs. 100,000. The firm used the cash
to purchase land
for Rs. 50,000,
a building for
Rs. 100,000, and office furniture and fixtures for Rs. 80,000. In addition,
the firm purchased another Rs. 50,000 of furniture and fixtures on account, all
of which will be paid for next year.
The following summary of
revenue and expense transactions and other transactions took place during 2000.
1.
Commissions earned during the year amounted to
Rs. 125,000. By
the end of the
year, Rs. 110,000 of these commissions had been collected in cash. The firm
expects to collect the remaining cash early next year.
2.
Various operating expenses of Rs. 105,000 were
incurred and paid in cash during the year.
3.
Saadiq withdrew Rs. 5,000 from office to pay
the utility bills of his residence.
REQUIRED:
Using the above information, prepare the
following financial statements:
1.
Income statement for the year ended December
31, 2000.
2.
Statement of owner’s equity at
December 31, 2000.
3.
Balance Sheet as at December 31, 2000.
SECTION-A
Q.
3. For each
of the following
independent situations, describe
the accounting assumptions,
characteristics or conventions that have been violated or that is involved.
A.
Hilary
Wong is the sole proprietor of Wong jewellery imports. During march the
following items were recorded as expenses on the firm’s books:
Rent
on
office Rs. 500 Employees’ wages 700
Supplies for personal
use 100
Advertising 250
Pleasure travel 800
B.
The Wright Corporation began business in 2000.
The company produces
a magazine for nature
enthusiasts. Two year subscriptions are offered. The firm has adopted the
policy of recognizing revenues when the cash is received.
C.
Over the last few years the president of
the federal company
has purchased a
number of paintings to decorate her office. Recently one of the artists
died, and his paintings have increased in value by over 200%. The president
has therefore instructed the accounting department to
increase the recorded cost of the paintings to reflect this change.
A.
Earth
Airlines has suffered huge losses in recent years and may not be able
to continue to operate. The
firm’s public accountants
feel that this
information should be disclosed
in their opinion.
B.
The
following footnote was taken from a recent annual report of general motors. “There are various claims and pending
actions against the corporation and its subsidiaries with respect to commercial
matters, including warranties and product liability, governmental regulations
including environmental and safety matters, civil rights, patent matters, taxes
and other matters arising out of the conduct of the business. The amounts of
liability on these claims and actions at December 31, 1982 were not
determinable but in the opinion of the management, the ultimate liability
resulting will not materially affect the consolidated financial position or
results of operations of the corporation and its consolidated subsidiaries”.
C.
ABC
company’s president has decided not to prepare financial statements this year
because the company suffered huge losses.
D.
A fancy staple machine costing Rs.125
was debited to the office
equipment account and will be
depreciated over 10 years.
E.
Recently
fine restaurant hired one of the country’s outstanding chefs. Based on the
anticipated increased earnings, the firm credited capital for Rs. 100,000.
F.
Good times received Rs. 3,200 for unlimited
passes to their amusement part.
Although half of these passes were not valid until the following
year, the entire amount was recorded currently as revenue.
G.
Two years
ago good times paid Rs. 2,790 for a
3-year insurance policy.
No insurance expense appeared on
this year’s income statement.
Q. 4. Financial statements are described as the
major product of the accounting information
systems. Explain this statement and
briefly describe the four principal financial statements. (12)
Q. 5. What is the relationship between the need
to prepare financial statements on timely basis and the matching convention? (12)
Section-B
Q. 6. (A) A partnership is
considering the possibility of liquidation because one of the partners,
Stewart, is insolvent. Capital balances at the current time are as follows, and
profits and losses are divided on a 6:3:1 basis, respectively.
George, Capital Rs. 70,000
Stewart, Capital 50,000
Thomas, Capital 80,000
Stewart’s
creditors have filed a Rs. 60,000 claim against the partnership’s assets. The
partnership currently holds assets reported at Rs. 300,000 and liabilities of
Rs. 100,000.
If the
assets can be
sold for Rs.
150,000, what is
the minimum amount that
Stewart’s creditors would receive? (09)
(B) The following
condensed balance sheet is for the partnership of Andrews, Carroll,
and Murray, who share profits and losses in the ratio of 6:2:2, respectively.
Cash Rs.
70,000
Other assets 130,000
Total assets Rs. 200,000
Liabilities Rs. 160,000
Andrews, Capital 25,000
Carroll, Capital 10,000
Murray, Capital 5,000
Total
liabilities and partners’
equity Rs. 200,000
Which partner is most
vulnerable to a loss? (09)
Q. 7. Why is it necessary to make
adjusting entries? Can you think of a situation when adjusting
entries would
not be required? (18)
Q. 8. (A) You have the following
information on BB Corp.:
|
Current ratio
|
2.0
|
|
Quick ratio
|
1.4
|
|
Current liabilities
|
Rs. 100,000
|
|
Inventory
turnover
|
6 x
|
|
Gross profit
margin
|
0.20
|
Given these
figures, calculate the firm’s
sales. (09)
(B) Following
are the selected data taken from Books of A Ltd at the end of year 2005:
|
Cash
|
Rs. 108,000
|
|
Account Receivable beg
|
380,000
|
|
Account Receivable end
|
350,000
|
|
Marketable
Securities
|
142,000
|
|
Merchandise Inventory beg
|
120,000
|
|
Merchandise Inventory end
|
150,000
|
|
Accounts Payable
|
200,000
|
|
Bills Payable
|
50,000
|
|
Credit Sales
(Net)
|
18,25,000
|
|
Cost of Goods Sold
|
540,000
|
|
Total Operating Expenses
|
600,000
|
REQUIRED: On the basis of above information, find out:
(09)
|
1.
|
Working Capital
|
2.
|
Current Ratio
|
3.
|
Quick Ratio
|
4.
|
Inventory Turnover
|
|
5.
|
Account
Receivable Turnover
|
6.
|
Gross Profit Percentage
|
7.
|
Net Profit Percentage
|
8.
|
Operating Expenses Rate
|
Q. 9. The non current asset section
of Aadil & Co. at December 31, 2005 is as
under:-
|
Land
Office equipment
|
Rs. 5,000,000
|
Rs. 1,000,000
|
|
Less: accumulated depreciation
|
250,000
|
4,750,000
|
|
Machinery
|
Rs. 600,000
|
|
|
Less: accumulated depreciation
|
120,000
|
480,000
|
|
Total non current asset
|
|
6,230,000
|
OTHER INFORMATION:
· All assets were purchased on
January 2, 2004
· The firm depreciates all
assets on a straight line basis with no residual value and with the following lives:
Office equipment 40 years
Machinery 10 years
The
following transactions occurred during 2006:
Apr. 01.
A new additional equipment was purchased for Rs. 1,000,000 and
machinery at a cost of Rs. 50,000. All items were paid for in cash.
Jul. 15. Repairs
of Rs. 5,000 were made for cash on machinery.
Sep. 30.
Machinery with a
cost of Rs.
100,000 and accumulated
depreciation of Rs. 20,000 (as of 31st December, 2005) was sold for Rs. 82,000 cash.
Dec. 31. Machinery
with a cost of Rs. 50,000 and accumulated depreciation of Rs. 10,000 (as of 31st December, 2005) was traded in for new
machinery. The firm received a trade-in allowance of Rs. 32,000. The list price
of the new machinery is Rs. 85,000.
REQUIRED:
Make all the required
Journal entries. Show all necessary computations.
(09)
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