Indian Institute of Management-KOZHIKODE Management Accounting 1 131 End Term Examination eMEP 06

1. Answer all questions 2.AIf questions carry equal marks 3. Maximum marks 40

Duration: 2.5 hours

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1. The trial bslance of Vivek Autocare Ltd. Is as follows: Vivek Autocare Ltc):Trial Balance as on Novem~r 30, 19X4 Account kepair Equipment Accumulated depreciation (on repair equipment) Supplies Cash Prepaid Rent Creditors Unearned Revenue Share Capital . Retained Eamings Dividends Service Revenue Eamed Salaries Expense .f.~I~~t E~~e

Debit
2S:OOO

Credit

4,000 6,{!20 3,780 6.000 2,410 1,380 20.000 3,450 3,500 25,880 8,320 3,800

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_ 51,120S1,13! D ./

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Additionallnformati~n ;..Dtl:> ..,,!>RM' (a) Estimated depreciation on repair equipment. ~s.2,OOO-L; k.c.. DLf' C~./ (It~ b ,/ (b) Inventoryof \'~ . . supplies,Rs 1,780 - -r-.~ ~~~ f>\ Ie.!, CT.,/ (c) UnexpiredInsurance, Rs. 1,200. (d) Service rendered to clients that had been paid 1'orin advance .andwas yetta be treated as revenue , Rs. 410 _. ~~"'N\~ ~~" ..6,(,...A \.\'I"~"'\,,)~ Rt..'\1t)..,/ c..-r (e) Reve:nueea~ed b~t r~otyet billed, Rs 23
-(f) Unpaid salanes, Rs. 720 (g) Estimated income tax expense, Rs 1,000

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Prepare profit&loss account, a statement of retained e:.\mingsGnda balance sheet.

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ccntd.on page 2

Page ~ 2. After completinga degreein fashiontechonology,Chandrikaset upFolkwearto sell designer dresses.SheinvestedRs.20,000in Ca::;h. She usedRs. 6~OOO to buystoreequipment.
The store opened for business on July 1. During the month, she paid out Rs. 62,700 for --'I" merchandise and Rs. 3~ towartls oDerating e~ns~. Also! she ~th~~.Rs. 11~o.oo for perso~al purposes. At the month-elld, she prepared the following balance sheet:

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Folkwear: BalanceSheetas on July 31, 19XX

Creditors(for merchandise) Chandrika,Capital

T 0'

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'19'600 43,800

Cash Debtors(ior sales)

Merchandise Inventory

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StoreF.qurpment
Less Depreciation

6,000 100

16,800
23,200 ~

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17,500-1 ~) 5,900 63,400

..

63,400

Calculate for July the net profit. Cost of gopds sold, sales and collection from customers Also prepare a profit and loss account for Folkwear for July 19>0< 3. The following infor.nation is available for Surat company
Sur!l~ C.')mpany: ?iofit .md Losskccount (For the year ended Dec..'>fl1ber31,19X4)

Net Sales Cost of Goods Sold Gross Profit Selling and administrative Expenses Profitbefore Interest and Tax Interest Expense

? ?

? ~ ~
13,000 13,500 ?

Profit before

Tax

Income Tax Profit after.Tax

Surat Company: Balance Sheet as on August 3~, 19X4 Share Holders' Funds
Share Capital Reserves and Surplus

95,000 ?

?
30,000 ? ?

Uabllities

Secured Loans
Unsecured Loans Current Liabilities

? ?
Assets
Fixed Assets
Investments Inventories Debtors Cash

1,30,000 ? ? ? 10,000 4,OO,OiiO contd. on page3

Page 3 Additional Information

(a) (b) (c) (d) Asset turnover is 2.3 times Total liabilities to equity ratic is 1.5 Current ratio is 1.8 Average debt collection perios is 36.5 days (assume a 365 ~.day )'ear)
'

(e) Gross prflt ratio is 15%

(f) Interest expense is.comprised of. interest on secured loans a~ 10% p.a and on unsecur6d loans at 15% p.a (9' Income tax is 50% of acwunting profit before tax Complete the financial statenients ofSurat Compan~' for 19X4. Show supporting cal..-:ulations. Assume that the year-end-3ccount balances are representative forthe.whoie year '. 4. The following information was available from the records of Joseph Company:

Beginning Inventory Purchases Purchase Returns ar.d Allowancos Sales Sales Returns and Allowances

At Cost At Retail 7,000 9,000 34,000 53,000 1:000 2,000 47,000 5,000

Estima:e the company's ending inventory at cost using the retail inventory method. Suppose that the physical year-er.d inventory at retail was Rs. 16,200. What is the cost of inventory lost through shoplifting and ot!'er ~uses? .
5. Vinay Electronics Company's Profit and loss account for the year ended July 31,19X7 and its balance shee~ as at July, 19X6 and 19X7, are as follows:

Vina) ;:lectronics Company: Prorlt and loss Acount

(For the year ended 31.07.19X7)
Sales Gain on Sale of Investments Dividend income interest Income Insurance Proceeds and Earthquake Loss Claim Cost of Goods Sold Selling and Administrative Expenses Interest Expense Loss on Sale of Patent Profit before Tax Income Tax

4,39,000 19,000 12,000 14,000 11,000 5,01,000 3,84,000 . 75,000. 64,000 26,000 (48000)

Profit After Tax

(48000)
contd. on page 4

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Additionalinformation: rI ~) Purchased machinery costing Rs. 1,39,000 with cash. 1(b) Purchased machinery for Rs.63,000 on long term, unsecured credit"(c) Repaid unsecured loans of Rs.14,000 f (d) Sold all the patents for Rs.3000"f (e) Sold investments costing Rs. 49,000 for Rs. 68,000:( (f) Issued secured debentures of Rs. 1,50,000 (g) Redeemed secured debetures of Rs. 24,000 f (h) Issued unsecured loans of Rs. 1,10,000 ,. f

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(i) PurchasedinvestmentsforRs. 13,000<j: Issuedat par equityshares forRs. 20,000

JWrote off Rs. 16,000 of debtors and provided Rs. 22,000 for doubtfuldebts, included in selling & administrative expenses ~Cost of Goods Sold includes depreciation of Rs.21,000 (m) Received insurance prOceeds of Rs. H,OOO'fromearth quake loss claim Explain why there was an increase in cash in spite of Vinay Electronics Company incurring a net loss of Rs.48,OOO.