XII Accounting

Instructions: Attempt any Five questions.

1. Single Entry

On January 1, 2000 the total Assets and total Liabilities of Mr. Aftab Ahmed, a sole proprietor, were Rs. 1,35,000 and Rs. 45,000 respectively. Upto December 31, 2000 the total assets increased by Rs. 65,000 and the total liabilities decreased by Rs. 20,000.

Required
i) Compute the capital of start and at the end of the year.
ii) Prepare statement of Profit and Loss for the year ended on December 31, 2000 under each of the following situations separately:
a) Mr. Aftab Ahmed withdrew Rs. 30,000 for business use and made additional investment of Rs. 20,000 during the year. At the end of the year the accrued rent amounted to Rs. 3,500 and prepaid insurance Rs. 2,000. The depreciation on fixed assets was estimated Rs. 5,500.
b) Mr. Aftab Ahmed withdrew for personal use Rs. 1,000 per month during the year, at the end of the year accrued salaries amounted to Rs. 6,000 and prepaid rent Rs. 3,000. The estimated Bad Debts expense was Rs. 4,000.

2.a) Partnership-Formation
On March 31, 2001 Naseem and Rasheed decided to form a partnership under the name “Mehran Traders” by merging their individual businesses. On that day the agreed values of each item of Balance Sheet were as under:

Item …………………… Naseem ……………….. Rasheed
Cash……………………Rs.20,000……………..Rs. 50,000
Account Receivable……….Rs.40,000……………..Rs. 25,000
Merchandise……………..Rs.35,000……………..Rs. 60,000
Building………………..Rs.85,000………………………
Office Equipment…………………………………Rs. 30,000
Allowance for Bad Debts…..Rs.15,000………………Rs. 12,000
Account Payable………….Rs.15,000………………Rs. 33,000
Capital…………………Rs.1,20,000…………….Rs.1,20,000

Required
i) Prepare entries in General Journal of the firm to record the formation of Partnership.
ii) Prepare initial Balance Sheet of the firm as on March 31,
b) Partnership-Distribution of Profit/Loss
Furqan and Fareed are partners with capital balances of Rs. 50,000 and Rs. 70,000 respectively. The partnership deed provides as under:
i) Furqan is allowed an annual salary of Rs. 36,000.
ii) Fareed is allowed commision of Rs. 60,000.
iii) Mark-up allowed on initial capital @ 10%.
iv) Remaining balance of Profit or Loss is to be distributed equally.
The net income for the year ending on March 31, 2001 amounted to Rs. 1,40,000.

Required
The Income Distribution Summary for the ending on March 31, 2001.

3. Partnership-Admission

Given:

Basit and Sajid are partners with Capital Balances Rs. 80,000 and Rs. 1,60,000 respectively, sharing profits and losses in the ratio of 2:3. They agreed to admit Nabeel as a partner.

Required
Give entries in General Journal to record admission of Nabeel in each of the following cases separately. (Show the necessary computations).
Case(i) Nabeel invests sufficient cash to acquire 1/4 interest in the capital and profit of the firm.
Case(ii) Nabeel invests Rs. 100,000 cash for 1/4 interest in capital and profit. (The total capital of the firm to be increased by Nabeels investments).
Case(iii) Nabeel invests Rs. 60,000 cash for 1/4 interest on capital and profit of the firm. (The old partners capital will remain unchanged).

4.a) Partnership-Retirement
Waseem, Nadeem and Saleem are equal partners having capital balances of Rs. 50,000, Rs. 70,000 and Rs. 90,000 respectively. Nadeem retires from the firm. The assets of the firm are revalued. The revaluation shows again of Rs. 60,000 which is to be distributed among the partners. The remaining partners continue the business.

Required
Give entries in Journal to record the retirement of Nadeem under each of the following cases separately:
Case(i) Waseem and Saleem purchase Nadeem’s interest equally by paying him cash from their private sources.
Case(ii) Nadeem is paid Rs. 40,000 cash and is issued a 6 month 10% note for the balance.

b) Partnership-Liquadation

Given:

The Balance Sheet of Azhar and Ashraf who share profits and losses in the ratio of 2:3 is as follows on December 31, 2000:
Cash……..Rs. 5,000…….A/c Payable……Rs.20,000
Other assets.1,15,000…….Azhar,capital…….40,000
……………………….Ashraf,Capital……60,000
………….Rs.1,20,000……………………Rs.1,20,000
On that date the partners liquidated their business.Other assets were sold for Rs. 65,000.Liabilities were paid off and the available cash distributed among the partners.

Required
Give entries in General Journal relating to liquidation and final settlement of partner’s Accounts.

5. Corporation-Issue of Shares and Debentures

Given:

Al-Mansoor Co. Limited made the following transactions.
The par value of share is Rs. 50 and of debenture Rs. 100.
i) The Company issued 20,000 shares at Rs. 60 each for cash.
ii) The Company issued 10,000 shares at Rs. 45 each for cash.
iii) The Company issued 5,000 shares for purchases of a piece of land with the market value of Rs. 3,00,000.
iv) The Company issued 2,000 shares at par to the promoters of the Company.
v) The Company issued 2,000, 10% debentures at Rs. 100 each repayable after 5 years at Rs. 110 each.
The Company issued 2,000, 10% debentures at Rs. 90 each repayable after 10 years at Rs. 110 each.

Required
Give necessary entries in proper form to record the above transactions.Give explanation below each entry.

6. Corporation-Financial Statement

Given:

Zeeshan Company Limited is registered with an autorized capital of Rs. 10,00,000 divided into ordianary shares of Rs. 100 each. The Preclosing Trial Balance of the Company on december 31, 2000 is as follows:

Debit Balances
Machinery Rs. 200,000; Building Rs 3,00,000; Office Equipments Rs. 60,000; Cash at Bank Rs. 80,000; Accounts Receivable Rs. 90,000; Merchandise Inventory (1.1.2000) Rs. 85,000; Purchases Rs. 1,05,000; Salaries Expense Rs. 25,000; Transportation in rs. 5,000; Rent Expense Rs. 44,000; Insurance Expense Rs. 25,000; Adverting Expense Rs. 15,000; Directors Fees rs. 15,000; Auditors Fees Rs. 15,000; Sales Returns Rs. 15,000 (Total Ts. 1,079,000).

Credit Balances
Accounts Payable Rs. 24.000; Purchase Returns Rs.10,000; Accumulated Depreciation on Machinery Rs. 25,000; Accumulated Depreciation on Building Rs. 30,000; Accumulated Depreciation on Office Equipment Rs. 10,000; Allowance for Bad Debts Rs. 5,000; Sales Rs. 3,65,000; Share capital Rs. 6,00,000; Retained Earnings Rs. 10,000.(Total Rs. 1,079,000).
Data for Adjustments:
i) Merchandise inventory (31.12.2000) Rs. 95,000.
ii) Accrued salaries Rs. 2,500.
iii) Unpaid Rent Rs. 6,000.
iv) Un-expired insurance Rs. 5,000.
v) Allowance for depreciation on Machinery Rs. 20,000; Building Rs. 15,000; Office Equipment Rs. 5,000.
vi) Allowance for Bad Debts increased by Rs. 1,500.

Required
i) Prepare Classified income Statement for the year ended on December 31, 2000.
ii) Prepare Classified Balance Sheet as on December 31,2000.

7. Depreciation-Accounting

Given:

On January 1, 1998 a machine was purchased for Rs. 2,00,000. The estimated useful life was 10 years and the salvage value Rs. 10,000.

Required
i) Calculate the amount of Depreciation expense under the Straight Line Method for the year 2000.
ii) Give in General Journal the adjusting and closing entries to record the depreciation expense on December 31,2000.
iii) Calculate the depreciation expense for the years 1998,1999 and 2000 under the Diminishing Balance Method using an annual rate of 20%.
iv) Prepare Partial Balance as on December 31, 2000.Showing machinery with accumulated Depreciation calculated under Diminishing Balance Method.

8.a) Corporation-Disposal of net Income

Given:

The Retained Earnings Account on Jawedan Company showed a credit Balance of Rs. 1,65,000 on March 31, 2001. The Expense and Rvenue Summary for the year ending on that date showed a Net income of Rs. 1,45,000 which is transferred to Retained Earnings Account. The Company decided on March 31, 2001 as under:
i) To declare a cash dividend of Rs. 50,000.
ii) To appropriate Rs. 20,000 for Reserve for Sinking Fund.
iii) To appropriate Rs. 15,000 for Reserve
iv) To establish Reserve for Building Extension for Rs. 30,000.

Required:
Give entries in General Journal to give effect to the above decisions.

b) Reserve and Funds
i) Distinguish from the viewpoint of accounting between Reserve and Fund.
ii) Give entries in General Journal to record the creation and disposal of Reserve representing Liability and Reserve representing the Retained Earnings.