B.COM I Accounting

INSTRUCTIONS
Attempt any FIVE questions. All questions carry equal marks.

Q.1. FINANCIAL STATEMENTS

The following is the Pre-Closing Trial Balance of Tanveer Company on June 30, 2007.

TITLE OF ACCOUNT
Cash
Merchandise Inventory
Account Receivable
Allowance for Bad Debts
Supplies
Prepaid Insurance
Furniture
Allowance for Depreciation
Account Payable
Unearned Commission
Tanveer Capital
Tanveer Drawing
Sales
Sales Return & Allowance
Purchases
Purchase Discount
Salaries Expense
Rent Expense

DEBIT …………. CREDIT
25,000
20,000
80,000
2,000
10,000
15,000
40,000
…………………….. 12,000
…………………….. 40,000
…………………….. 15,000
…………………….. 100,000
12,000
…………………….. 200,000
8,000
1,40,000
…………………….. 5,000
15,000
5,000
3,72,000 | 3,72,000

Additional data for adjustment.
1. Merchandise Inventory on June 30, 2007, was valued at Rs. 25,000.
2. Salaries expense for the year Rs. 20,000.
3. Insurance expired Rs. 5,000.
4. Depreciation on furniture for the year Rs. 3,000
5. The Allowance for Bad Debts was estimated at the rate of 5% of the year and Accounts Receivable.
6. Unearned Commission at Rs. 5,000.

Required
1. Prepare Adjusted Trial Balance for the year ended on June 30, 2007.
2. Prepare INCOME STATEMENT for the year ended on June 30, 2007.
3. Prepare classified BALANCED SHEET as on June 30, 2007.

Q.2. DEPRECIATION

Huma Company purchased various types of Assets. Details are as follows.

ASSETS | Building, Machinery, Equipment
DATE OF PURCHASE | January 01, 2004, July 01, 2005, April 01, 2006
COST | Rs. 2,000,000, Rs. 300,000, Rs. 440,000
ESTIMATED LIFE/RATE | 40 Years, 5%, 10 Years
METHOD | Straight Line, Diminishing Balance, Sum of the Years digits

On January 10, 2006 the company paid Rs. 100,000 for replacing the plaster of walls of building. It is estimated that the new plaster will extend the life of building from an originally estimated 40 years to a total of 50 years.

Required
1. Compute the Depreciation Expense for the year 2004, 2005 and 2006 (Show your computation).
2. Record the extra ordinary repair of building in General Journal.
3. Record the Depreciation expense for the year ended December 31, 2006.
4. Prepare a Partial Balance Sheet as on December 31, 2006.

Q.3. INVENTORY VALUATION

Zulfiqar Trading Company used Periodic Inventory system. The beginning Inventory Balance of item “Z” on June 1 and purchases of this item during June were as follows
June 01, Inventory 10,000 units @ Rs. 10.00.
June 08, Purchases 15,000 units @ Rs. 14.00.
June 14, Purchases 18,000 units @ Rs. 16.00.
June 22, Purchases 12,000 units @ Rs. 18.00.
June 27, Purchases 05,000 units @ Rs. 20.00.
During the month of June, Net Sales are Rs. 875,000 @ Rs. 25 per unit.

Required
1. Determine the cost of Ending Inventory under each of the following methods
a. FIFO Method
b. LIFO Method
c. Weighted Average Method
2. Prepare Comparative Income Statement for the period ended on June 30, 2007 to determine Gross Profit.

Q.4. VALUATION OF ACCOUNTS RECEIVABLE

Shandar Company has 120 Account Receivable in its subsidiary ledger. All accounts are due in 30 days. On December 31st, 2006 an aging schedule was prepared. The results are summarized below.
Not Yet Due | 150,000
1-30 Days Past Due | 90,000
31-60 Days Past Due | 60,000
61-90 Days Past Due | 40,000
Over 90 Days Past Due | 10,000
Customers (118 names) Subtotal | 350,000
Two account receivable were accidentally omitted from this schedule. The following data is a available regarding these accounts.
Mateen
Owes Rs.50,000 from two invoices. Invoice no. 101 dated September 14 in the amount of Rs. 40,000 and invoice no 250 dated November 9 in the amount of Rs. 10,000
Nadeem
Owes Rs. 20,000 from two invoices, Invoice No. 230 dated November 19 in the amount of Rs. 12,000 and Invoice No. 410 dated December 5 in the amount of Rs. 8,000

Required
1. Complete the aging schedule as of December 31st by adding to the column subtotals and aging of the account of Mateen and Nadeem.
2. Prepare a schedule to compute the estimated portion of each age group that will prove uncollectible and the required balance in the Allowance for Doubtful Accounts. The following percentages of each age group are estimated to be uncollectible. Not yet due 2%, 1-30 days 6%, 31-60 days 15%, 61-90 days 40%, over days 50%.
3. Prepare the Journal entry to bring the Allowance for Doubtful Account up to its required balance at December 31st 2006, Prior to making this adjustment the account has a credit balance of Rs. 31,060.
4. Show how accounts receivable would appear in the company’s balance sheet at December 31st 2006.

Q.5. PARTNERSHIP ADMISSION

The following is the Balance Sheet of Mumtaz and Alam Partnership.

ASSETS
Cash | Rs. 150,000
Other Assets | 3,50,000
TOTAL | 5,00,000

EQUITIES
Mumtaz’s Capital | Rs. 3,00,000
Alam’s Capital | 2,00,000
TOTAL | 5,00,000
Mumtaz and Alam share Profit and loss in the ratio of 3:2. They agree to admit Chohan as a partner.

Required
Give the necessary journal entires in each of the following cases separately:
1. Chohan invests Rs. 310,000 for 1/3 interest in the firm.
2. Chohan invests Rs. 190,000 for 1/3 interest in the firm. The total capital of the firm after admission will be Rs. 7,20,000.

Q.6. SPECIAL JOURNAL

Zakaullah Company uses mutiple column cash payment journal. The cash transactions during the month of September 2007 were as follows.
September 01, Purchased Equipment for cash Rs. 15,000
September 06, Rent expenses paid Rs. 10,000
September 08, Paid Salesmen’s salaries Rs. 6,000
September 10, Paid to Wajid Co. for invoice of Sept. 5, Rs. 30,000 less 2%
September 14, Purchased furniture Rs. 15,000 and machinery Rs. 35,000, for future use in business, paid cash of Rs. 20,000 and signed a Promissory Note for the Balance of Rs. 30,000
September 18, Purchased merchandise for cash Rs. 18,000
September 22, Paid Tariq Traders for invoice of September 16, Rs. 26,000 less 2%.
September 24, Paid for three year insurance policy Rs. 6,000.
September 27, Purchased merchandise for Rs. 30,000. Paid cash Rs. 14,000 and balance amount on credit.
September 30, Paid advertising expenses Rs. 5,000.

Required
1. Record the above transactions in a six-columns Cash Payment Journal.
2. Foot and Rule the Journal.

Q.7. VOUCHER SYSTEM

Ahmed company uses a voucher system for all major expenditures. Selected transactions for May 2007 are presented below.
May 02, Drew a cheque Rs. 10,000 to establish petty cash fund.
May 04, Purchased equipment from Aslam Traders for Rs. 25,000 terms 2/10 n n/30.
May 07, Purchased furniture Rs. 42,000 making a down payment fo Rs. 12,000 and agreeing to pay the balance in 20 days.
May 10, Received credit memorandum from Aslam Traders Rs. 15,000 for the return of a part equipment purchased from them.
May 13, Paid Aslam Traders invoice taking the discount.
May 16, Paid Notes plus accrued interest was Rs. 27,000 (Face value of the notes Rs. 24,000)
May 19, Advance paid by cheque Rs. 22,000 for traveling expenses of a business trip.
May 22, Purchased merchandise Rs. 50,000 paying Rs. 20,000 and signing notes for the balance.
May 25, Issued 10% 30 days notes for Rs. 25,000 and paid Rs. 45,000 in settlement of vouchers payable Rs. 68,000.
May 30, Reimbursed the officer by cheque with Rs. 3,000 for expenses incurred by him in excess of travel advance.

Required
Using General Journal forms shows how the above transactions would be recorded in Voucher Register, Cheque Register or General Journal.

Q.8. PARTNERSHIP DIVISION OF NET INCOME OR LOSS

The Selected normal balance of M & I Distributions indicate the following account balances at the end of the year 2006.
Cash | Rs. 1,00,000
Other Assets | 4,00,000
Liabilities | 2,10,000
Capital Maqsood | Rs. 3,00,000
Capital Irfan | Rs. 1,00,000
Sales | 4,20,000
Sales Return | 15,000
Sales Discount | 5,000
Cost of Goods Sold | 2,50,000
Rent Expense | 20,000
Advertising Expense | 30,000
Commission Income | 20,000
The partnership Deed has the following provisions regarding distribution of Net Income.
Each Partner is to receive interest @ 10% on capital balance.
Each partner will be allowed a monthly salary of Rs. 4,000.
The remaining Net Income or Net Loss if any will be divided equally.

Required
1. Pass the closing entries in General Journal and prepare Expenses and Revenue Summary Account.
2. Prepare an Income Distribution Summary showing the distribution of Net Income.
3. Make entries for Distribution of Net Income to each partner and close the Expense and Revenue Summary Account.