Advanced Financial Accounting Associate Degree of commerce PU — University of the Punjab 2022

UNIVERSITY OF THE PUNJAB

Associate Degree in Commerce Part-II Annual Exam – 2022

Subject: Advanced Financial Accounting Paper: DC-401

Time: 3 Hrs. Marks: 100

NOTE: Attempt any FIVE questions. All questions carry equal marks.

Q.1 Explain the various methods of valuation of goodwill and shares.

Q.2 The following are the extracts from the balance sheet of ABC Company Limited as on 31st

December 2021.

Authorized capital:

Rs.

20,000 ordinary shares of Rs.10 each

200,000

Issued & subscribed capital

7,000 ordinary shares of Rs.10 each

70,000

Reserve Fund

36,000

Profit & Loss Account

29,000

The board of Directors pass a resolution to capitalize a part of existing reserves and profit

by issuing bonus shares. One bonus share is being issued for every 4 ordinary shares held at

present. For this purpose Rs.10,000 are to be provided out of Reserve Fund and the balance out of

Profit and Loss Account.

Required: Make necessary journal entries to give effect of the resolution and show how they

would affect the balance sheet.

Q.3 The undermentioned balances appeared in the books of the ZA Ltd. as on December 31st 2021

Rs.

Rs.

Share capital (authorized and

600,000 Motor Vehicles

15,000

issued) 60000 shares

General Reserve

250,000 Furniture

5,000

Unclaimed Dividend

6,526 Stock

172,058

Trade Creditors

36,858 Book Debts

223,380

Building

100,000 Investment

288,950

Purchases

500,903 Depreciation reserve

71,000

Sales

983,947 Cash Balance

72,240

Manufacturing Expenses

359,000 Director's fees

1,800

Establishment

26,814 Interim Dividend

15,000

General charges

31,078 Interest (Cr)

8,544

Machinery

200,000 Profit and Loss account (Cr)

16,848

Staff Provident Fund

37,500

Adjustments:

i. The stock of wheat and flour on 31st December 2021 were valued at Rs. 148,680.

ii. Provide Rs. 10,000 for depreciation on building and Rs. 1,500 for the company's

contribution to the staff provident fund.

iii. Interest accrued on investment amounted to Rs. 2,750.

iv. A claim of Rs. 2,500 for workmen's compensation is being disputed by the company.

v. Establishment included Rs. 6,000 paid to manager who is entitled to remuneration @ 5%

of profit ascertained subject to a minimum of Rs. 10,000 p.a.

Required: Prepare Trading and Profit & Loss Account, Profit & Loss Appropriation Account and

Balance sheet.

Q.4 Karim Transport Ltd. purchased a truck costing Rs. 300,000 on the hire purchase system.

Payment was to be made Rs. 100,000 down and the remainder in four equal instalments of Rs.

50,000 together with interest at 10% p.a. Karim Transport write off depreciation at 20% on the

diminishing balance method. Karim Ltd. paid the down payment and three successive instalments

but fails to pay the last instalment. Due this, the hire vendor reclaims the truck. He spends Rs.

10,000 on its repairs and sells it for Rs. 100,000.

Required: Give the necessary ledger accounts in the books of the both parties.

Q.5 A and Co. of Lahore have a branch at Multan. Goods are sent by the head office at invoice

price which is at a profit of 20% on invoice price. All expenses of the branch are paid by the head

office.

Opening Balances

Rs.

Rs.

Stock at invoice price

11,000 Goods return by branch at invoice price

400

Credit sales

22,800

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