CSS Accountancy & Auditing Past Paper 2017
Paper-I (Subjective) 80 Marks
Attempt ONLY FOUR questions from Paper-I PART-II by selecting TWO questions from EACH SECTION. (20×4)
SECTION – I
Q. 2. Bella Beauty Salon’s unadjusted trial balance for the current year follows:
Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued
revenues was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The
employee was paid last week but has worked four days this week for which she has not
been paid.
h. Three months’ property taxes, total $450, have accrued. This additional amount of
property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded.
Required: Based on the above information, prepare the adjusting journal entries for Bella’s
Beauty Salon and adjusted trial balance for Bella’s Beauty Salon.
Q. 3. (A) A corporation had stockholders’ equity on January 1 as follows:
Common Stock, $10 par value, 1,500,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $2,500,000.
Required: Prepare journal entries to record the following transactions:
Feb. 15 The board of directors declared a 10% stock dividend to stock holders of record on
March 1, to be issued on April 15. The stock was trading at $8 per share prior to the dividend.
March 30 Sold 100,000 shares of common stock for $11 per share.
March 31 Issued the stock dividend.
(B) Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $42,300. The machine’s useful life is estimated at 10 years, or 363,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 35,000 units of product.
Required: Determine the machine’s second-year depreciation under the straight-line method.
Q. 4. The following financial data were taken from the annual financial statements of Smith Corporation:
Required: (A). Based on these data, calculate the following for 2008 and 2009:
- Working capital
- Current ratio
- Acid-test ratio
- Accounts receivable turnover
- Merchandise inventory turnover
- Inventory turnover in days
(B). Evaluate the results of your computations in regard to the short-term liquidity of the firm.
SECTION – II
Q. 5. The marketing department of Graber Corporation has submitted the following sales forecast for the
upcoming fiscal year.
The selling price of the company’s product is $22.00 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $66,000. The company expects to start the first quarter with 3,200 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 3,400 units.
Required:
1. Prepare the company’s sales budget and schedule of expected cash collections.
2. Prepare the company’s production budget for the upcoming fiscal year.
Q. 6. Valenko Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials):
Finished goods . . . .. . $30,000 ?
The total manufacturing costs for the year were $675,000; the cost of goods available for sale total $720,000; the unadjusted cost of goods sold total $665,000; and the net operating income was $35,000. The company’s over-applied or under-applied overhead is closed entirely to cost of goods sold.
Required: Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. (Hint: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.)
Q. 7. Linden Company manufactures and sells a single product. Cost data for the product as follows: Variable costs per unit:
The product sells for $40 per unit. Production and sales data for May and June, the first two months of operations, are as follows:
Income statements prepared by the accounting department, using absorption costing, are presented below:
Required:
- Determine the unit product cost under:
a. Absorption costing.
b. Variable costing. - Prepare contribution format variable costing income statements for May and June.
- Reconcile the variable costing and absorption costing net operating incomes.
Q. 8. The PVC Company manufactures a high-quality plastic pipe that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May: Production data:
Required:
- Compute the equivalent units of production.
- Compute the costs per equivalent unit for the month.
- Determine the cost of ending work in process inventory and of the units transferred out to
the next department. - Prepare a cost reconciliation report for the month.