CSS Accountancy & Auditing Past Paper 2018
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. No. 2. Following is the summary of closing balances (unadjusted trial balance) of Muddasar Co. for the year ended on December 31, 2016.
Additional Information (adjustments) needs settlements at the end of period to show the true picture
of the financial performance of Co.
i. Closing Merchandise Inventory valued at Rs. 35 000
ii. Store supplies on hand at the end of year is Rs. 1500
iii. It is noticed that Prepaid Rent amounting Rs. 9240 was expired during the period
iv. Prepaid Insurance is valued Rs. 1500 at the end of the period
v. Outstanding salaries are Rs. 3000
vi. Depreciation is charged @ 10 % for Plant & Machinery and @ 7% for Furniture
Required: Based upon above information, prepare Adjusting Entries, Adjusted Trail Balance and
Income Statement & Balance Sheet.
Q. No. 3. The Income Statement of the Abdul Rehman & Co for the year on December 31 (for each year 2015 & 2016) is given as under:
The Balance sheet of the Company as on December 31 for each year is given as under:
Required: Horizontal Analysis and Vertical Analysis for the above given financial statements (Income Statement & Balance Sheet) of Abdul Rehman & Co. and comment on the results.
Q. No. 4. (a) The XYZ Co. purchased a large machine 5 years ago at a total cost of Rs. 400,000. The accumulated depreciation on this machine is Rs. 290,000. The corporation sold the machine at Rs.10, 000 gain.
Required: Calculate the amount would be reported as cash flow from this sale.
(b) On April 1, 1993 Ayesha Industries purchased new equipment at a cost of Rs. 325000. Useful life of this equipment was estimated at 5 years, with a residual value of Rs. 25000. For tax purposes, however, this equipment is classified as “3- year property”.
Required: Compute the annual depreciation expense for each year until this equipment becomes fully depreciated under each depreciation methods listed below (Because you will record depreciation for only a fraction of a year in 1993, depreciation will extend through in all methods except MACRS) and show supporting computations.
i. Straight –line, with depreciation for fractional years rounded to the nearest whole month.
ii. 20%-declining-balance method, with the half-year convention. Limit depreciation in
1998 to an amount which reduces the undepreciated cost to the estimated residual value.
iii. Sum-of-the-years’-digits, with the half-year convention
iv. MACRS accelerated rates for “3-year property”
SECTION – II
Q. No. 5. Proprietor (Owner) of ABC Industries has limited knowledge of Cost & Managerial Accounting who prepared Income Statement for his business for the year ended on December 31, 2016 that is given as under:
The Owner has some doubts about the accuracy of the above statement and has requested you (as Professional Accountant) to check over the statement and make necessary corrections based upon following additional information.
(i) 80% of the electricity bill, 75% of insurance expired and 70% of Rent of Premises associated to Factory operations and the remaining amounts are applicable to Selling and Administrative activities.
(ii) Beginning Inventory (January 1, 2016) and Ending Inventory (December 31, 2016) in Rs.
were:
Finished Goods——– | 50000 | 60000
Work in Progress——-| 42500 | 30000
Raw Material———– | 7500 | 18000
(iii) Factory overhead is applied @ Rs. 5 per machine hour. The total machine hours are 26400
during the year. Factory overhead variance is charged to cost of goods sold, finished goods
and work in process ending inventories.
Required:
(a) Prepare cost of goods manufactured and cost of goods sold statement indicating cost of goods
sold at normal and at actual.
(b) Prepare revised income statement
(c) Explain the reason for difference between net profit as per Owner’s Income statement and
revised statement (prepared by you).
Q. No. 6. (a) Delight Food Products produces Squash Cubes by continuous processing in three departments i.e. A, B and C. During November 2017 Department B received 8000 cubes from the Department A (preceding department) and transferred 5500 cubes to Department C (next department). During the month there was a normal loss of 400 cubes at the end of process. Moreover, 600 cubes, 75% completed, were lost due to negligence of a worker in the B department. There was no work in process beginning inventory, the ending inventory was estimated as 60% completed. Following product costs were charged to the department during the month of November:
Cost from preceding department — Rs. 16400
Direct Material ———————–2000
Direct Labour ————————3625
Factory Overhead———————5075
————————————–| 27100
It is noticed that all materials are added at the start of process in Department B.
Required: Prepare the Cost of Production Report for the month of November, 2017 (for Department B).
(b) Ahmad Enterprises produces and sells the finest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2017 for its Elite Quality golf club sets:
Required: How many sets of clubs (unit) must be sold for Ahmad Enterprises to reach their breakeven point?
Q. No. 7. XYZ Enterprises applies factory overhead @ 60% of direct labour cost. During the year 2016 following actual costs were recorded:
Required:
(i) Based upon above given information, determine under-applied or over-applied factory
overhead.
(ii) Pass general journal entry to close factory overhead applied account at the end of year.
(iii) Pass general journal entries to dispose off under applied or over applied factory overhead in
the following cases:
(a) The variance is considered as a significant amount
(b) The variance is considered as an insignificant amount
(c) The variance is considered as cause by poor scheduling of production and excessive
spending
Q. No. 8. (a)
Required: based upon above given information, Calculate:
(i) Total Factory overhead variance
(ii) Capacity variance
(iii) Budget variance
(b) Calculate the total fixed cost of the shipping department of Areeba & Co. based upon the following information for the year 2016:
Paper-II (Subjective) 80 Marks
Attempt ONLY FOUR questions from Paper-II PART-II by selecting at least ONE question from EACH SECTION. (20×4)
SECTION – I (AUDITING)
Q. No. 2. How an internal control system helps the management in conduct of their business affairs?Explain the difference among internal check, internal audit and internal control.
Q. No. 3. ABC Company is an audit and assurance firm, which has recently accepted the audit of XYZ. Explain the purpose of auditing financial statement of XYZ and the three elements of audit risk faced by the company.
Q. No. 4. Due to the inherent limitations of audit, auditors are only able to offer ‘reasonable assurance’ over the truth and fairness of the financial statements rather than absolute assurance. Keeping in view the above statement, explain the limitation of audit of financial statement.
SECTION – II (BUSINESS TAXATION)
Q. No. 5. (A) Explain the law regarding the definition of business and taxability of business income along with the relevant examples under section (18) of Income Tax Ordinance 2001.
(B) Mr. Atif is working as Chief accountant of a multi-national company. He received the following income during the tax year 2017. He is a non-filer.
Required: Calculate his tax payable.
Q. No. 6. (A) What is the scope of sales tax? What is the procedure for transfer of registration and deregistration under Sales Tax Act, 1990?
(B) Mr Abdul Packages Ltd is a registered manufacturer of candies. Data regarding his business is given below:
Required: Calculate the sales tax liability for July 2016
SECTION – III (BUSINESS STUDIES AND FINANCE)
Q. No. 7. (A) Information technology is perceived as an important source of future economic prosperity and employment growth. Explain the role of information technology in business organisation in Pakistan’s scenario.
(B) You have been hired as a financial advisor to Raheel Abbas. He has received two offers for playing professional basketball and wants to select the best offer, based on considerations of money only. Offer A is a Rs.10m (offer for Rs.2m a year for 5 years). Offer B is a Rs.11m (offer of Rs.1m a year for four years and Rs.7m in year 5).
Required: Calculate the present value of each contract by assuming a range of interest rate (8% – 14%). What is your advice regarding the contracts.
Q. No. 8. (A) Define financial markets and explain the features and classification of financial markets.
(B) ABC Company is considering a new product line to supplement its range line. It is anticipated that the new product line will involve cash investment of Rs.700,000 at time 0 and Rs. 1.0 million in year 1. After tax cash inflows of Rs. 250,000 are expected in year 2, Rs 300,000 in year 3, Rs. 350,000 in year 4, and Rs. 400,000 each year thereafter through year 10. Through the product line might be viable after year 10, Company prefers to be conservative and end all calculations at that time.
Required: (a) if the required rate of return is 15% what is the net present value of the project. Is it acceptable?
(b) What is its internal rate of return?
(c) What would be the case if the required rate of return was 10%?