CSS Accountancy & Auditing Past Paper 2016
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. Global Service Company was organized on April 1, 2015. The company prepares quarterly financial statements. The adjusted trial balance at June 30, 2015, is given below.
(a) Prepare an income statement for the Quarter April 1 to June 30.
(b) Prepare a Statement of Retained Earnings.
(c) Prepare a Balance Sheet with proper headings.
Q.3 (a). Pool and Burns, who share profits and losses equally, decide to dissolve their partnership at June 30, 2015. Their balance sheet on that date was as follows:
The debtors realized Rs. 8,200, the building Rs. 66,000, and tools and fixtures Rs. 1,800.
The expenses of dissolution were Rs. 400 and discounts totaling Rs. 300 were received from creditors.
Required: Prepare the accounts necessary to show the results of the realization and of the disposal of the cash.
(b). The trial balance before and after adjustment for Mushtaq company at the end of its fiscal year is
presented below.
Q.4 (a). On January 1, 2015, Hydri Construction acquired a small excavator for Rs.85,000. This device had a 4-year service life. It is expected that the equipment will be sold for Rs.10,000 salvage value at the end of 4 years. The company uses the double-declining balance depreciation method.
- Prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each subsequent year.
- Show how the asset and related accumulated depreciation would appear on a balance sheet at December 31, 2015.
- Prepare journal entries to record the asset’s acquisition, annual depreciation for each year, and the asset’s eventual sale for Rs.10,000.
Q.4 (b). Rabika Limited has the following balance sheet and income statement for 2015 (in thousands rupees).
On the basis of this information, compute the following:
- Current ratio
- Acid test ratio
- Average collection period
- Inventory turnover ratio
- Debt to net worth ratio
- Gross profit margin
- Net profit margin
- Rate of return on common stock equity
SECTION – II
Q.5 (a). The records of the Electronic Equipment Company show the following information for the year ended December 31, 2015.
Required:
- An income statement for the period.
- The number of units manufactured.
- The unit cost of calculators manufactured.
- The gross profit per unit sold.
- The income per unit sold.
- The ratio of gross profit to sales.
- The income to sales percentage.
(b). The Homes Garments Company has decided to distribute the costs of service departments by the algebraic method. The producing departments are Cutting Department and Sewing Department. The service departments are Maintenance and Cafeteria, and monthly data are
Required:
Total factory overhead of producing department Cutting after distribution of service department costs.
Q.6 (a). Ten employees work as a group in Altech Manufacturing Company. When the group’s weekly production exceeds the standard number of pieces per hour, each worker in the group is paid a bonus for the excess production in addition to wages at hourly rates.
The amount of bonus is computed by first determining the percentage by which the group’s production exceeds the standard; one-half of this percentage is then applied to a wage rate of $9 to determine the hourly bonus rate.
The standard rate of production before a bonus can be earned is 200 pieces per hour for total hours worked.
Required:
- Calculate the group’s bonus for each day and for the week.
- The week’s earnings of each employee.
Q.6 (b). The Cambridge Company uses job order costing. At the beginning of December, two jobs were in process.
There was no inventory of finished goods on December 1. During the month, Jobs 373, 374, 375, 376, 378, and 379 were started.
Material requisitions for December totaled Rs. 130,000, direct labor cost Rs. 100,000, and actual factory overhead Rs. 160,000. Factory overhead is applied at a rate of 150% of direct labor cost. The only job still in process at the end of December is No. 379, with a cost of Rs. 14,000 for material and total Rs. 9,000 for direct labor and applied overhead.
Job No. 376, the only finished job on hand at the end of December, has a total cost of Rs. 20,000.
Required:
- T-accounts for Work in Process, Finished Goods, Cost of Goods Sold, Factory Overhead Control, and Applied Factory Overhead.
- General journal entries to record:
a) Cost of goods manufactured.
b) Cost of goods sold.
c) Closing of over-or-under-applied overhead to Cost of Goods Sold.
Q.7 (a). The budgeted results of Best Gases Limited are as under:
Fixed overheads for the period are Rs. 2,511,000. The management is worried about the results.
Required:
Prepare a statement showing the amount of loss, if any, being incurred at present and recommend a change in the sale value of each product as well as the total sale value maintaining the same sale-mix, which will eliminate the said loss.
Q.7 (b). Fedder Manufacturing Company provides the following information concerning its 2015 operations:
There was no beginning inventory for the firm.
Required:
- Prepare an absorption costing income statement for Fedder Manufacturing Company.
- Prepare a variable costing income statement for Fedder Manufacturing Company.
- Reconcile the difference in profits under the two income statements.
Q.8. Seven Seas Ltd. has developed a process for the manufacture of after-shave. Material is added at the beginning of the process, and conversion costs are incurred uniformly. Details for the month ended December 31, 2015, are as follows:
Required: Using the weighted average basis, prepare a cost of production report for the process for December 2015, showing:
a) A quantity schedule.
b) Cost charged to process.
c) Cost of equivalent units
d) Cost of finished goods.
e) Value of closing work-in-process.
Paper-II (Subjective) 80 Marks
Attempt ONLY FOUR questions from Paper-I PART-II by selecting One questions from EACH SECTION. (20×4)
SECTION – I (AUDITING)
Q. No. 2. As an Auditor of an entity, during your interim visit you observed that Internal Control were not in use throughout the period under Audit. What are the Control Objectives you would like to consider for your purpose?
Q. No. 3. What is materiality? Discuss materiality in planning and performing an Audit in relations to ISA-320.
Q. No. 4. Financial Statements of a company are prepared in accordance with International Financial Reporting Standards. Being an Auditor, what consideration would be taken while planning & performing an Audit based on this condition?
SECTION – II (BUSINESS TAXATION)
Q. No. 5.
(a) What is Income from Property? What are possible deductions allowed under Income from Property, explain in detail?
(b) You are Manager of a Tax Consultant Firm. One of your internees is assigned to prepare an assessment report of your client. Following is the information provided by the client:
Required: Calculate the Taxable Income & Tax Payable based on the above data.
Q. No. 6.
(a) What is Sales Tax? What procedure should a person follow to get himself registered under the Sales Tax Act, 1990? What are the conditions under the Sales Tax Act, 1990, where registration becomes compulsory?
(b) Shahid Dairy Products Ltd is a registered manufacturer of Ice-Cream. Data regarding its business for the month of May-2015 is given below:
- Sales to registered persons Rs. 300,000
- Sales to consumer (Including tax) Rs. 150,000
- Sales to non-registered persons Rs. 100,000
- Sales to school children during factory visit Rs. 20,000
- Sales of Dairy products to retailers Rs. 200,000
- Purchase of Milk & vegetables without brand name Rs. 70,000
- Purchase of Milk & vegetables from a registered person Rs. 50,000
- Purchase of cream from a non-registered person Rs. 80,000
- Ice Cream flavor imported Rs. 30,000
- Purchase of syrup from wholesaler (used in ice cream) Rs. 18,000
Required: Compute the Sales Tax liability of Shahid Dairy Products Ltd for May-2015 (Note: Purchases at Sr. No 6 & 7 are Zero rated).
SECTION – III (BUSINESS STUDIES AND FINANCE)
Q. No. 7.
(a) Explain the contemporary challenges posed by businesses nowadays in Pakistan.
(b) You have the following information about ABC Ltd, which pays tax @ 35% p.a:
- 7,000 Bonds with 8% coupon, face value of $1,000 & maturity period of 15 years, payments to be made semi-annually, currently sold at 90% of par value.
- 300,000 common shares outstanding, currently selling at $60 per share having a beta of 1.10.
- 20,000 outstanding shares of $6 preferred shares, selling at $95 per share.
Required: Work out overall cost of capital assuming a 7% market risk premium and a 5% risk-free rate of return.
Q. No. 8.
(a) Define & explain Business Cycle and discuss its implications in detail.
(b) Mr. Tom has $50,000 that he can deposit in any of the three saving accounts for a period of three years:
- Bank A compounds interest on an annual basis.
- Bank B compounds interest semi-annually.
- Bank C compounds interest quarterly.
All banks have a stated rate of 5% per annum.
Required:
- Compute the Effective Annual Rate (EAR) Mr. Tom can earn from each bank.
- Calculate the amount Mr. Tom would have at the end of the 3rd year, leaving all interest paid on deposit (no withdrawals), from each bank.