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Financial accounting model question paper 2018
Financial accounting model question paper
BBA | BBA-BI | BBA-TT | BCIS
Pokhara University
Level: Bachelor Semester – Fall Year: 2018
Programme: BBA | BBA-BI | BBA-TT | BCIS Full Marks: 100
Course: Financial Accounting I Pass Marks: 45
Time: 3hrs
Candidates are required to give their answers in their own words as far as practicable.
The figures in the margin indicate full marks.
Section “A”
Very Short Answer Questions
10 × 2
Attempt all questions.
- Describe the features of a corporation.
- List out the external users of accounting information.
- What does the going concern mean?
- What is the major weakness of the single-step income statement?
- What are the prepaid expenses? Give some examples.
- What do you mean by double entry-system of accounting?
- Write the purpose of trial balance?
- Burlin Company stars the year with Rs. 100,000 in assets and Rs. 80,000 in liabilities. Net income for the year is Rs. 25,000, and no dividends are paid. How much is the owner’s equity at the end of the year?
- The company paid rent for three months (June, July, and August) on June 15, 2016, of Rs. 6000. Prepare accounting equation on the date of payment of rent and end of each month.
- Differentiate between cash and accrual basis accounting?
Descriptive Answer Questions
6 × 10
Attempt any six questions.
11. Kantipur Delivery Service is incorporated on January 2, 2018, and enters into the following transactions during its first month of operations:
January 2: Field articles of incorporation with the state and issued 100,000 shares of capital stock. Cash of Rs. 100,000 is received from the new owners for the shares.
Jan 3: Purchased a warehouse and land for Rs. 80,000 in cash. An appraiser values the land at Rs. 20,000 and the warehouse at Rs. 60,000.
Jan 4: Signed a three-year promissory note at Third State Bank in the amount of Rs. 50,000.
Jan 6: Purchased five new delivery trucks for a total of Rs. 45,000 in cash.
Jan 15: Performed services on account that amount to Rs. 16,000 during the month.
Jan 25: Cash amounting to Rs. 7,500 was received from customers on the account during the month.
Jan 31: Established an open account at a local service station at the beginning of the month. Purchases of gas and oil from January amounted to Rs. 3000. Kantipur has until the 10th of the following month.
Required
- Prepare journal entries for each transaction.
- Post each transaction to the appropriate T accounts.
- Prepare a trial balance.
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12. A list of accounts for Maple Inc. at 12/31/17 follows.
| Accounts Receivable
Advertisement expense Building, net Capital stock Cash Depreciation expense Dividends Income tax expense Income tax payable Rent expenses Inventory, Jan, 1 Inventory, Jan, 31 Land Purchase discount Purchase Retained earnings Salaries Expense Salaries payable Sales Sales return Sales commission Utility expenses Bonds payable Accounts payable |
Rs. 2000
4000 59, 500 50,000 5,000 500 1,000 750 750 1,000 6,000 2,000 20,000 1,000 51,000 8,500 20,000 3,000 92,000 2,000 4,500 3,000 20,000 5,000 |
Required:
- Prepare income statement for 2017.
- Prepare the statement of Retained Earnings for 2017.
- Prepare a balance sheet dated December 31, 2017.
13. Moon Star Inc. prepares monthly financial statements and therefore adjusts its accounts at the end of every month. Prepare necessary adjusting entries on June 30, 2017.
a. On June 1, 2017, Moon Star received an Rs. 10,000, 12%, 90-days note receivable from a customer for services rendered.
b. Office supplies totaling Rs. 6,000 were purchased during the month. The asset account supplies are increased whenever a purchase is made. A count in the storeroom on June 30, 2017, indicates that supplies on hand amount to Rs. 1,000. The supplies on hand at the beginning of the month total Rs. 2,000.
c. The company purchased machines last year for Rs. 170,000. The machines are expected to be used for four years and have an estimated salvage value of Rs. 2000.
d. The company operates seven days per week with a weekly payroll of Rs. 7,000. Wage earners are paid every Sunday. The last day of the month is Saturday, June 30.
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14. The following transactions are entered into by Auto Car Wash during its first month of operations.
a. Articles of incorporation are filed with the state, and 20,000 shares of capital stock are issued. Cash of Rs. 40,000 is received from the new owners for the shares.
b. A five-year promissory note is signed at the local bank. The received from the loan is Rs. 120,000.
c. An existing car wash is purchased for Rs. 150,000 in cash. The values assigned to the land, building, and equipment are Rs. 25,000, Rs. 75,000, and Rs. 50,000, respectively.
d. Cleaning supplies are purchased on account for Rs. 2,500 from a distributor. None of the supplies are used in the first month.
e. During the first month, Rs. 1,500 is paid to the distributor for the cleaning supplies. The remaining Rs. 1,000 will be paid next month.
f. Gross receipts from car washes during the first month of operations amount to Rs. 7,000.
g. Wages and salaries paid in the first month amount to Rs. 2,000.
h. The utility bill of Rs. 800 for the month is paid.
i. A total of Rs. 1,000 in dividends is paid to the owners.
Required:
Prepare a table to summarize the preceding transactions as they affect the accounting equation.
15. What are the qualitative characteristics of accounting information?
16. The trial balance of Everest Trading Concern on January 31, is shown. It was prepared after posting the recurring transaction for the month of January, but it does not reflect any month-end adjustments.
Everest Trading Concern
Unadjusted Trial Balance
January 31
| Cash
Office supplies Land Buildings Accumulated depreciation Equipment Accumulated depreciation Unearned revenue Capital stock Retained earnings Service revenue Maintenance expenses Wage and salary expense Total |
Rs. 75,000
45,000 80,000 2,50,000 6,50,000 19,000 30,000 11,49,000 |
Rs. 24,000
1,20,000 85,000 5,00,000 3,68,000 52,000
11,49,000 |
The following additional information is available:
a. Office supplies on January 31 were Rs. 25,000.
b. The estimated life of the building is 20 years with an estimated salvage value of Rs. 10,000. The original cost of the equipment was Rs. 250,000.
c. The estimated life of the equipment is ten years with an estimated salvage value Rs. 50,000. The original cost of the equipment was Rs. 650,000.
d. Revenue earned during the month of Rs. 50,000 from unearned revenue.
e. Wages and salaries owed but unpaid to employees at the end of January total Rs. 7,000.
f. Assume a corporate income tax rate of 20%.
Required:
Ten column worksheet and closing entries.
17. The company’s book showed the debit balance of Rs. 10,000 on April 30, 2018, but company’s account showed a credit balance of Rs. 11,400.
The following items were found:
- Outstanding check of Rs. 5,000.
- Deposit in transit of Rs. 6,000.
- A bill of Rs. 5,000 and interest of Rs. 500 was directly collected by the bank.
- Service charge of Rs. 200 was charged by the bank.
- NSF check of Rs. 2,000 returned by the bank.
- A check of Rs. 2,100 sent for deposit but the bank was credited of Rs. 1,200.
Required:
a. Prepare bank reconciliation statement in good form.
b. Prepare necessary journal entries for adjustment.
Section “C”
18.
Read the case situation given below and answer the questions that follow:
A trading concern had the following financial statements prepared as of December 31, 2017:
Income statement
For the Period Ended December 31, 2017
| Sales revenues
Less: Cost of goods sold Gross margin Depreciation Advertising expenses Salaries expenses Total operating expenses Operating income Loss on sale of land Income before tax Income tax Net income |
Rs. 89,000
57,000 32,000 6,500 3,200 12,000 21,700 10,300 2,500 7,800 2,600 5,200 |
Balance Sheet
As of December 31, 2017
| 2017 | 2016 | |
| Cash
Account receivable Inventory Prepaid advertisement Total current assets Land Equipment Accumulated depreciation Total long-term assets Total assets Accounts payable Salaries payable Income taxes payable Total current liabilities Notes payable Capital stock Retained earnings Total stockholder’s equity Total liabilities and stockholder’s equity |
Rs. 12,000
22,000 25,400 10,000 69,400 1,20,000 1,90,000 (70,000) 2,40,000 3,09,400 15,300 14,000 1,200 30,500 70,000 1,30,000 78,900 2,08,900 3,09,400 |
Rs. 9,500
18,400 20,500 8,600 57,000 80,000 1,30,000 (63,500) 1,46,500 2,03,500 12,100 16,400 700 29,200 – 1,00,000 74,300 1,74,000 2,03,500 |
Additional information:
a. The land was purchased by issuing notes during the year.
b. A piece of land was sold during the year for Rs. 27,500.
c. The capital stock was issued for cash.
You are required to prepare Statement of Cash Flows and also calculate cash from operating activity under the indirect method.
Also, read management notes
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