MGT401- Financial Accounting II (Session - 4) FINALTERM EXAMINATION Fall 2009 (3/2/2010 12:00:00 AM)

FINALTERM EXAMINATION

Fall 2009

MGT401- Financial Accounting II (Session - 4)

Question No: 1 ( Marks: 1 ) - Please choose one

Which of the following is a present obligation of the entity arising from a past event the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits?

► Asset

► Income

► Expense

► Liability

Question No: 2 ( Marks: 1 ) - Please choose one

Which of the following types of business enjoys greater freedom and flexibility in making business decisions according to the economic conditions?

► Private Limited Company

► Sole-proprietorship

► Partnership

► Public Limited Company

Question No: 3 ( Marks: 1 ) - Please choose one

Proper Books of Accounts are kept by every company under which of the following sections of the Companies Ordinance 1984?

► Section 230

► Section 233

► Section 184

► Section 110

Question No: 4 ( Marks: 1 ) - Please choose one

Which of the following item may be included in a Balance Sheet at more than its historical cost?

► Good will

► Land

► Research expenditures

► Work in progress

Question No: 5 ( Marks: 1 ) - Please choose one

Which of the following information must be disclosed in case of loan and advances to subsidiary companies?

► The name of each borrower

► Amount of loans and advances

► The terms of loan and the particulars of collateral security held

► All of the given options

Question No: 6 ( Marks: 1 ) - Please choose one

The valuation of stock at lower of its cost or net realizable value is an application of:

► The consistency concept

► The going concern concept

► The prudence concept

► The accrual concept

Question No: 7 ( Marks: 1 ) - Please choose one

Which one of the following is an example of Financial Asset?

► Inventories

► Patent rights

► Goodwill

► Accounts receivable

Question No: 8 ( Marks: 1 ) - Please choose one

Mr. Jason invested Rs. 100,000 in bank as bonds for nine months. At the end of the year, this invested amount will be shown in Balance Sheet under the head of:

► Fixed Assets

► Current Asset

► Current Liabilities

► Long Term Liabilities

Question No: 9 ( Marks: 1 ) - Please choose one

Which of the following represents the Financial Information presented in the financial statements relating to the assets and incomes should not be overstated.

► Consistency

► Profit

► Materiality

► Prudence

Question No: 10 ( Marks: 1 ) - Please choose one

Which of the following statement shows the movement of cash inflows and outflows?

► Income Statement

► Balance Sheet

► Statement of Owner's equity

► Cash Flows Statement

Question No: 11 ( Marks: 1 ) - Please choose one

Which of the following is an example of current liability?

► Bank Overdraft

► Stock

► Goodwill

► A loan repayable in two years

Question No: 12 ( Marks: 1 ) - Please choose one

Which of the following is a component of current liabilities?

► Assets subject to finance lease

► Debentures

► Provision for Taxation

► Loans taken for more than five years

Question No: 13 ( Marks: 1 ) - Please choose one

A damage claim of Rs.15 million for breach of contract has been served on the Company. The Company legal counsel is of the view that it is possible that the damages will be awarded to the plaintiff. However, the amount of damages can not be reasonable estimated. What accounting treatment would be made in this regards?

► A provision will be made for damages

► Damages will be disclosed as contingent liabilities not sure

► Damages will be treated as accrued income

► No treatment will be taken

Question No: 14 ( Marks: 1 ) - Please choose one

Which of the following term represents the amount of share capital collected from the shareholders on application of shares?

► Registered Capital

► Subscribed Capital not sure

► Nominal Capital

► Paid up capital

Question No: 15 ( Marks: 1 ) - Please choose one

Where shares are purchased at a price above the face value, the difference shall be charged to:

► Share Premium Account

► Share Discount Account

► Distributable Profit Account

► Un-distributable Profit Account

Question No: 16 ( Marks: 1 ) - Please choose one

In case of operating lease, an asset is recorded in the books of lessee at which of the following value?

► Faire value

► Present value

► Market value

► Not recorded at any value

Question No: 17 ( Marks: 1 ) - Please choose one

Which of the following IAS covers the Debentures?

► IAS 32 only

► IAS 39 only

► Both IAS 32 and IAS 39

► IAS 17

Question No: 18 ( Marks: 1 ) - Please choose one

Which of the following events are indicative of conditions that arose after Balance Sheet date?

► Adjusting events after balance sheet date

► Adjusting events before balance sheet date

► Non - adjusting events after balance sheet date

► Non - adjusting events before balance sheet date

Question No: 19 ( Marks: 1 ) - Please choose one

Which of the following is/are the event/s after the balance sheet date with respect to IAS 10?

► Adjusting events only

► Non-adjusting events only

► Both Adjusting and Non-adjusting events

► None of the given options

Question No: 20 ( Marks: 1 ) - Please choose one

With respect to IAS 10, major purchases of assets, classification of assets as held for sale, other disposal of assets, or expropriation of major assets by Govt. are considered as which of the following?

► Adjusting Events

► Non-Adjusting Events

► Bogus Events

► Contingent Events

Question No: 21 ( Marks: 1 ) - Please choose one

With respect to IAS 10, sale of inventory after the balance sheet date below its cost and also below its net realizable value (inventory was measured at net realizable value on the balance sheet date) is considered as which of the following?

► Adjusting Event not sure

► Non-Adjusting Event

► Bogus Event

► Contingent Event

Question No: 22 ( Marks: 1 ) - Please choose one

Which of the following is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the control of the entity?

► Contingent asset

► Fixed asset

► Current asset

► Floating asset

Question No: 23 ( Marks: 1 ) - Please choose one

Which of the following is/are related to the IAS-37?

► Contingent Assets

► Contingent Liabilities

► Both Contingent Assets and Contingent Liabilities

► Inventory

Question No: 24 ( Marks: 1 ) - Please choose one

Which of the following is the example of Certain Liabilities?

► Creditors against supplies not sure

► Accruals against expenses

► Provision against expected losses

► Provision against expected profits

Question No: 25 ( Marks: 1 ) - Please choose one

An equity instrument that is subordinate to all other classes of equity instruments is:

► Ordinary share

► Potential ordinary share

► Warrants

► Options

Question No: 26 ( Marks: 1 ) - Please choose one

Which of the following is/are Financial Instruments that give the holder, the right to purchase ordinary shares?

► Equity shares

► Potential ordinary shares

► Warrants or Options

► Preference shares

Question No: 27 ( Marks: 1 ) - Please choose one

Which of the following is widely used by investors as a measure of Company performance in comparing the results of a Company over a period of time?

► Earning Per Share

► Balance Sheet

► Cash Flow Statement

► Notes to the accounts

Question No: 28 ( Marks: 1 ) - Please choose one

Which of the following represents the Equity?

► Share capital + Accumulated profit + General reserves not sure

► Share capital + Accumulated profit - General reserves

► Share capital - Accumulated profit - General reserves

► Accumulated profit - General reserves

Question No: 29 ( Marks: 1 ) - Please choose one

Which of the following is included in the Equity Section of the Balance Sheet?

► Share capital

► Long term financing

► Deferred cost

► Liability against assets subject to finance lease

Question No: 30 ( Marks: 1 ) - Please choose one

Which of the following is NOT considered as expense by their function with respect to IAS 01?

► Cost of goods sold

► Distribution costs

► Administrative expenses

► Transportation costs

Question No: 31 ( Marks: 1 ) - Please choose one

Which of the following is TRUE?

► Gross profit - Operating expenses = Operating profit not sure

► Cost of sales + Operating expenses = Operating profit

► Cost of sales - Operating expenses = Net profit

► Cost of sales - Operating expenses = Gross profit

Question No: 32 ( Marks: 1 ) - Please choose one

An electricity accrual of Rs. 375 was treated as prepayment in preparing a trader's profit and loss account. As a result his profit was:

► Understated by Rs. 750

► Overstated by Rs. 750

► Understated by Rs. 375 not sure

► Overstated by Rs. 375

Question No: 33 ( Marks: 1 ) - Please choose one

If A Limited Company entered into a contract with Pakistan Leasing Company to acquire an asset with down payment of Rs.30, 000, semi-annual payment of Rs. 50,000 and the lease term is 2 years. The lessee guaranteed the lessor to purchase the asset at the end of lease term at Rs. 10,000 which is estimated residual value. Then what is the amount of Minimum Lease Payment with respect to the lessee?

► Rs. 130,000

► Rs. 220,000 not sure

► Rs. 230,000

► Rs. 240,000

Question No: 34 ( Marks: 1 ) - Please choose one

Which of the following is the correct formula to find the Present Value? Where FV = Future Value, r = Interest rate and n = Time period

► FV(1 + r)^{-n not sure}

► FV (1 + r)ⁿ

► FV(1 - r)^-n

► FV(1 x r)^-n

Question No: 35 ( Marks: 1 ) - Please choose one

If you plan to save Rs. 5,000 with a bank at an interest rate of 8%, what will be the worth of your amount after 4 years if bank offers simple interest?

► Rs. 5,400

► Rs. 5,900

► Rs. 6,600

► Rs. 6,802

Question No: 36 ( Marks: 1 ) - Please choose one

What will be the purchase source at the time of re-purchase of shares?

► The purchase shall be in cash and out of the distributable profits.

► The purchase shall be in cash and out of the un-distributable profits.

► The purchase shall be in credit and out of the distributable profits.

► The purchase shall be in cash and out of the Revaluation surplus profits.

Question No: 37 ( Marks: 1 ) - Please choose one

Which of the followings item(s) must be disclosed on the face of income statement according to IAS-1?

► Revenue

► Results of operating activities

► All of the given options

► Finance costs

Question No: 38 ( Marks: 1 ) - Please choose one

Which of the following is the combined account for showing both result of business, i.e., gross and net profits?

► Trading and profit and loss account

► Profit and loss appropriation account

► Income statement

► None of the given options

Question No: 39 ( Marks: 1 ) - Please choose one

The goods are written off when:

► These are completely damaged

► These are stolen

► These are destroyed by fire

► All of the given options

Question No: 40 ( Marks: 1 ) - Please choose one

Which of the following bases, stock should be valued according to IAS-2?

► Cost

► Higher of cost or net realizable value

► Lower of cost or net realizable value

► Net realizable value

Question No: 41 ( Marks: 5 )

What are the disclosure requirements of Revenue with respect to IAS-18?

Question No: 42 ( Marks: 5 )

A Limited Company is engaged in production of surgical items. The company acquired the asset on the following terms:

Fair value of the asset	Rs. 68,000
Down payment	Rs. 10,000
Annual payments	Rs. 20,000
Lease term	3 years
Interest rate implicit in the lease	10.65% p.a.
Residual value guaranteed by the lessee	Rs. 10,000

You are required to calculate the Present Value of Minimum Lease Payment.

Question No: 43 ( Marks: 10 )

The comparative financial statement data for XYZ Company is given below:

December 31

Assets: 2007 2006

Rs. Rs.

• Cash 4,000 7,000
• Accounts receivable 36,000 29,000
• Inventory 75,000 61,000
• Plant and equipment 210,000 180,000
• Accumulated depreciation (40,000) (30,000)

Total Assets 285,000 247,000

Liabilities & Stockholder's equity:

1. Accounts payable 45,000 39,000
2. Common stock 90,000 70,000
3. Retain earnings 150,000 138,000

Total liabilities & Stockholder's equity 285,000 247,000

For 2007, the company reported net income as follows:

XYZ Company

Income Statement

For the year ended 31^st December, 2007

Rs.

Sales 500,000

Less: Cost of goods sold 300,000

Gross margin 200,000

Less Operating expenses 180,000

Net Income 20,000

Required:

Using direct method, prepare a Statement of Cash Flows if dividend of Rs. 8,000 was declared and paid during 2007. There were no sales of plant and equipment during the year.

Question No: 44 ( Marks: 10 )

Briefly describes the reporting requirement and effects of IAS-02 “Inventories” on Income Statement.

Question No: 45 ( Marks: 10 )

You are the chief accountant in GMC. The junior accountant of the firm faced problems to understand the following concepts in the light of IAS-37. Being a chief accountant you are requested to explain these concepts with example for guiding the junior accountant in the light of IAS-37.

• Probable
• Possible
• Remote
• Warranty