ICMA.

Pakistan

Time Allowed: 2 Hours 45 Minutes

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EXTRA ATTEMPT, NOVEMBER 2013 EXAMINATIONS

Thursday, the 28th November 2013
FINANCIAL
ACCOUNTING (AF-301)
SEMESTER-3
Maximum Marks: 90

Roll No.:

Attempt all questions.

Answers must be neat, relevant and brief.
In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,
effective presentation, language and use of clear diagram/ chart, where appropriate.
Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.
Use of non-programmable scientific calculators of any model is allowed.
DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script.
Question No.1 Multiple Choice Question printed separately, is an integral part of this question paper.
Question Paper must be returned to invigilator before leaving the examination hall.

Marks
Q. 2 The following trial balance relates to M/s Hi Fliers, a limited company, as on June 30, 2013:

Land and building at valuation on July 1, 2012 (Note 3)

Plant at cost
Accumulated depreciation of plant
Investment
Investment income
Cost of sales
Distribution cost
Administrative expenses
Finance costs
Inventory as on June 30, 2013 (Note 1)
Income tax (Note 2)
Trade receivables
Revenue
Equity shares (Rs.10 each)
Retained earnings (as on July 1, 2012)
Trade payables
Revaluation reserves
Deferred tax
Bank (running finance)

(Rs. in million)
Debit
Credit
130.00
125.00
35.00
40.00
5.00
125.00
14.50
15.50
7.50
36.00
6.50
33.50
273.50
80.00
27.00
40.00
15.00
5.00
40.00
527.00
527.00

The following notes are relevant to M/s Hi Fliers:

(1) The company is engaged in supply of consumer goods and has hundreds of goods in
inventory. During the year, the management decided to discontinue some goods due to
slow movement. The value of these goods is Rs. 3 million and included in ending
inventory. The management is trying to sell these goods but did not receive any good
offer. The best price that has been offered is Rs. 1.2 million.
(2) The balance of income tax in the trial balance is due to difference in tax provision by the
company and assessment by the tax authority for the year ended June 30, 2012. The
estimated income tax liability for the year ended June 30, 2013 is Rs. 27.5 million.

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(3) The company has the policy to revalue its land and building each year-end. The value in
the trial balance includes land component of Rs. 40 million. On June 30, 2013, the value
of building was Rs. 90 million while value of land was increased by 20%. The estimated
remaining life of building was 30 years on June 30, 2012, which remains same. The
company policy is to charge 2/3 depreciation to cost of sales and 1/3 to administrative
expenses and the plant is depreciated @ 15% per annum using reducing balance method
and is charged to cost of sales.
Required:
Prepare the following:
(a) Statement of Profit or Loss for the year ended June 30, 2013.

10

(b) Statement of Financial Position as at June 30, 2013.

10

Q. 3 The following Statements of Financial Position relate to Legend Company, listed in stock
exchanges:
Statements of Financial Position
as at June 30
(Rs. in million)
2013
2012
Non-current Assets
Property, plant and equipment
Intangible assets
Current Assets
Inventories
Accounts receivable
Cash and bank

Equity
Ordinary share capital @ Rs.10 each
Share premium
Retained earnings
Revaluation surplus
Long-term Liabilities
Long-term loan
Liabilities against finance lease
Deferred tax
Current Liabilities
Trade and other payables
Interest payable
Dividend payable
Current portion of liabilities against finance lease
Provision for taxation

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1,033.00

1,033.00

887.00
32.00
919.00

148.00
128.00
158.00
434.00
1,467.00

175.00
111.00
48.00
334.00
1,253.00

560.00
29.00
207.00
80.00
876.00

500.00
18.00
175.00
50.00
743.00

235.00
120.00
50.00
405.00

210.00
90.00
45.00
345.00

80.00
12.00
30.00
41.00
23.00
186.00
1,467.00

65.00
10.00
20.00
45.00
25.00
165.00
1,253.00

Marks
The following information relating to Legend Company is available:
(1) Depreciation charged to the profit or loss amounted to Rs. 40 million. During the year, the
company disposed of a machine having book value of Rs. 1.50 million and incurred loss
of Rs. 500,000. No addition or disposal of intangible assets was carried out during the
year.
(2) During the year, non-current assets of Rs. 50 million were acquired against finance lease.
(3) During the year, the management declared the dividend of Rs. 30 million.
(4) Financial charges and income tax expense for the year are Rs.12 million and Rs.17.5
million, respectively.
(5) A machine was revalued by Rs. 30 million.
Required:

Q. 4

Prepare Statement of Cash Flows for Legend Company for the year ended June 30, 2013 as
per IAS 7 using indirect method.

20

(a) Define Adjusting Events giving at least four examples.

05

(b) Gulf Company is in process to build a new hotel at contracted price of Rs. 500 million. At
the beginning of year July 01, 2012 details of contract were as under :
Rs. in million
Cumulative revenue invoiced to date
Cumulative cost incurred to date

225.00
168.75

During the year, Gulf Company received progress payment of Rs. 243 million for 90% of
work certified at March 31, 2013. The surveyor has estimated the sales value of the
further work completed from April to June 2013 to be Rs. 30 million.
Total cost incurred till June 30, 2013 was Rs. 232.50 million and estimated cost to
complete the contract was Rs. 167.50 million.
The company calculates the percentage of completion of its contract as the proportion of
sales value earned to date compared to contract price.
Required:
Prepare the extracts of Statement of Profit or Loss and Statement of Financial Position
for the year to June 30, 2013 as per IAS 11.

Q. 5

10

(a) Define the following as per IAS 12:

(i)

Deferred tax liabilities.

01

(ii) Deferred tax assets.

03

(iii) Tax base.

01

(b) What are the formal objectives of the International Accounting Standards Board (IASB) as
formulated in its mission statement?

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(c) Ahad Limited has been constructing a property for the last 10 months. At December 31,
2012 (year-end) the property was nearing completion and the costs incurred to date were
as under:
Rs. in million
Materials
Labour
Other directly attributable overheads
Interest on borrowings

500
250
200
70

It is the companys policy to capitalize interest on specific borrowings raised for the
purpose of financing a construction. The amount of borrowings outstanding at December
31, 2012 in respect of this project is Rs. 800 million and the interest rate is 10.50% per
annum.
During the six months to June 30, 2013 the project was completed, with the following
additional costs incurred:
Rs. in million
Materials
150
Labour
100
Other directly attributable overheads
50
Required:
You are required to calculate the following as per IAS 23:
(i)

Borrowing cost incurred for the year ended December 31, 2013 on the project.

(ii) Cost of property as at December 31, 2013.

Q. 6

02
05

(a) The lessor, FBL Financing Company, leases an asset, which it purchased for
Rs. 540,000, to a textile company Amman Textile under a finance lease arrangement.
The lease is for three years and comprises six equal payments of Rs. 105,878.25 each
paid in advance. The lease commences on January 1, 2013. The rate of interest implicit
in the lease is 14% per year. The estimated useful life of the asset is three years and has
no residual value at the end of its useful life.

Required:
Show the relevant extracts from the accounts of Amman Textile at the year-end
June 30, 2013 according to IAS 17.

10

(b) Wahid Company purchased an item of plant at a value of Rs. 1 million on January 1,
2013 with additional modification cost of Rs. 100,000 and transportation and installation
costs of Rs. 50,000. The plant has an estimated life of 5 years with no residual value. The
plant qualified for a government grant of 40% of its purchase price at the time of its
purchase but it had not been received by June 30, 2013. It is the company policy to treat
the grant as deferred credit and transfer a portion to revenue each year.
Required:
Prepare extracts of Wahid Companys financial statements for the year to June 30, 2013
in respect of the plant and the related grant as per IAS 20.

THE END

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