Cost Accounting

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2013
B.COM – II – ADVANCED AND
COST ACCOUNTING
REGULAR
Compiled and Solved by:
Sameer Hussain
Compiled & Solved by: Sameer Hussain
www.a4accounting.weebly.com
a4accounting@hotmail.com
ADVANCED AND COST

ACCOUNTING – 2013
REGULAR
Instructions: (1) Attempt any FIVE questions in all, THREE questions from Section – A and TWO
questions from Section – B. (2) All questions carry equal marks.
(3) Answers without necessary computations will not be accepted.
SECTION “A” (ADVANCED ACCOUNTING)

Q.No.1 ANALYSIS OF FINANCIAL STATEMENTS
a) On March 1, 2012 the amount of current liabilities of a company was Rs.40,000 which is 2/3 of
current assets. During the month the company purchased furniture Rs.26,500 by paying cash Rs.12,000
and issuing a six month note for the balance.
REQUIRED
Compute current ratio on March 31, 2012. No other transaction has been taken place during the month
except mentioned above.
b) Umar & Co. supplied the following information:

Account balances on July 1, 2008:
Accounts receivable Rs.70,000; Accounts payable Rs.60,000; Accrued operating expenses Rs.50,000 and
Merchandise inventory Rs.28,000.
During the year the following transactions took place:
Sales return Rs.9,000; Returned goods to suppliers Rs.40,000; Discount allowed to customers Rs.15,000;
Discount received from suppliers Rs.2,000; Collection from customers Rs.80,000 and payment to
suppliers Rs.50,000.
Account balances on June 30, 2009:
Accounts receivable Rs.250,000; Accounts payable Rs.90,000; Accrued operating expenses Rs.56,000
and Merchandise inventory Rs.20,000.
REQUIRED
Compute the following: (Suppose all sales and purchases were on credit).
(a) Inventory turn over (b) Receivable turn over
(c) Rate of net income on sales (d) Rate of operating expenses on sales
SOLUTION 1 (a)
Computation of Current Assets on March 31, 2012:
Current assets on March 1, 2012 (40,000 x 3/2) 60,000
Less: Cash paid (decrease in current assets) (12,000)
Current assets on March 31, 2012 48,000
Computation of Current Liabilities on March 31, 2012:

Current liabilities on March 1, 2012 40,000
Add: Notes payable (increase in current liabilities) 14,500
Current liabilities on March 31, 2012 54,500
B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 2

Computation of Current Ratio:
Current ratio = Total current assets
Total current liabilities
Current ratio = 48,000
54,500
Current ratio = 0.88 : 1
SOLUTION 1 (b)
Computation of Sales:
Accounts receivable (ending) 250,000
Add: Cash collection from customers 80,000
Total receivable 330,000
Less: Accounts receivable (beginning) (70,000)
Net credit sales 260,000
Add: Sales return and allowances 9,000
Add: Sales discount 15,000
Total credit sales 284,000
Computation of Purchases:
Accounts payable (ending) 90,000
Add: Cash payments to the suppliers 50,000
Total payable 140,000
Less: Accounts payable (beginning) (60,000)
Net credit purchases 80,000
Add: Purchase return and allowances 40,000
Add: Purchase discount 2,000
Total credit purchases 122,000
Computation of Operating Expenses:

Accrued operating expenses (ending) 56,000
Less: Accrued operating expenses (beginning) (50,000)
Total operating expenses 6,000
Computation of Net Income:

Sales 284,000
Less: Sales return and allowance (9,000)
Less: Sales discount (15,000)
Net sales 260,000
Less: Cost of Goods Sold:
Merchandise inventory (beginning) 28,000
Add: Net Purchases:
Purchases 122,000
Less: Purchase return and allowance (40,000)
Less: Purchase discount (2,000)
Net purchases 80,000
Merchandise available for sale 108,000
Less: Merchandise inventory (ending) (20,000)
Cost of goods sold (88,000)

Gross profit 172,000
Less: Operating expenses (6,000)
Net income 166,000
(i) Inventory Turnover:

Inventory turnover in times = Cost of goods sold
Average inventory
Inventory turnover in times = 88,000
(28,000 + 20,000) / 2
Inventory turnover in times = 88,000
24,000
Inventory turnover in times = 3.67 times
Inventory turnover in days = 365
Inventory turnover in times
Inventory turnover in days = 365
3.67
Inventory turnover in days = 100 days
(ii) Accounts Receivable Turnover:

Receivable turnover in times = Net credit sales
Average receivable
Receivable turnover in times = 260,000
(70,000 + 250,000) / 2
Receivable turnover in times = 260,000
160,000
Receivable turnover in times = 1.625 times
Receivable turnover in days = 365
Receivable turnover in times
Receivable turnover in days = 365
1.625
Receivable turnover in days = 225 days
(iii) Rate of Net Income on Sales:

Net profit percentage = Net income X 100
Net sales
Net profit percentage = 166,000 X 100
260,000
Net profit percentage = 63.85%
(iv) Rate of Operating Expenses on Sales:

Operating expenses rate = Operating expense X 100
Net sales
Operating expenses rate = 6,000 X 100
260,000
Operating expenses rate = 2.31%

Q.No.2 INSTALLMENT SALES
On January 1, 2010 Star Installment Co. has 5 computers in stock costing Rs.20,000 each. On January 6,
2010 Co. purchased 7 computers for Rs.175,000 on account from M/S Sun Computer House. On March
20, 2010 Star Installment Co. sold 9 computers for Rs.270,000. The customers paid Rs.3,000 for each
computer as down payment on the same date and rest will be paid in 10 equal quarterly installments.
The agreement shows that the amount of installment will be received on the last day of each quarter
and buyer will pay 6% interest on unpaid balance. The first installment due on June 30, 2010. Star
Installment Co. uses FIFO method of inventory valuation and Co.’s accounting year ends on December
31, each year.
REQUIRED
Prepare journal entries including adjusting and closing for the year 2010 only.
SOLUTION 2
Computation of Cost of Ending Inventory:
Merchandise inventory (beginning) in units 5
Add: Units purchases 7
Units available for sale 12
Less: Units sold (9)
Units at end 3
Cost of ending inventory = (175,000/7) x 3

Cost of ending inventory = Rs.75,000
Computation of Cost of Installment Sales:

Merchandise inventory (beginning) (5 x 20,500) 102,500
Add: Purchases 175,000
Less: Merchandise inventory (ending) (75,000)
Cost of installment sales 202,500
Computation of Unrealized Gross Profit:

Unrealized gross profit = Installment sales – Cost of installment sales
Unrealized gross profit = 270,000 – 202,500
Unrealized gross profit = 67,500
Computation of Unrealized Gross Profit Rate (DGP%):

Unrealized gross profit rate = Unrealized gross profit x 100
Installment sales
Unrealized gross profit rate = 67,500 x 100
270,000
Unrealized gross profit rate = 25%
Computation of Cash Collection:

Down payment (3,000 x 9) 27,000
Add: Quarterly installment received {(270,000 – 27,000)/10 x 3} 72,900
Total cash collection 99,900

Computation of Realized Gross Profit:
Realized gross profit = Cash collection X DGP%
Realized gross profit = 99,900 x 25%
Realized gross profit = Rs.24,975
Computation of Interest Income on 30 June 2010:

Installment sales 270,000
Less: Down payment (27,000)
Unpaid balance on 30 June 2010 243,000
Interest income = Unpaid balance x rate of interest
Interest income = 243,000 x 6% x 3/12
Interest income = Rs.3,645
Computation of Interest Income on 30 September 2010:

Unpaid balance on 30 June 2010 243,000
Less: Installment received on 30 June 2010 (243,000/10) (24,300)
Unpaid balance on 30 September 2010 218,700
Computation of Interest Income on 31 December 2010

Unpaid balance on 30 September 2010 218,700
Less: Installment received on 30 September 2010 (24,300)
Unpaid balance on 31 December 2010 194,400
STAR INSTALLMENT CO.

GENERAL JOURNAL
Date Particulars P/R Debit Credit
Jan. 6 Merchandise 175,000
2010 Accounts payable (M/S Sun Computer House) 175,000
(To record the merchandise purchased on account)
Mar. 20 Installment accounts receivable 270,000
2010 Installment sales 270,000
(To record the merchandise sold on installment basis)
Mar. 20 Cost of installment sales 202,500
2010 Merchandise 202,500
(To record the cost of installment sales)
Mar. 20 Cash 27,000
2010 Installment accounts receivable 27,000
(To record the down payment received)
June. 30 Cash 27,945
Interest income 3,645
(To record the cash collected on installment basis)

Sep. 30 Cash 27,581
Dec. 31 Cash 27,216
Dec. 31 Installment sales 270,000
2010 Cost of installment sales 202,500
Unrealized gross profit 67,500
(To record the unrealized gross profit)
Dec. 31 Unrealized gross profit 24,975
2010 Realized gross profit 24,975
(To record the realized gross profit)
Dec. 31 Realized gross profit 24,975
2010 Interest income 9,842
Expense and revenue summary 34,817
(To close the realized gross profit)
Q.No.3 CASH FLOW STATEMENT

The comparative balance sheet of Hamza Corporation at December 31, 2011 and 2012 are as follows:
DEBIT BALANCES CREDIT BALANCES
Dec.31,2011 Dec.31,2012 Dec.31,2011 Dec.31,2012
Cash 131,000 115,000 Accounts payable 24,000 30,000
A / receivable 42,000 25,000 Accrued expenses 32,000 24,000
Inventories 30,000 38,000 Bonds payable 120,000 40,000
Machinery 65,000 93,000 Ordinary share capital 100,000 180,000
Land 65,000 55,000 Share premium 25,000 28,000
Patents 17,000 20,000 Retained earnings 39,000 29,000
All. for dep.(machinery) 10,000 15,000
350,000 346,000 350,000 346,000
The Corporation declared a cash dividend of Rs.15,000 and stock dividend of Rs.25,000 during 2012.
Machinery sold for Rs.17,000 costing Rs.18,000 and at the time of sale its book value was Rs.16,500.
REQUIRED
(a) Prepare a cash flow statement showing operating, investing and financing activities for the year
ended December 31, 2012.
(b) Determine working capital for both the years.

SOLUTION 3 (a)
Computation of Net Income:
Retained earnings (2012) 29,000
Less: Retained earnings (2011) (39,000)
Retained earnings for the period (10,000)
Add: Dividend:
Cash dividend 15,000
Stock dividend 25,000
Total dividends 40,000
Net income 30,000
HAMZA CORPORATION
CASH FLOW STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2012
Cash Flow from Operating Activities:
Net income 30,000
Adjustments:
Add: Depreciation expense (machinery) 6,500
Less: Gain on sale of machinery (500)
income before changes in working capital 36,000
Add: Decrease in accounts receivable 17,000
Less: Increase in merchandise inventory (8,000)
Add: Increase in accounts payable 6,000
Less: Decrease in accrued expenses (8,000)
Net cash flow from operating activities 43,000
Cash Flow from Investing Activities:
Purchase of machinery (46,000)
Sale of machinery 17,000
Sale of land 10,000
Purchase of patents (3,000)
Net cash flow from investing activities (22,000)
Cash Flow from Financing Activities:
Issue of shares 58,000
Payments of bonds payable (80,000)
Cash dividend paid (15,000)
Net cash flow from financing activities (37,000)
Net decrease in cash and cash equivalents (16,000)
Add: Opening cash and cash equivalents balance 131,000
Closing cash and cash equivalents balance 115,000

SOLUTION 3 (b)
Computation of Working Capital:
Particulars 2011 2012
Current Assets 131,000 115,000
Accounts receivable 42,000 25,000
Inventories 30,000 38,000
Total current assets 203,000 178,000
Less: Current Liabilities:
Accounts payable 24,000 30,000
Accrued expenses 32,000 24,000
Total current liabilities (56,000) (54,000)
Working capital 147,000 124,000
Q.No.4 COMPANY ACCOUNTING – RECONSTRUCTION

The following is the balance sheet of Aman & Co. Ltd. as on December 31, 2012:
Equities:
Accounts payable Rs.90,000; Interest on debentures payable Rs.6,500; Bank loan Rs.20,000; 5%
Debentures payable Rs.130,000; General reserves Rs.500,000; Ordinary shares capital Rs.800,000
(80,000 shares of Rs.10 each).
Assets:
Cash Rs.4,000; Accounts receivable Rs.120,000; Inventory Rs.214,000; Patents Rs.108,500; Machinery
Rs.570,000; Building Rs.400,000; Profit & loss Rs.130,000.
The company was authorized to issue 100,000 ordinary shares of Rs.10 each. During the past few years
the company sustained huge losses and, therefore, a scheme of reconstruction is prepared and
approved by the shareholders. A summary of the scheme is as follows:
(i) Every ordinary shareholder should surrender 50% of his holdings to the company.
(ii) The debenture holders have agreed to forego the outstanding interest.
(iii) The debenture holders accept 1,000 ordinary shares and thirty – day note in exchange of
debentures.
(iv) The surrendered ordinary shares are to be utilized as under:
a) To write off deficit.
b) To bring down the value of patents to Rs.68,500.
c) Inventory is valued at Rs.123,000.
d) To write off Rs.10,000 from accounts receivable.
e) The balance of the surrendered shares is to be utilized in written down the machinery.
(v) Company further issued 1,000 ordinary shares at Rs.10 each against cash. The cash so received
is utilized in paying bank loan and the note issued against the balance of debentures.
REQUIRED
1) Pass entries in the General Journal of Aman Company Ltd. to give effect to the above scheme.
2) Prepare revised balance sheet of Aman Company Ltd.

SOLUTION 4 (i)
AMAN COMPANY LTD.
GENERAL JOURNAL
1 Ordinary shares capital 400,000
Capital reduction 400,000
(To record the reduction in ordinary shares capital)
2 Interest on debenture payable 6,500
Capital reduction 6,500
(To record the writing off interest on debentures)
3 5% Debentures payable 130,000
Ordinary share capital (1,000 x 10) 10,000
Notes payable 120,000
(To record the shares and note issued in settlement of
debentures payable)
4 Capital reduction 406,500
Profit and loss 130,000
Patents 40,000
Merchandise inventory 91,000
Allowance for bad debts 10,000
Allowance for depreciation (machinery) 135,500
(To record the write off various assets account)
5 Cash (1,000 x 10) 10,000
Ordinary shares capital (1,000 x 10) 10,000
(To record the shares issued for cash)
6 Bank loan 14,000
Cash 14,000
(To record the payment of bank loan)
SOLUTION 4 (ii)
AMAN COMPANY LTD.
BALANCE SHEET
AS ON 31 DECEMBER 2012
Equities Assets
Authorized Capital: Fixed Assets:
100,000 ordinary shares @ Rs.10 each 1,000,000 Machinery 570,000
Less: All for dep. (135,500)
Paid up Capital: 434,500
42,000 ordinary shares @ Rs.10 each 420,000 Building 400,000
General reserves 500,000 Patents 68,500
Total shareholders’ equity 920,000 Total fixed assets 903,000
Liabilities: Current Assets

Accounts payable 90,000 Inventory 123,000
Bank loan 6,000 A/ receivable 120,000
Notes payable 120,000 Less:All for b/d (10,000) 110,000
Total liabilities 216,000 233,000
Total equities 1,136,000 Total assets 1,136,000

Capital Reduction
4 Assets 406,500 1 Ordinary share capital 400,000
2 Interest on debentures payable 6,500
406,500 406,500
Q.No.5 BRANCH ACCOUNTING

The following are the selected data taken from M/S Wisha & Company and its branch on December 31,
2012. Head office sent goods to its branch at 20% above cost.
Head Office Branch
Cash Rs.400,000 250,000
Furniture (Purchased on October 1, 2012) 80,000 ------
Equipment ------ 20,000
Land 100,000 ------
Merchandise inventory (opening) 250,000 120,000
Sales 720,000 350,000
Purchases 300,000 120,000
Freight – in 72,000 ------
Goods sent to branch 133,750 ------
Goods received from head office ------ ?
Rent expenses 16,000 17,000
Other operating expenses 120,000 ------
Additional Data for Adjustment on December 31, 2012:
1. Inventory on December 31, 2012 at head office Rs.75,000 and branch Rs.27,000 (including
Rs.9,000) from local purchases).
2. Head office accrued rent Rs.2,000.
3. Branch prepaid rent Rs.5,000.
4. Depreciation on fixed assets charges @ 15% per annum.
REQUIRED
(a) Prepare consolidated income statement of head office and branch for the year ended December
31, 2012.
(b) Prepare adjusting entry for allowance for overvaluation in the books of head office. (Show
necessary computation).
SOLUTION 5 (a)
Computation of Allowance for Overvaluation:
Particulars Billed Cost Allowance for
over valuation
Merchandise inventory (beginning) (120,000 x 20/120) 120,000 100,000 20,000
Add: Merchandise supplied (133,750 x 20/100) 160,500 133,750 26,750
Unadjusted allowance for overvaluation 280,500 233,750 46,750
Less: Merchandise inventory ending (18,000 x 20/120) (18,000) (15,000) (3,000)
Adjusted allowance for overvaluation 262,500 218,750 43,750

M/S WISHA & COMPANY
HEAD OFFICE BOOK
CONSOLIDATED INCOME STATEMENT
Sales (720,000 + 350,000) 1,070,000
Less: Cost of Goods Sold:
Merchandise inventory (beginning) (250,000 + 100,000) 350,000
Add: Net Purchases:
Purchases (300,000 + 120,000) 420,000
Add: Freight – in 72,000
Net purchases 492,000
Less: Merchandise inventory (ending) (75,000+15,000+9,000) (99,000)
Cost of goods sold (743,000)
Gross profit 327,000
Less: Operating Expenses:
Rent expenses (16,000 + 17,000 + 2,000 – 5,000) 30,000
Other operating expenses 120,000
Depreciation expense (Furniture) (80,000 x 15% x 3/12) 3,000
Depreciation expense (Equipment) (20,000 x 15%) 3,000
Total operating expenses (156,000)
Net income 171,000
SOLUTION 5 (b)
M/S WISHA & COMPANY
HEAD OFFICE BOOK
GENERAL JOURNAL
Dec. 31 Allowance for overvaluation 43,750
2012 Profit & loss account 43,750
(To adjust the allowance for overvaluation)
SECTION “B” (COST ACCOUNTING)

Q.No.6 JOB ORDER COSTING
Mehran Manufacturing Company uses job order system. The following data are for April 2012:
a. Raw material purchased for cash Rs.20,000.
b. Raw material purchased on account Rs.10,000.
c. Raw material requisitions and direct labour hours:
Job No. Raw Material (in Rs.) Direct Labour Hours
2A Rs.7,000 250
3B Rs.5,000 380
5D Rs.3,000 400
7F Rs.1,000 120
8G Rs.2,000 210
d. Factory overhead applied @ Rs.5 per direct labour hour and direct labour cost @ Rs.7 per direct
labour hour.
e. Depreciation of office premises Rs.2,000 and for factory machinery Rs.4,000.

f. Factory overhead incurred on account Rs.500 per job.
g. Job number 3B, 7F and 8G were completed and transferred to stockroom.
h. Job number 7F and 8G were sold on account for Rs.13,000 and Rs.16,000 respectively.
REQUIRED
(i) Pass entries in General Journal.
(ii) Setup T – accounts for raw material, work – in – process, finished goods and factory
overhead. Close and balance the accounts as the case may be.
SOLUTION 6 (i)
MEHRAN MANUFACTURING COMPANY
GENERAL JOURNAL
1 Raw material 20,000
Cash 20,000
(To record the purchase of raw material for cash)
Accounts payable 10,000
(To record the purchase of raw material on account)
3 Work – in – process 18,000
Raw material 18,000
(To record the raw material used)
4 Work in process 9,520
Accrued payroll 9,520
(To record the direct labour assigned to production)
5 Work in process 6,800
Factory overhead applied 6,800
(To record the applied factory overhead)
6 Depreciation expense (Office premises) 2,000
Factory overhead 4,000
Allowance for depreciation – Office premises 2,000
Allowance for depreciation – factory machinery 4,000
(To record the depreciation on factory and office)
7 Factory overhead (5 x 500) 2,500
Accounts payable 2,500
(To record the actual factory overhead cost incurred)
8 Finished goods 16,520
Work in process 16,520
(To record the cost of finished goods)
9 Cost of goods sold 6,960
Finished goods 6,960
(To record the cost of goods sold)
10 Accounts receivable 29,000
Sales (13,000 + 16,000) 29,000
(To record the goods sold to customers on account)
11 Over applied factory overhead 300
Cost of goods sold 300
(To close the factory overhead account)

Particulars 2A 3B 5D 7F 8G Total
Direct material 7,000 5,000 3,000 1,000 2,000 18,000
Direct labour 1,750 2,660 2,800 840 1,470 9,520
Factory overhead applied 1,250 1,900 2,000 600 1,050 6,800
Total work – in – process 10,000 9,560 7,800 2,440 4,520 34,320
Finished goods --- 9,560 --- 2,440 4,520 16,520
Cost of goods sold --- --- --- 2,440 4,520 6,960
SOLUTION 6 (ii)
Raw Material
1 Cash 20,000 3 Work – in – process 18,000
2 Accounts payable 10,000 c/d balance 12,000
30,000 30,000
Work in Process
3 Raw material 18,000 8 Finished goods 16,520
4 Accrued payroll 9,520 c/d balance 17,800
5 Factory overhead 6,800
34,320 34,320
Finished Goods
8 Work in process 16,520 9 Cost of goods sold 6,960
c/d balance 9,560
16,520 16,520
Factory Overhead
6 Allowance for depreciation 4,000 5 Work in process 6,800
7 Accounts payable 2,500
11 Cost of goods sold 300
6,800 6,800
Q.No.7 MANUFACTURING CONCERN

Following data have been extracted from the books of Shadab Manufacturing Co.:
Finished goods inventory (opening) Rs.120,000
Work in process (opening) 10,000
Freight in 5,000
Factory overhead (80% of direct labour) 120,000
Raw material inventory (opening) 10,000
Purchase of raw materials ?
Material returned to supplier 3,000
Work in process (ending) 80,000
Gross profit (20% of sales) 60,000
Cost of goods manufactured 300,000
Raw material inventory (ending) 12,000
REQUIRED
(a) Prepare statement of cost of goods manufactured and cost of goods sold.
(b) Compute sales revenue.

SOLUTION 7 (a)
Computation of Purchases of Raw Material:
Add: Work – in- process ending inventory 80,000
Total work – in – process during the period 380,000
Less: Work – in – process opening inventory (10,000)
Total manufacturing cost 370,000
Less: Conversion Cost:
Direct labour (120,000 x 100/80) 150,000
Add: Factory overhead 120,000
Total conversion cost (270,000)
Direct material used 100,000
Add: Raw material ending inventory 12,000
Raw material available for use 112,000
Less: Raw material opening inventory (10,000)
Net purchases of raw material 102,000
Less: Freight – in (5,000)
Add: Purchase return and allowance 3,000
Purchases of raw material 100,000
SHADAB MANUFACTURING CO.

STATEMENT OF COST OF GOODS MANUFACTURED
FOR THE PERIOD ENDED ______________
Direct Materials:
Raw materials (opening) 10,000
Add: Net Purchase of Raw Material:
Purchases of raw material 100,000
Add: Freight – in 5,000
Delivered purchases of raw material 105,000
Less: Purchase return and allowances (3,000)
Net purchases of raw material 102,000
Raw materials available for use 112,000
Less: Raw materials (ending) (12,000)
Raw materials used 100,000
Add: Direct labour 150,000
Prime cost 250,000
Add: Factory overheads 120,000
Total manufacturing cost 370,000
Add: Work – in – process (opening) 10,000
Total work – in – process during the period 380,000
Less: Work – in – process (ending) (80,000)

Computation of Cost of Goods Sold:
Sales (60,000 x 100/20) 300,000
Less: Gross profit (60,000)
Cost of goods sold 240,000
Computation of Cost of Finished Goods Ending:

Finished goods beginning inventory 120,000
Add: Cost of goods manufactured 300,000
Finished goods available for sale 420,000
Less: Cost of goods sold (240,000)
Finished goods ending inventory 180,000
SOLUTION 7 (b)
Computation of Sales Revenue:
Gross profit (20% of sales) 60,000
Sales (60,000 x 100/20) 300,000
Q.No.8 PROCESS COSTING

United Cycle Manufacturing Company supplied the data relating to goods in process account of its frame
department for September 2013:
Beginning inventory in process Rs.45,400
Raw material used Rs.74,400
Direct labour used Rs.90,000
Applied factory overhead (90% of direct labour)
Production report for September 2012:
Units in process September 1, 2012 (100% completed as material and 50% completed as
conversion cost) 6,000 units
Units put in process during the month 32,000 units
Units completed and transferred to painting department 28,000 units
Units in process September 30, 2012 were 90% completed as material and 50%
completed as conversion cost ?
REQUIRED
(a) Compute:
(i) Equivalent production units. (ii) Unit cost.
(iii) Cost of units transferred to painting department.
(b) Pass general Journal entries for:
(i) Cost charged to frame department. (ii) Cost transferred to painting department
SOLUTION 8 (a)
Computation of Ending Units in Process:
Units in process (beginning) 6,000
Add: Units placed in production 32,000
Total units available 38,000
Less: Units completed and transferred out (28,000)
Unit in process (ending) 10,000

UNITED CYCLE MANUFACTURING COMPANY
EQUIVALENT PRODUCTION UNITS
FRAME DEPARTMENT
FOR THE MONTH OF SEPTEMBER 2012
Particulars Material Labour Equivalent Overhead
Equivalent Units Units Equivalent Units
Units completed & transferred out 28,000 28,000 28,000
Add: Work in process (ending):
Direct material (10,000 x 90%) 9,000
Direct labour (10,000 x 50%) 5,000
Factory overhead (10,000 x 50%) 5,000
Work in process during the period 37,000 33,000 33,000
Less: Work in process (opening):
Direct material (6,000 x 100%) (6,000)
Direct labour (6,000 x 50%) (3,000)
Factory overhead (6,000 x 50%) (3,000)
Equivalent production in units 31,000 30,000 30,000

PER UNIT COST
FRAME DEPARTMENT
Particular Cost Equivalent Units Per Unit Cost
Direct material 74,400 31,000 2.4
Direct labour 90,000 30,000 3.0
Factory overhead (90,000 x 80%) 81,000 30,000 2.7
Total per unit cost 245,400 8.1

STATEMENT OF UNITS COMPLETED AND TRANSFERRED TO PAINTING DEPARTMENT
FRAME DEPARTMENT
Cost of Work in Process Opening Inventory:
Cost b/d from last month 45,400
Add: Cost Applied During This Month From Work in Process Beginning Inventory:
(WIP opening units x % of completion x unit cost of element)
Direct labour (6,000 x 50% x 3.0) 9,000
Factory overhead (6,000 x 50% x 2.7) 8,100
Total cost applied during this month from work in process beginning inventory 17,100
Total cost of work in process beginning inventory 62,500
Add: Remaining Units Completed During This Month:
(Units completed – WIP opening units) x Unit cost
Total cost of remaining units completed (22,000 x 8.1) 178,200
Total cost of units completed and transferred to painting department 240,700

SOLUTION 8 (b)
GENERAL JOURNAL
Sep. 30 Work in process (Frame department) 245,400
Accrued payroll 90,000
Factory overhead 81,000
(To record the manufacturing cost of frame
department)
Sep. 30 Work in process (Painting department) 240,700
2012 Work in process (Frame Department) 240,700
(To record the goods completed and transferred to
painting department)

Cost Accounting

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Cost Accounting

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The workings under the heading of “Additional Working”

are not required according to the requirement of the examiner.

Compiled and Solved by:

ADVANCED AND COST

SECTION “A” (ADVANCED ACCOUNTING)

b) Umar & Co. supplied the following information:

Computation of Current Liabilities on March 31, 2012:

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 2

Computation of Operating Expenses:

Computation of Net Income:

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 3

(i) Inventory Turnover:

(ii) Accounts Receivable Turnover:

(iii) Rate of Net Income on Sales:

(iv) Rate of Operating Expenses on Sales:

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 4

Cost of ending inventory = (175,000/7) x 3

Computation of Cost of Installment Sales:

Computation of Unrealized Gross Profit:

Computation of Unrealized Gross Profit Rate (DGP%):

Computation of Cash Collection:

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 5

Computation of Interest Income on 30 June 2010:

Computation of Interest Income on 30 September 2010:

Computation of Interest Income on 31 December 2010

STAR INSTALLMENT CO.

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 6

Q.No.3 CASH FLOW STATEMENT

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 7

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 8

Q.No.4 COMPANY ACCOUNTING – RECONSTRUCTION

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 9

Liabilities: Current Assets

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 10

Q.No.5 BRANCH ACCOUNTING

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 11

SECTION “B” (COST ACCOUNTING)

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 12

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 13

Q.No.7 MANUFACTURING CONCERN

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 14

SHADAB MANUFACTURING CO.

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 15

Computation of Cost of Finished Goods Ending:

Q.No.8 PROCESS COSTING

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 16

UNITED CYCLE MANUFACTURING COMPANY

UNITED CYCLE MANUFACTURING COMPANY

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 17

B.Com – II – Advanced and Cost Accounting – 2013 (Regular) Page 18

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