PUNJAB PUBLIC SERVICE COMMISSION
COMBINED COMPETITIVE EXAMINATION FOR RECRUITMENT TO THE
POSTS OF PROVINCIAL MANAGEMENT SERVICE, ETC. (BS-17) – 2015
SUBJECT: COMMERCE (OPTIONAL) PAPER-I
TIME ALLOWED: THREE HOURS MAXIMUM MARKS: 100
Note: Attempt FIVE questions in all but selecting minimum TWO questions from each part. Calculator is allowed. All questions carry equal marks.
PART A
Q.1. The trial balance of Ammamalnc. shows among other items the following balances on December 31, 2012, the end of a fiscal year:
| Particulars | Rs. | Rs. |
|---|---|---|
| Accounts Receivable | 80,000 | |
| 4.5% Panorama City Bonds | 50,000 | |
| Buildings | 90,000 | |
| Accumulated Depreciation – Buildings | 31,500 | |
| Land | 100,000 | |
| 6% First – Mortgage Bonds Payable | 100,000 | |
| Rental Income | 26,000 | |
| Office Expenses | 2,000 |
The following facts are ascertained on this date upon inspection of the records of the company:
- It is estimated that approximately 2% of accounts receivable may prove uncollectible.
- Interest is receivable semi-annually on the Panorama City bond on March 1 and September 1.
- Buildings are depreciated at 2.5% a year; however there were buildings additions of Rs. 30,000 during the year. The company computes depreciation on asset acquisition during the year at one half the annual rate.
- Interest on the first–mortgage bonds is payable semi-annually on February 1 and August 1.
- Rental income includes Rs. 1,500 that was received on October 1, 2012, representing rent on part of the building for the period October 1, 2012 to September 30, 2013.
- Office supplies of Rs. 600 are on hand on December 31. Purchases of office supplies were charged to office expense account.
Instructions:
- Prepare the journal entries to adjust the books on December 31, 2012.
- Give the reversing entries that may appropriately be made at the beginning of 2013.
Q.2. The selling expenses of F and M, Inc for 2012 are 10% of sales. General expenses excluding doubtful accounts are 25% of cost of sales but only 15% of sales. Doubtful accounts are 2% of sales. The beginning merchandise inventory was Rs. 62,000 and it decreased 25% during the year. Income for the year before income taxes of 40% is Rs. 52,000. Prepare an income statement, giving supporting computations.
Q.3. Asfand, a builder states, “I do not use the percentage of completion method. It is just too difficult to apply.” What problems are associated with valuation of inventories by the percentage of completion method? How can they be overcome?
Q.4. Operations of FIRSZ Co, for 2012 and 2011 are summarized below:
| Particulars | 2012 Rs. |
2011 Rs. |
|---|---|---|
| Sales | 260,000 | 210,000 |
| Sales returns | 10,000 | 10,000 |
| Net Sales | 250,000 | 200,000 |
| Cost of goods sold | 180,000 | 120,000 |
| Gross profit on sales | 70,000 | 80,000 |
| Selling and general expense | 65,000 | 50,000 |
| Operating Income | 5,000 | 30,000 |
| Other expense items | 20,000 | 10,000 |
| Income (loss) before income tax | (15,000) | 20,000 |
| Income taxes | – | 10,000 |
| Net income (loss) | (15,000) | 10,000 |
Instructions:
- Prepare a comparative income statement showing Re. changes and percentage changes for 2012 as compared to 2011.
- Prepare a comparative income statement offering a percentage analysis of component revenue and expense items in terms of net sales for each year.
PART B
Q.5. The Habib Corporation manufactures a kitchen appliance to sell for Rs. 280. Last year the company sold 2000 of these appliances, realizing the profit that amounted to 25% of the cost of goods sold. Of this total cost of goods sold, materials accounted for 40% of the total and factory overhead for 15%.
During the coming year it is expected that the material and the labor costs will each increase 25% per unit and factory overhead will increase 12.5% per unit. To meet these rising costs a new selling price has to be set.
Required: The number of units that must be sold to realize the same total gross profit in coming year as realized last year if the new selling price is set as (1) Rs.300; (2) Rs.350.
Q.6. For December the Production Control Department for Faro Chemical Inc. reported these production data for department 2:
| Transferred in from department 1 | 55,000 liters |
| Transfer out to department 3 | 39,500 liters |
| In process at the end of December (with 1/3 labor and factory overhead) |
10,500 liters |
All materials were put in process in department 1.
The Cost Department collected these figures for Department 2:
| Unit cost for units transferred in from Department 1 | Rs. 1.80 |
| Labor cost in Department 2 | Rs. 27,520 |
| Factory overhead applied | Rs. 15,480 |
Required: A Cost of Production Report for department 2 for December.
Q.7. Factory overhead for Alim Company has been estimated as follows:
| Fixed factory overhead | Rs. 15,000 |
| Variable factory overhead | Rs. 45,000 |
| Estimated direct labor hours | 20,000 |
Production for the month reached 75% of the budget, and actual factory overhead totaled Rs. 43,000.
Required: (1) Over or under-applied Factory overhead. (2) Spending and Idle capacity Variance.
Q.8.
- Why must the conventional income statement be re-stated for computation of the break-even point?
- What type of statement is constructed?