icmab question august 2013 all levels all questions

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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH CMA AUGUST 2013, EXAMINATION

FOUNDATION LEVEL SUBJECT: 001. PRINCIPLES OF ACCOUNTING.

Time: Three Hours Full Marks:100 All questions are to be attempted. Show computations, where necessary. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet. Q. No. 1.

CAMP’S MUSIC STORE Trial Balance July 31, 2012

Debits Credits Cash ……………………………………………... Tk. 34,780 Accounts Receivable …………………………….. 4,600 Merchandise Inventory, 8/1/2011 ………………… 31,400 Prepaid Fire Insurance …………………………. 720 Prepaid Rent …………………………………….. 4,800 Office Equipment ………………………………... 12,000 Accumulated Depreciation – Office Equipment Tk. 4,500 Accounts Payable………………………………… 8,000 Clay Camp, Capital ……………………………... 22,000 Clay Camp, Drawing ……………………………. 20,000 Sales ……………………………………………… 300,000 Sales Returns and Allowances …………………. 1,000 Purchases ………………………………………… 194,000 Purchase Returns and Allowances ……………… 1,400 Transportation – In ……………………………… 5,200 Advertising Expense ……………………………... 1,000 Supplies Expense ………………………………… 1,800 Salaries Expense …………………………………. 23,200 Utilities Expense ………………………………….. 1,400 Tk. 335,900 Tk. 335,900 Clay Camp has prepared the above trial balance for Camp’s Music Store. The following information will be used to prepare the work sheet. 1. A 12-month fire insurance policy was purchased for Tk.720 on April 1, 2012, the date on

which insurance coverage began. 2. On February 1, 2012, Camp paid Tk. 4,800 for the next 12 months’ rent. The payment was

recorded in the Prepaid Rent account. 3. Depreciation expense on the office equipment is Tk. 1,500. 4. Merchandise inventory at July 31, 2012, was Tk. 26,400. Required: a. Prepare a 10-column work sheet for Camp’s Music Store for the fiscal year ended July 31,

2012. b. Prepare a classified income statement for the fiscal year ended July 31, 2012. Do not

separate operating expenses into selling and administrative categories. c. Prepare a statement of owner’s equity for the fiscal year ended July 31, 2012. d. Prepare a classified balance sheet for July 31, 2012. e. Prepare closing entries.

[Marks: (8+7+2+4+4) = 25]

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CMA AUGUST 2013, EXAMINATION FOUNDATION LEVEL SUBJECT: 001. PRINCIPLES OF ACCOUNTING.

Q. No. 2. (a) Write a note on impress system of accounting. (b) The following information is available to reconcile XYZ Company’s book balance of cash

with its bank balance as of July 31, 2011. (i) The July 31 cash balance according to accounting records is Tk. 80,756.60 and the bank

statement balance on that date is Tk. 93,644.80. (ii) An examination of deposit slips revealed that daily cash receipts of Tk. 19,166.20 were

placed in the bank’s evening depository on July 31, which do not appear on the July 31 bank statement.

(iii) When the July Cheques are compared, it is found that Cheque No. 1437 had been correctly drawn for Tk. 6,918 to pay for office supplier but was erroneously in the accounting records as Tk. 6,981.

(iv) Cheque No. 1244 for Tk. 9,178.60 and Cheque No. 1284 for Tk. 800.00 both written and entered in the cash book in July, are not among the cancelled Cheques. Two Cheques, No. 1211 for Tk. 4,578 and No. 1223 for Tk. 820.80, were outstanding on the most recent June 30 reconciliation. While Cheque No. 1211 is included in the July cancelled cheque list, but Cheque No. 1223 is not listed.

(v) Two debit memoranda are enclosed with the statement and are unrecorded at the time of reconciliation. One of it is for Tk. 1,525 and debit with an NSF cheque for Tk. 1,490 that had been received from a customer, BM Company. The bank assessed a Tk. 35 fee for processing it. The second debit memorandum is a Tk. 198 charge for cheque printing.

(vi) A credit memorandum indicates that the bank collected Tk. 38,000 on a note receivable for the company, deducted a Tk. 40 collection fee, and credited the balance to the company account.

(vii) A two-month, 7% Tk. 15,000 customer’s note dated May 28, discounted on July 15, had been retested on July 28, and the bank had charged the company for Tk. 15,045 which included a pretest fee of Tk. 45.

Required: (i) Prepare Bank Reconciliation Statement as of July 31, 2011 bringing both balances to the

correct position. (ii) Prepare the necessary journal entries to adjust the cash.

[Marks: {5+ (15+5)} = 25] Q. No. 3. (a) The Best Company estimates its bad debts expense to be 1% of sales. Sales in 2012 were

Tk. 750,000.

Required: Prepare the journal entries for the following transactions:

1. The company prepared the adjusting entry for bad debts for the year 2012. 2. On January 15, 2013, the company decided that the account for James Ryan in the

amount of Tk. 500 was uncollectible. 3. On February 12, 2013, James Ryan’s check for Tk. 500 arrived.

(b) A Tk. 15,000, 90-day, 12% note dated June 15, 2012, was received by the Long Company from the Short Company in payment of its account. Required: Prepare the journal entries in the records of the Long Company for each of the following: 1. The Long Company received the note on June 15, 2012. 2. The Long Company discounted the note on July 15, 2012, at 10% at the Citizens’

National Bank.

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CMA AUGUST 2013, EXAMINATION FOUNDATION LEVEL SUBJECT: 001. PRINCIPLES OF ACCOUNTING.

Q. No. 3. (contd……..)

3. The Short Company paid the note at maturity. 4. Assume that the Short Company did not pay the note at maturity. The Citizen’s National

Bank charged the note to the Long Company. The Long Company decided that the note was uncollectible.

(c) The Meaders Company reported annual net income as follows: 2010 …………………. Tk. 68,000 2011 …………………. 71,000 2012 …………………. 60,000

Analysis of the inventories shows that certain clerical errors were made with the following results: Incorrect Correct Inventory Inventory Amount Amount December 31, 2010 ………… Tk. 12,000 Tk. 14,200 December 31, 2011 ………… 14,000 11,700 Required: What is the corrected net income for 2010, 2011, and 2012? (d) “Allowance for doubtful debts is an application of conservatism” – Critically evaluate the

statement. [Marks: (5+10+5+5) = 25]

Q. No. 4. (a) On January 1, 2006, a company purchased a machinery at an acquisition cost of Tk.

84,000. The machinery has been depreciated by the straight line method using a 4 year service life and a Tk. 12,000 salvage value. The company’s fiscal year ends on December 31. Required: Prepare the journal entries to record the disposal of the machinery that it was: (i) Retired and scrapped with no salvage value on January 1, 2010. (ii) Sold for Tk. 15,000 on July 1, 2009. (iii) Traded in on a new machinery on January 1, 2009. The fair market value of the old

machinery was Tk. 34,000 and Tk. 6,000 was paid in cash. (b) A Ltd. Company depreciates its machinery at 10% on diminishing balance method, had on

1st January 2010 Tk. 175,000 to the debit of machinery account. A part of machinery purchased on 1st January, 2008 for Tk. 30,000 was sold for Tk. 15,000 on July 01, 2010. A new machinery at of cost of Tk. 35,000 was purchased and installed on the same date installation charge being Tk. 2,500. The company wanted to change its method of depreciation from diminishing balance method to straight line method with effect from 1st January, 2010. The rate of depreciation is remained the same. Required: (i) Pass Journal entries to record the sale of the machinery. (ii) Calculate the depreciation expense of the existing machinery to be recorded in the

books for 2010. [Marks: (15+10) = 25]

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FOUNDATION LEVEL SUBJECT: 002. BUSINESS COMMUNICATION AND OFFICE MANAGEMENT.

Time: Three Hours Full Marks:100 Answer THREE questions from each part, where Q. No. 4 and 8 are compulsory. Answer must be brief, relevant, neat and clean. Use a fresh sheet for answering each question. Start answering each question from a fresh sheet.

GROUP - A : BUSINESS COMMUNICATION

Q . No. 1. (a) What is Non verbal communication? (b) List and discuss four objectives of graphic and visual aids. (c) What is meant by Electronic Communication? (d) What are the functions of a CPU?

[Marks: (3+4+4+4) = 15] Q. No. 2. (a) Give a brief thought on how language can he used more effectively in Business

Communication. (b) Write an application to the HRM (Human Resources Management) of Eastern Bank

Limited for internship program. [Marks: (10+5) = 15]

Q. No. 3. (a) What is a Short Report? Describe different kinds of Short Report. (b) How does the annual report of a listed company help the major users of such report? Give

examples of two such major users. (c) As a Company Secretary, draft a report to the Company’s management suggesting ways

for settling of a labor unrest. [Marks: (7+3+5) = 15]

Q. No.4. Write short notes on any FIVE of the following: (a) Credit Report (b) Electronic Communication (c) Trading Corporation Bangladesh (TCB) (d) Letter of Credit (e) Book Building Method (BBM) (f) ADB (g) BOI (h) European Union.

[Marks: (4 x 5) = 20]

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CMA AUGUST 2013, EXAMINATION FOUNDATION LEVEL SUBJECT: 002. BUSINESS COMMUNICATION AND OFFICE MANAGEMENT.

GROUP - B : OFFICE MANAGEMENT Q. No. 5. (a) Briefly write about “Goal Congruence” & “MBO (Management By Objective)”. (b) Briefly discuss about the important role of HRM (Human Resources Management). (c) Briefly write about “KPI” – Knowing Performance Indicator.

[Marks: (5+6+4) = 15] Q. No. 6. (a) What is work measurement? (b) Explain the different methods of job evaluation. (c) What is management training & why is it important?

[Marks: (3+4+8) = 15] Q. No. 7. (a) What is office form? Discuss the different types of office forms. (b) Discuss the principles of a good Filing System (c) Why is an index prepared? Explain in brief the various methods of indexing of files.

[Marks: (5+4+6) = 15] Q. No. 8. Write short notes on any FIVE of the following: (a) Source of File (b) Record Management (c) Office environment (d) Card index (e) Functional organization (f) Office Layout (g) Employer employee relationship (h) Standing committee

[Marks: (4 x 5) =20]

= THE END =

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FOUNDATION LEVEL SUBJECT: 004. BUSINESS ECONOMICS AND INTERNATIONAL BUSINESS.

Time: Three Hours Full Marks:100 Answer FIVE questions, Taking at least TWO from each Group “A” and “B” Answer must be brief, relevant, neat and clean. Use a fresh sheet for answering each question. Start answering each question from a fresh sheet.

GROUP - A : BUSINESS ECONOMICS Q. No. 1. (a) Describe the importance of Time Element in Price Determination. (b) State the similarities and dissimilarities between Monopoly competition and Perfect

competition. (c) State the areas where Demand and Supply analysis can be applied under perfect

competition. [Marks: (6+6+8) = 20]

Q. No. 2. (a) Differentiate between demand-pull and cost-push inflation. Is inflation always bad? Justify

your views. (b) What are the causes of and remedies for inflation in the present situation of Bangladesh? (c) Explain the impact of interest rate on investment. (d) What are the relative advantages and disadvantages of foreign aid for development of

Bangladesh, particularly financing Padma-Bridge Construction? [Marks: (5+4+4+7) = 20]

Q. No. 3. (a) Differentiate between demand-pull and cost push inflation. (b) How to manage inflation without affecting economic growth? (c) Explain the term “Super Profits”.

[Marks: (7+7+6) = 20] Q. No. 4. (a) Explain how Monetary Measures and Fiscal Measures help to Control Inflation. (b) Discuss with example:

(i) Fixed cost and Variable cost. (ii) Direct cost and Indirect cost. (iii) Opportunity cost and Outlay cost.

(c) The table below is presented with the data of information regarding a nation’s income. You are required to ascertain (i) Net National Product at Market Prices, (ii) Disposable Personal Income

Data Value in billion Taka Net Domestic Product at Factor Price 12,860 Government Income from State Owned Enterprise (SOEs) 10 Interest on National Debt 110 Transfer Payments by Government 280 Net Foreign Donations 260 Net earned income from export 162 Indirect Taxes 1660 Direct Taxes 470 Subsidies 110 Taxes on Corporate profits 345

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[Marks: (7+6+7) = 20] CMA AUGUST 2013, EXAMINATION FOUNDATION LEVEL SUBJECT: 004. BUSINESS ECONOMICS AND INTERNATIONAL BUSINESS. Q. No. 5. (a) Distinguish between:

(i) Direct Cost and Indirect Cost. (ii) Marginal Cost and Average Cost. (iii) Average Revenue and Marginal Revenue. (iv) Fixed Cost and Variable Cost.

(b) Calculate average cost, marginal cost, marginal revenue and profit from the following data: Units of output

Total Cost (Tk.)

Variable Cost (Tk.)

Fixed Cost (Tk.)

Total Revenue (Tk.)

1 350 150 200 300 2 400 200 200 600 3 450 250 200 900 4 550 350 200 1100 5 600 400 200 1300 6 650 450 200 1500 7 700 500 200 1750 8 800 600 200 2000

[Marks: (8+12) = 20]

GROUP - B : INTERNATIONAL BUSINESS Q. No. 6. (a) Discuss different types of global competitive strategies with example? (b)

(c) Describe export development strategies for both thrust and special sector products export from Bangladesh.

Suggest your strategies to make Bangladesh Garments product competitive in the international market.

[Marks: (7+6+7) = 20] Q. No. 7. (a) What do you mean by the back to back letter of credit? (b) What is the mode of Export financing in Bangladesh? (c) State the role of Multinational Corporation (MNC) in international business of a country. (d) What is the importance of international business for a country?

[Marks: (5+5+5+5) = 20] Q. No. 8. Write Short notes on any five from the following: (i) Trade and Investment Cooperation Framework Agreement (TICFA); (ii) Anti-Globalization; (iii) International Product Life cycle; (iv) Foreign Direct Investment (FDI); (v) Rules of Origin; (vi) M.D.G.; (vii) Free Trade Area (FTA).

[Marks: (4x5) = 20]

= THE END =

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PROFESSIONAL LEVEL-I SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING.

Time: Three Hours Full Marks:100 All questions are to be attempted. Show computations, where necessary. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet.

Q. No. 1. The comparative Statement of Financial Position for XYZ Company shows the following information:

Statement of Financial Position As on 31st December

Assets 2012 2011 Equity and Liabilities 2012 2011 Non Current Assets Capital and Reserves Property, plant and equipment 418,500 345,300 Share Capital (Tk. 10 par) 280,000 225,000 Less: Accumulated Depreciation 90,000 Share premium 78,000 18,000 10,000 328,500 267,300 Revaluation reserve 13,000 5,000 Patent 65,000 73,000 Retained earnings 123,500 111,800 Current Assets Non Current Liabilities Inventories 30,000 21,000 8% Debenture 45,000 65,000 Account receivables 45,000 37,000 Current Liabilities Cash and cash equivalent 40,500 47,300 Accounts Payable 20,500 17,200 Prepaid expenses 6,500 8,700 Outstanding expenses 2,800 4,000 Income tax liability 12,000 16,000 . Interest payable . 700 Total Assets

300 515,500 454,300 Total Equity and Liability 515,500 454,300

Additional Information: (a) Details of property, plant and equipment:

Cost Accumulated Depreciation 2011 2012 2011 2012 Freehold building 175,000 200,000 0 0 Furniture and fixtures 45,300 73,000 22,500 28,700 Equipment 125,000 145,500 55,500 Total

61,300 345,300 418,500 78,000 90,000

(i) No depreciation has been provided for freehold building , however, during the year a professional revaluation of buildings taking account of additions during the year has been incorporated into the books of accounts. There were no disposals during the year.

(ii) Account payable includes Tk. 15,000 for purchase of furniture during the year. (iii) Equipment with original cost of Tk. 45,000 was sold for Tk. 18,000 during the year.

(b) Profit before interest and tax was Tk. 47,800 for the year which includes loss on sale of equipment Tk. 2,500.

(c) Company paid interest of Tk. 1,800 on the outstanding balance of debenture. (d) Corporate tax rate applicable for the firm is 35%. (e) On February 2012 the company made a right issue of 1 for 5 shares at Tk. 11.50 per

share. (f) New shares were issued at June 2012. Part of the proceeds was used to redeem 8%

Debenture at a premium of 4% of their face value. (g) On November 2012 cash dividend was declared and paid by the company.

Required: Prepare a statement of cash flow for XYZ Company following BAS – 7. [Marks: 20]

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING.

Q. No. 2. XYZ Company reported following ledger balances at December 31, 2012.

Tk. Debit Tk. Credit Cost of goods sold 252,500 Accounts payable 4,300 Land 400,000 Revenue 693,500 Building 225,000 Allowance for doubtful accounts 500 Office Equipment 125,000 8% Bonds payable 25,000 Long term Investments 56,000 Share capital (Tk. 10 par) 350,000 Distribution costs 36,000 Share premium 72,950 Administrative expenses 56,000 Retained earnings 60,300 Short term investments 45,000 Accumulated depreciation – Equipment 24,000 Accounts receivable 20,800 General reserve 28,200 Inventories 12,350 Investment income 16,700 Patent 9,000 Sinking fund 21,000 Losses from asset abandonment 3,800 Losses from earthquake 25,000 Loss on disposal of a discontinued division

30,000

Additional Information: (a) Net realizable value of company’s inventory at the year end is Tk. 11,700. (b) A full year interest on bonds payable is due and applicable income tax rate for the

company is 40%. (c) Allowance for bad debt has to charge @ 6% on the ending balance of account receivable.

But in previous years the rate was estimated and applied as 5%. If the new rate had been used in prior years, cumulated bad debt expense would have been Tk. 7,250 instead of Tk. 6,425.

(d) Patent (to sell and distribute a special product) was acquire on 1 July 2011 with an useful life of 5 years. The annual impairment review has indicated that the paten has a recoverable value at the end of current year Tk. 6,000.

(e) Depreciation on equipment has to be charged @ 20% under reducing balance method. But in previous years depreciation was charged following straight line method which resulted Tk. 12,000 depreciation per year. Under the new method, depreciation expense would be Tk. 22,800 for 2010 and Tk. 20,440 for 2011.

(f) The company identified at the year end some unrealized holding gain on available for sale securities (included in short term investment) of Tk. 12,800.

(g) A transfer of Tk. 20,000 for the year should be made to general reserve. (h) Bonds payable will be due in June 2013 for which XYZ has been accumulated the sinking

fund. A sum of Tk. 3,000 should be transferred to sinking fund at the end of the year from general reserve.

Required: (i) A statement of financial position as at December 31, 2012. (ii) A statement of comprehensive income for the year ended December 31, 2012 and (iii) A statement of changes in equity.

[Marks: (8+7+5) = 20] Q. No. 3. (a) State the amount of revenue and/or expense for 1984 in each of the following transactions

of the Marine Co. The accounting period ends December 31, 1984. Treat each item individually. (i) On December 15, 1984, Marine received Tk. 12,000 as rental revenue for a 6-month

period ending June 15, 1985.

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING. Q. No. 3. (contd…….)

(ii) Marine, on July 1, 1984, sold one of its tractors and received Tk. 10,000 in cash and a note for Tk. 50,000 at 12% interest, payable in one year. The fair market value of the tractor is Tk. 60,000.

(iii) One of the Marine’s steady customers is presently in a weak cash flow position. To maintain its goodwill with this customer, Marine sells them 2 tractors with a normal combined selling price of Tk. 112,000, but allows them a special discount of Tk. 8,000.

(iv) During 1984, tractors sold for Tk. 400,000 are accompanied by a Marine guarantee for one year. Past experience indicates that repairs equal to 1% of sales revenue will be required in year of sale, and an additional 3% of sales revenue will be needed for repairs in the subsequent year.

(v) On December 28, 1984, Marine sold 6 tractors for a total of Tk. 435,000. As of December 31, 1984, 3 of the tractors were still in Marine’s Warehouse.

(b) Ignace Paderewski Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Paderewski’s Accounts Receivable account was Tk. 555,000 and the Allowance for Doubtful Accounts had a credit balance of Tk. 35,000. The year end balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging schedule shown below:

Days Account Outstanding Amount Probability of collection Less than 16 days Tk. 300,000 0.98 Between 16 and 30 days 100,000 0.90 Between 31 and 45 days 80,000 0.85 Between 46 and 60 days 40,000 0.75 Between 61 and 75 days 20,000 0.40 Over 75 days 15,000 0.00 Required: (i) What is the appropriate balance for the Allowance for Doubtful Accounts at year-end? (ii) Show how accounts receivable would be presented on the balance sheet. (iii) What is the taka effect of the year-end bad debt adjustment on the before-tax income?

[Marks: (10+10) = 20] Q. No. 4. Listed below are selected items from the financial statements of G & H Pumb Co. for the year ended December 31, 2007:

Notes payable to Prime Bank

Taka 99,000

Income taxes payable 63,000 Loss contingency relating to law suit 200,000 Accounts payable and accrued expenses 163,230 Mortgage note payable 240,864 Bonds payable 2,200,000 Premium on bonds payable 1,406 Accrued bond interest payable 110,000 Pension Expenses 61,400 Unearned revenue 25,300

Other Information: (i) The note payable owed to Prime Bank is due in 30 days, G & H has arranged with this

bank renew the note for an additional two years. (ii) G & H has been sued for BDT 200,000 by someone claiming the company’s pumps are

excessively noisy. It is reasonably possible, but not probable, that a loss has been sustained.

(iii) The mortgage note is payable at BDT 8,000 per month over the next three years. During the next 12 months, the principal amount of this note will be reduced to BDT 169,994.

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(iv) The bonds payable mature in seven months. A sinking fund has been accumulated to repay the full maturity of this bond issue.

CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING.

Q. No. 4. (contd…….) Required: (a) Using this information, prepare the current liabilities and long-term liabilities sections of a

classified balance sheet at December 31, 2007. (b) Explain briefly how the information in each of the four numbered paragraph affected your

presentation of the company’s liabilities. [Marks: (15+5) = 20]

Q. No. 5. (a) Revolving Chair (RC) is one of the most popular items of Home Fusion, a furniture

manufacture. Most of the company’s RCs are standard models and are sold on the basis of catalog prices. At December 31, 2012 Tk. 78,000 of finished RC appears in the company’s inventory. Catalog prices of 2012 and 2013 are Tk. 98,000 and Tk. 92,000 respectively. Estimated current cost to manufacture the RCs is Tk. 75,000 and expected sales commission and other costs of disposal is Tk. 2,000. The 2012 catalog was in effect through November 2012, and the 2013 catalog is effective as of December 1, 2012. All catalog prices are net of the usual discounts. Generally, the company attempts to obtain a 30% gross profit on selling price and has usually been successful in doing so. At what amount should RC appear in the company’s December 31, 2012, inventory assuming that the company has adopted a lower of cost or market approach for valuation of inventories?

(b) Presented below is information related to Prince Bazar. Assuming that Prince Bazar uses the conventional retail inventory method, compute the cost of its ending inventory at June 30, 2013.

Cost Retail Retail Inventory, 1.7.12 Tk. 30,000 Tk. 48,000 Gross sales Tk. 412,000 Purchases 339,500 520,800 Sales returns 28,300 Purchase returns 25,800 36,480 Markups 32,500 Purchase discounts 7,590 - Markup cancellations 8,320 Freight-in 8,920 - Employee discounts granted 3,400 Markdowns - 12,000 Loss from breakage (normal) 2,400 (c) Alvi Corporation has two classes of capital stock outstanding: 12%, Tk.100 par preferred

and Tk. 30 par common. At December 31, 2012 the following accounts were included in stockholders’ equity.

Preferred Stock, 80,000 shares Tk. 8,000,000 Common Stock, 800,000 shares 24,000,000 Paid-in Capital in Excess of Par – Preferred Stock 1,600,000 Paid-in Capital in Excess of Par – Common Stock 20,000,000 Retained Earnings 12,500,000 The following transactions affected stockholders’ equity during 2013.

Jan. 1 25,000 shares of preferred stock issued at Tk. 125 per share. Feb. 1 70,000 shares of common stock issued at Tk. 80 per share. June 1 3-for-2 stock split (par value reduced to Tk. 20) July 1 60,000 shares of common treasury stock purchased at Tk. 90 per

share. Alvi uses the cost method. Sept. 15 15,000 shares of treasury stock reissued at Tk. 95 per share. Dec. 31 The preferred dividend is declared, and a common dividend of Tk.

0.25 per share is declared. Dec. 31 Net income is Tk. 8,250,000 Required: Prepare the stockholders’ equity section for Alvi Corporation at December 31, 2013. Show all supporting computations.

[Marks: (5+5+10) = 20]

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= THE END =

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PROFESSIONAL LEVEL-I SUBJECT: 102. COST ACCOUNTING.

Time: Three Hours Full Marks:100 All questions are to be attempted. Show computations, where necessary. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet. Q. No. 1. (a) Describe the three main components of product cost. Select a product with which you are

familiar and provide examples of costs that would be classified under each of those three components.

(b) During November the following transactions took place in Sevenhill Manufacturing Company: (i) Materials purchased on account, Tk.35,600. (ii) Materials issued during the month as follows: to fill requisitions on job orders,

Tk.25,250, supplies issued to the factory, Tk.1,300. (iii) Materials issued to complete defective units, Tk.200. (iv) Freight paid for materials received, Tk.850. (Freight is not added to unit costs on

materials inventory cards). (v) Materials returned to the vendor during the month, Tk.225. (vi) Scrap materials received in the storeroom were set up at a value of Tk.175, and

credit was given to Factory Overhead Control for that amount. A separate general ledger account, Scrap Materials is used.

(vii) Materials returned to the storeroom during the month as follows: from job orders, Tk.1,090; from supplies issued to the factory, Tk.175.

(viii) Total payroll for the month as follows; Recorded and then paid liability for net pay to workers, Tk.41,503. Withheld for income tax, Tk.7,780. Withheld for hospitalization plan, Tk.950. Other deductions, Tk.2,367.

(ix) Employers liability for the Provident Fund is 6.5% of total payroll. (x) The payroll was distributed as follows: direct labor, Tk.40,200; indirect labor,

balance of payroll. (xi) Depreciation for the month: building, Tk.3,000; machinery, Tk.4,800. (xii) Property taxes accrued during the month, Tk.750; insurance expired with a credit to

the prepaid account, Tk.850. (xiii) Factory overhead is charged to production at a rate of Tk.1.40 per direct labor

hour. Records show 19,200 direct labor hours used during the month. (xiv) Close out the over or under applied factory overhead to Cost of Goods Sold. (xv) Cost of Goods completed during the month Tk.81,750. (xvii) Goods costing Tk.75,500 were sold on account during the month for Tk.90,000.

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 102. COST ACCOUNTING.

Q. No. 1. (cont’d………)

Required: (a) Journal entries to record the above transactions. Indicate the subsidiary records to which

the entries would also be posted. (b) Ledger accounts for Work in Process, Factory Overhead Control, Materials and Finished

Goods. The November 01 balances were: Work in Process, Tk.9,750; Materials, Tk.6,180; Finished Goods, Tk.5,660.

[Marks: (4+12+8) = 24] Q. No. 2: (a) Under EOQ approaches, order costs can be minimized by placing large infrequent orders

of inventory. However, under JIT, inventory-related costs are reduced by ordering frequently and in small quantities. Can you explain why both of these statements are correct?

(b) Monyem Limited uses a small casting in one of its finished products. The castings are purchased from a foundry. Monyem Limited purchases 54,000 castings per year at a cost of Tk.800 per casting. The castings are used evenly throughout the year in the production process on a 360-day-per-year basis. The company estimates that it costs Tk.9,000 to place a single purchase order and about Tk.300 to carry one casting in inventory for a year. The high carrying costs result from the need to keep the castings in carefully controlled temperature and humid conditions and the high cost of insurance. Delivery from the foundry generally takes 6 days, but it can take as much as 10 days. The days of delivery time and percentage of their occurrence are shown in the following table:

Delivery time (days) : 6 7 8 9 10 Occurrence : 75% 10% 5% 5% 5%

Required: (i) Compute the economic order quantity (EOQ). (ii) Assume the company is willing to assume a 15% risk of being out of stock. What would be

the safety stock? The re-order point? (iii) Assume 5% stock-out risk. What would be the total cost of ordering and carrying inventory

for one year? (iv) Refer to the original data. Assume that using process re-engineering the company reduces

its cost of placing a purchase order to only Tk. 600. In addition, company estimates that when the waste and inefficiency caused by inventories are considered, the true cost of carrying a unit in stock is Tk.720 per year. (a) Compute the new EOQ. (b) How frequently would the company be placing an order, as compared to the old

purchasing policy?

[Marks: 5 + {3+3+3+(3+3)} = 20]

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Q. No. 3. (a) Conventional costing systems apply manufacturing overhead costs to products using a

volume-based cost driver such as direct labour hours. What do we mean by the term volume-based cost driver? What problems can arise with this approach to product costing when use in a modern manufacturing environment?

(b) The accountant of Camberwell Electronics Company believes that the identification of the variable and fixed components of the firm’s costs will enable the firm to make better planning and control decisions. Among the costs the accountant is concerned about is the behavior of indirect materials cost. She believes that machine hours are a cost driver for indirect materials costs. A member of the accountant’s staff has suggested that regression analysis be used to determine the cost behavior of indirect materials. The following regression equation was developed from 40 pairs of observations:

S = $200+$4H where S = total monthly costs of indirect materials

H = machine hours per month Required: (i) Explain the meaning of ‘200’ and ‘4’ in the regression equation S = $200 + $4H. (ii) Calculate the estimated cost of indirect materials if 900 machine hours are to be used

during a month. (iii) To determine the validity of the cost estimate calculated in requirement (ii), what questions

would you ask the accountant about the data used for the regression? (iv) Consider three other activities that could be used as cost drivers to predict the total

monthly costs of indirect materials. [Marks: 6+(4+3+4+3) = 20]

Q. No. 4.

Kennelly and Sons manufactures components for the computer industry. The company uses an activity-based costing system to assign labour, manufacturing overhead and non-manufacturing costs to products. Below is a partially completed bill of activities for one of the company’s major products, Switch 3901.

Activity Cost per unit of activity driver

Annual quantity of activity driver

Prepare purchase order $43 per purchase order 50 purchase orders Process payables $27 per invoice received 50 invoices Prepare payroll $10 per payslip 300 payslips Process sales orders $33 per sales order 500 sales orders Pack and dispatch $17 per sales order 500 sales orders Program solder robots $153 per program 200 programs Solder circuits $2 per solder joint 72,000 solder joints Assemble circuit boards $5 per board 15,000 boards Wire in switch $14 per switch 5,000 switches Insert fuse $10 per fuse 5,000 fuses Test switch $4 per switch 5,000 switches Design switch $5,000 for model 3901

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Q. No. 4. (cont’d………)

These annual costs relate to an annual production level of 5,000 switches. The direct material cost per switch is $20. Required: (i) Calculate the total cost per unit for Switch 3901. (ii) Calculate the manufacturing cost per unit for Switch 3901. (iii) Discuss the role that product costs that include both manufacturing and non-manufacturing

costs can play in management decision making. [Marks: (5+5+4) = 14]]

Q. No. 5. The following data relate to Sparkling Waters Ltd, a manufacturer of softdrinks: Work in process, 1 February: (100% complete as to material;

35% complete as to conversion cost) 10,000 units

Direct material $ 5,500 Conversion $ 17,000 Costs incurred during February: Direct material $ 110,000 Conversion $ 171,600 The equivalent units for February were as follows:

Weighted average Direct material

FIFO 110,000 100,000

Conversion 92,000 88,000 During February, 89,000 units were completed and transferred out. Required: (a) Calculate each of the following amounts using weighted average process costing:

(i) Cost of goods completed during February. (ii) Cost of the 28 February work in process inventory.

(b) Repeat requirement (a) using the FIFO method.

[Marks: (10+12) = 22]

= THE END =

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PROFESSIONAL LEVEL-I SUBJECT: 103. MANAGEMENT & MARKETING MANAGEMENT.

Time: Three Hours

Full Marks:100

Answer THREE questions from each part . Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet.

PART – A : MANAGEMENT (TOTAL MARKS-50) Q. No. 1. (a) What is Management? (b) Different types of management have different types of function - Explain. (c) Managerial process comprise four main task; planning, organizing, leading and

controlling. Your company want to launch a new product in the market, How can you relate managerial functions with this decision. Explain briefly?

[Marks: (4+6+6) = 16] Q. No. 2. (a) What is the meaning of organizing? Identify the basic elements of organizations. (b) Describe the benefits and limitations of job specialization. (c) What are the alternative approaches you suggest in overcoming the limitations of

job specialization? [Marks: (6+4+6) = 16]

Q. No. 3. (a) Define control? (b) Why control is necessary? (c) What are the steps involved in the control process?

[Marks: (3+8+5) = 16] Q. No. 4. (a) How would you define and differentiate corporate level and business level

strategy? Give examples. (b) Which strategy should a firm develop first – Business level or Corporate level

strategy? Explain why? (c) Explain use of “SWOT” for formulating strategy.

[Marks: (4+6+6) = 16] Q. No. 5. (a) Management is both science and Art; (b) Span of Control; (c) Supply Chain Management; (d) Corporate Governance.

[Marks: (4+4+4+4) = 16] * Two Marks are reserved for neatness and relevance.

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 103. MANAGEMENT & MARKETING MANAGEMENT.

PART – B : MARKETING MANAGEMENT (TOTAL MARKS-50) Q. No. 6. (a) “Marketing is about identifying and meeting human and social needs” – explain. (b) Distinguish between social and managerial definition of marketing. (c) Explain with example the process of value creation in strategic marketing.

[Marks: (4+5+7) = 16] Q. No. 7. (a) Define Brand, Brand equity and Brand positioning. (b) Briefly describe marketing strategies at different stages of a product life cycle. (c) Differentiate between product and brand.

[Marks: (4+8+4) = 16] Q. No. 8. (a) What are the factors that influence the consumer buying behavior? Give a brief. (b) Describe the 5 stage model of consumer buying decision process.

[Marks: (8+8) = 16] Q. No.9 (a) What do you mean by market segmentation? (b) Discuss the advantages of market segmentation. (c) Explain major market segmentation.

[Marks : ( 4+6+6) = 16] Q.No.10 (a) What is marketing information system? (b) What are the components of marketing information system? (c) Design a marketing information system for Bangladesh Ice-Cream Co. Ltd.

[Marks : ( 4+6+6)=16]

* Two Marks are reserved for neatness and relevance.

= THE END =

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PROFESSIONAL LEVEL-I SUBJECT: 104. INFORMATION TECHNOLOGY.

Time: 2 hours 30 minutes Full Marks: 80 Answer any FOUR of the following questions. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet. Q. No. 1. (a) What is computer based Information System? Why is the study of information systems

important to you? (b) What is the role of information system in today’s competitive business environment? (c) Briefly discuss several data-storage issues that face the modern organization. (d) What ethical, social, and political issues are raised by Information Systems?

[Marks: (5+5+5+5) = 20] Q. No. 2. (a) What advantages and disadvantages are associated with the use of client/server

computing? (b) What role do the bridge, router, gateway and switch play in a network? (c) What is telecommunicating? Why are many companies using it? (d) What is voice over IP (VoIP) and how could it be used in a business setting?

[Marks: (5+5+5+5) = 20] Q. No. 3. (a) What is a “Traditional Filing System” state problems with traditional filing system? (b) What are the elements in a database environment? (c) Differences between WI-FI and WI Max? (d) What is PAN, LAN, MAN, WAN?

[Marks: (8+4+4+4) = 20] Q. No. 4. (a) Prepare a checklist for selecting an accounting software for your organization. (b) Discuss the classification of accounting software. (c) Describe the common modules of accounting software/List and explain eight core modules

that accounting software may have. [Marks: (8+6+6) = 20]

Q. No. 5. (a) Define networking. Discuss some major advantages of networking. (b) What is meant by e-commerce? Describe the characteristics of e-commerce? (c) What are the benefits and limitations of e-commerce? (d) Briefly explain network management. Discuss its functions.

[Marks: (4 x 5) = 20] Q. No. 6. Write short notes on (any five): (a) Half-duplex channel; (b) Wi-Fi and Bluetooth; (c) Outsourcing; (d) Upload and Download; (e) Speech-Recognition Technology; (g) Point-of-Sale Device.

[Marks: (5 x 4) = 20]

= THE END =

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PROFESSIONAL LEVEL-II SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I.


Q. No. 1. (a) What are the advantages and disadvantages of leasing assets instead of owning them? (b) Purabi Leasing Co. Ltd. signs an agreement on January 01, 2008, to lease equipment to

Rana Enterprise. The following information relates to this agreement: (1) The term of the non-cancelable lease is 8 years with no renewal option. The

equipment has an estimated economic life of 10 years. (2) The equipment will revert to the lessor at the end of the lease term, at which time the

equipment is expected to have a residual value of Tk 500,000 which is guaranteed by Ran Enterprise.

(3) Rana Enterprise will bear the executory cost which include insurance cost of Tk. 15,000 and servicing cost of Tk. 9,000 per year. The executory cost is to be paid with annual rental payment.

(4) The agreement requires equal rental payment of Tk. 250,000 to Purabi leasing beginning on January 01, 2008.

(5) Rana Enterprise can borrow at 12% to purchase this type of equipment while Purabi Leasing expects 10% returns on its investment. Purabi’s expected rate of return is known to Rana Enterprise.

(6) Rana Enterprise uses the straight line depreciation method for all equipment. (Present Value of Tk. 1 payable annually at beginning for 8 years at 10% interest rate is 5.86842 and at 12% is 5.56376. Present value of Tk. 1 payable at the end of 8th

Assets

year at 10% interest rate is 0.46651 and at 12% is 0.40388)

Required: (i) Do you think that the lease is capital one? Explain. (ii) Prepare an amortization schedule for Rana Enterprise. (iii) Prepare all journal entries for Rana Enterprise for the years 2008 and 2009. (iv) Prepare Balance Sheet as on December 31, 2008 for Rana Enterprise reflecting lease

related items only. Assume Rana Enterprise follows calendar year to prepare Financial Statements.

(v) Assume that instead of paying installment due on 01.01.2010 Rana Enterprise offered to purchase the equipment for Tk. 13,40,000. What journal entry would Rana pass on 01.01.2010 ?

[Marks: {5 + (3 x 5)} = 20] Q. No. 2 The Balance Sheet of Universal Traders Ltd as on January 01, 2012 is given below:

Liabilities and Capital Cash Tk. 80,000 Accounts Receivable 160,000 Merchandise Inventory 96,000 Store Furniture & Fixture 48,000 Less- Allow. for depre 15,600

Accrued Expenses Tk. 1,500 Accounts Payable 40,000 Capital Stock 250,000 Retained Earnings

32,400 Total Assets Tk. 368,400

76,900 Total Liabilities & Capital Tk. 368,400

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I. Q. No.2.(Contd…….)

On January 01, 2012 the company established a branch sales office at Jessore. The branch is sent the following assets by Head Office upon its organization: a) Cash Tk. 30,000 b) Merchandise, Cost Tk. 30,000, billed at 120% of cost. c) Store furniture and fixture previously used by head office – Cost Tk. 10,000; age, 5 years;

depreciation rate used in the past, 10% a year. The cost of shipment and installation, Tk. 1,500, is paid by the branch. The cost is to be written off over the remaining life of the asset. The fixed assets accounts are to be carried on the books of branch office.

Head office and branch transactions with outsiders during the year 2012 were: Head Office

a) Merchandise billed Tk. 12,000 was shipped by head office to the branch on December 30, 2012; this merchandise is in transit and will not reach the branch until January 2013. (This shipment is not included in the transfer previously mentioned).

Branch Sales on account Tk. 250,000 Tk. 175,000 Collection on accounts 280,000 140,000 Purchase on account 220,000 120,000 Payment on account 240,000 115,000 Payment of expenses (including accruals as of January 01) 30,000 5,000

Interoffice transactions during 2012 were: Merchandise shipment to branch at billed price Tk. 60,000 Cash remittance to Head office 25,000 The following information is to be recorded on December 31, 2012:

b) Expenses paid by the head office during the year that are chargeable to the branch total Tk. 6,000. (These are included in the Tk. 30,000 amount)

c) Depreciation on furniture and fixtures is recorded at the rate of 10% a year. d) Merchandise inventories, excluding merchandise in transit, are, head office Tk. 60,000;

branch Tk. 40,000, composed of merchandise received from head office at billed price, Tk. 9,600.

e) Accrued expenses are: head office, Tk. 1,800; branch, Tk. 900. Required: (i) Prepare journal entries including adjusting entries to record the foregoing transactions for

(a) the head office and (b) the branch office. (ii) Prepare individual Income Statement for the year ended December 31, 2012 and Balance

Sheet as on December 31, 2012 for the head office and branch. [Marks: (10 + 10) = 20]

Q. No. 3. (a) When the outcome of a contract can be estimated reliably as per IAS 11? (b) How the stage of completion of a construction contract may be determined as per IAS 11? (c) What do you mean by (i) Jointly Controlled Operations, (ii) Jointly Controlled Assets, and

(iii) Jointly Controlled Entities ? (d) National Engineers Ltd. Commenced work on 1st January 2011, on a contract of which the

agreed price was Tk. 50,00,000. The following expenditure was incurred during the year to 31st December 2011:

Wages Tk. 14,00,000 Plant 3,50,000

Materials 10,50,000 Sundry Expenses 65,000 Head Office Charges 1,25,000

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I.

Q. No.3.(Contd…….)

Certain of the materials costing Tk. 1,00,000 proved unsuitable and were sold for Tk. 1,15,000, and part of the plant was scrapped and sold for Tk. 17,000. Of the contract price Tk. 24,00,000 representing 80% of the work certified, had been received by 31st December 2011, and on that date the value of the plant, on the job was Tk. 80,000 and the value of the materials Tk. 30,000. The cost of the work done but not certified was Tk. 2,50,000. It was decided to estimate what further expenditure would be incurred in completing the contract, to compute from this estimate and the expenditure already incurred the total profit that would be made on the contract and to take to the credit of the Profit and Loss Account for the year ended December 31st

a) That the total contract would be finished by 30

2011, and that proportion of the total profit which corresponded with the work certified. The estimates were as follows:

th

b) That wages to complete would amount to Tk. 8,49,500; June, 2012;

c) The materials in addition to those in stock on 31st

d) That a further Tk. 1,50,000 would have to be spent on plant and that the residual value of the plant on 30

December, 2011, would cost Tk. 5,00,000, and sundry expenses on the contract Tk. 35,000 further;

th

e) That head office charges to the contract would be at the same annual rate as in 2011; June, 2012, would be Tk. 60,000;

f) That the claims, temporary maintenance and contingences would require Tk. 90,000. Prepare Contract Account for the year ended 31st

Accounts Titles

December, 2011 and show your calculation of the sum to be credited to Profit and Loss Account for the year.

[Marks: (4+3+13) = 20] Q. No. 4. The following Trial Balance was extracted from the books of the Popular Life Assurance Company as on December 31, 2012;

Dr. (Tk.) Cr. (Tk.) Issued and Subscribed Capital: 10,000 shares of Tk.15 each, Tk.10 called

1,00,000

Life Assurance Fund on 01.01.2012 29,00,300 Dividend Paid 16,000 Bonus to policy-holders 30,500 Premium received 2,33,500 Claims paid 1,97,000 Commission paid 9,300 Management expenses 32,300 Mortgage in Bangladesh 4,92,200 Interest and Dividend received 1,12,700 Agent’s Balances 9,300 Freehold premises 40,000 Investments 23,00,000 Loan on company’s policies 1,78,600 Cash Deposits 27,000 Cash in hand 7,300 Surrenders 7,000 …...

Total 33,46,500 33,46,500

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I. Q. No.4.(Contd…….)

Adjustments: (i) Claims admitted but not paid Tk.10,000; (ii) Management expenses due Tk. 1,200; (iii) Interest accrued Tk.21,300; (iv) Premiums outstanding Tk.10,000; (v) Bonus utilized in reduction of premium Tk.6,000; and (vi) Claims covered under re-insurance Tk.2,300. Required: (a) Revenue Account and (b) Balance Sheet.

[Marks: (10+10) = 20] Q. No. 5. The following details were available regarding the affairs of Emacol Ltd as at 31 December 2012 when the company was contemplating filing a petition for liquidation or reorganization:

Accounts payable Taka 97,500

Mortgage Notes payable 100,000 Bank Notes payable 16,000 Cash in Hand 2,000 Cash at Banks 2,100 Notes Receivable 12,000 Accounts Receivable (estimated collectible value: Tk.14,000) 23,500 Wages and Salaries due to 3 employees 6,750 Interest Payable- Bank Notes 550 Interest Payable- Mortgage Notes 4,250 Inventories – Finished Goods 28,000 Inventories – Work in Progress 12,000 Inventories – Raw Materials 19,500 Prepaid Insurance (estimated recovery value: Tk.300) 600 Investment in Stock 13,250 Capital Stock 125,000 Retained Earnings (deficit) (70,600) Land (appraised value: Tk.20,000) 21,000 Building – Net (appraised at Tk.50,000) 99,000 Plant and Machinery –Net (estimated disposal value: Tk.19,000) 46,500

(a) The Notes Receivable are expected to be fully realized, and they have been pledged as collateral on a Bank Note in the principal amount of Tk.10,000 plus interest payable of Tk.300.

Additional Information:

(b) Finished goods inventory can be sold at a mark-up of 20% over cost, with estimated selling expenses of 10% of selling price.

(c) Inventories-WIP required Taka 6,000 to complete, of which Taka 2,500 represents the cost of raw materials. Estimated selling price of the completed WIP inventories is Taka 12,500.

(d) Estimated selling price of the raw materials is Taka 11,900. (e) Investment in stock is pledged as collateral on a Bank Note Payable in the principal

amount of Taka 6,000 plus interest payable of Taka 250. (f) Land and Buildings serve as collateral on the Mortgage Note Payable. Required: Prepare a Statement of Affairs for Emacol Ltd. along with a Deficiency Account.

[Marks: 20]

= THE END =

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PROFESSIONAL LEVEL-II SUBJECT: 202. MANAGEMENT ACCOUNTING.


Q. No. 1. (a) Explain how costs and benefits are relevant to the design of management accounting

systems. (b) Give an example of management accounting information that could be use by a manager

to make each of the following decisions. Remember to consider non-financial information where relevant. (i) The manager of a discount department store is deciding how many security

personnel to employ to reduce shoplifting. (ii) A city council is deciding whether to build an extension to the public library. (iii) The manager of a rental car agency is deciding whether to add luxury cars to the

rental car fleet. (iv) The production manager in a car manufacturing plant is deciding whether to have

routine maintenance performed on a machine weekly or every two weeks. (c) What are the advantages and limitations of the four types of benchmarking?

[Marks: (4+6+8) = 18] Q. No. 2. (a) Discuss the following comment by the manager of a small manufacturing company:

‘Budgeting is a waste of time. I’ve been running this business for forty years. I don’t need to plan.’

(b) The annual flexible budget of Tesco Lotus Ltd is as follows:

Capacity 40% 60% 80% 100% Tk. Costs Tk. Tk. Tk.

Direct labor 16,000 24,000 32,000 40,000 Direct Materials 12,000 18,000 24,000 30,000 Production Overheads 11,400 12,600 13,800 15,000 Administration costs 5,800 6,200 6,600 7,000 Selling and Distribution cost 6,200 6,800 7,400 8,000 51,400 67,600 83,800 1,00,000 Owning to trading difficulties, the Company is operating at 50% capacity. Selling prices have had to be lowered to what the directors maintain in an uneconomical level and they are considering whether or not their single factory should be closed down until trade recession has passed. A market research consultant has advised that in about 12 months’ time there is every indication that sales will increase to about 75% of normal capacity and that the revenue to be produced in the second year will amount to Taka 90,000. The present revenue from sales at 50% capacity would amount to only Tk. 49,500 for a complete year. If the directors decided to close down the factory for a year, it is estimated that: (i) The present fixed cost would be reduced to Tk. 11,000 p.a. (ii) Closing down cost would amount to Tk. 7,500. (iii) Necessary maintenance at plant would cost Tk. 1,000 p.a.

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 202. MANAGEMENT ACCOUNTING.

Q. No. 2.(cont’d…….)

(iv) On reopening the factory, the cost of overhauling plant, training and engagement of new personnel would amount to Tk. 4,000.

Required: Prepare a statement for the directors presenting the information in such a way as to indicate whether or not it is desirable to close the factory.

[Marks: (5+15) = 20] Q. No. 3. Berwin Ltd is a manufacturer of small industrial tools with annual sales of approximately $7 million. Sales growth has been steady during the year and there is no evidence of cyclical demand. Production has increased gradually during the year and has been evenly distributed throughout each month. Carla Viller, the accountant, has designed and implemented a new budget system in response to concerns voiced by CEO George Berwin. Carla prepared an annual budget that has been divided into 12 equal segments; this budget can be used to assist in the timely evaluation of monthly performance. George was visibly upset upon receiving the May performance report for the machining department. He exclaimed: ’How can they be efficient enough to produce nine extra units every working day and still miss the budget by $300 per day!’ Gene Jordan, the supervisor of the machining department, could not understand ‘all the red ink’ when he knew that the department had operated more efficiently in May than it had done in months. Gene stated: ‘I was expecting a pat on the back. Instead, the boss tore me apart. What’s more, I don’t even know why!’

Berwin Ltd Machining Department

Performance Report For the month ended 31 May 2008

Budgeted

Actual Variance

Volume in units 3,000 3,185 185 F Variable manufacturing costs:

Direct materials $24,000 $24,843 $ 843 U Direct labour 27,750 29,302 1,552 U Variable overheads 33,300 35,035 1,735 U

Total variable Costs $85,050 $89,180 $4,130 U Fixed manufacturing Costs:

Indirect labour $ 3,300 $ 3,334 $ 34 U Depreciation 1,500 1,500 0 Taxes 300 300 0 Insurance 240 240 0 Other 930 1,027 97 U Total fixed costs $ 6,270 $ 6,401 $ 131 U

Corporate costs: Research and development $ 2,400 $ 3,728 $1,328 U Selling and administrative 3,600 4,075 475 U Total corporate costs $6,000 $ 7,803 $1,803 U Total costs $97,320 $103,384 $6,064 U

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Q. No. 3(cont’d…….)

Required (a) Discuss the strengths and weaknesses of the new budgetary system.

(b) Identify the weaknesses of the performance report and explain how it should be revised to eliminate each weakness.

(c) Prepare a revised report for the machining department using the May data.

(d) What other changes would you make to improve Berwin’s budgetary system?

[Marks: (4+4+8+4) = 20]

Q. No. 4.

(a) Hawaiian Candy Company is a wholesale distributor of candy. Small but steady growth in sales has been achieved by the company over the past few years while candy prices have been increasing. The company is manufacturing its plans for the coming fiscal year. Presented below are the data used to project income of $184,000.

Average selling price $4.00 per box

Average variable costs Cost of Candy $2.00 per box Selling expenses $0.40 per box Total $2.40 per box

Annual fixed costs Selling $160,000 Administrative

280,000 Total $440,000

Expected annual sales volume (390,000 boxes) $1,560,000

The manufacturing of the candy have announced that they will increase prices of their products by 15 percent in the coming year. The company expects that all other costs will remain the same rates or levels as the current year.

Required: (i) What is Hawaiian Candy Company’s breakeven point in boxes of candy and in dollar

amount for the current year? (ii) Calculate margin of safety and degree of operating leverage of the current year. What will

be change in expected profit if expected sales are increased by 15%?

(iii) What selling price per box must the company charge to cover the 15 percent increase in the cost of candy and still maintain the current contribution margin ratio?

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Q. No. 4. (cont’d…….) (b) The management of Baker Company is considering the elimination of an unprofitable

product. Data for its three major products are as follows:

Snap Crackle Sales

Pop $4,000 $2,000 $1,000

Manufacturing Costs 2,800 1,200 600 Fixed Operating expenses 800 600 Income

800 $400 $200 $(400)

Variable cost ratio 40% 30% 50% Allocated fixed ratio $ 200 $ 200 $200 Allocated fixed costs would not be affected by a decision to drop a product. However, 50% of fixed costs (both manufacturing and operating) identified with a product would be dropped if the product were eliminated. Prepare an analysis to see whether pops should be eliminated.

[Marks: (4+6+4) + 8 = 22] Q. No. 5. (a) Would you recommend variable costing or absorption costing as a source of information

for managers? Explain your answer. (b) Slim and Trim produces frozen yoghurt, a low-fat dairy dessert. The product is sold in five-

litre containers and had the following price and variable costs per unit in the current year: Sales price $27.00 Direct material 9.00 Direct labour 3.60 Variable overhead 5.40

Budgeted fixed overhead for the current year was $600,000, which was equal to actual fixed overhead. Actual production was 150,000 five-litre containers, which was equal to the budgeted level of production, but only 125,000 containers were sold. Slim and Trim incurred the following selling and administrative expenses:

Fixed $100,000 Variable $2 per container sold.

Required: (i) Calculate the cost per unit under variable and absorption costing. (ii) Prepare income statements for the current year using:

(a) Absorption costing; (b) Variable costing.

(iii) Reconcile the profits reported under the two methods. [Marks: 6 + {3 + (4+4) + 3} = 20]

= THE END =

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PROFESSIONAL LEVEL-II SUBJECT: 203. COMMERCIAL & INDUSTRIAL LAWS.

Answer SIX questions taking any THREE from each part, including compulsory question No. 5 and 10.

Time: Three Hours Full Marks:100

Answer must be brief, relevant, neat and clean. Use a fresh sheet for answering each question. Start answering each question from a fresh sheet.

PART-A: COMMERCIAL LAWS

Q. No. 1. (a) “Every agreement by which any one is restrained from exercising a lawful profession,

trade or business of any kind is to that extent void” – Explain with at least two examples. (b) By whom is a contract to be performed? Who can demand performance?

[Marks: (8 + 7) = 15] Q. No. 2. Discuss the circumstances where the object or consideration of an agreement is unlawful?

[Marks: 15] Q. No. 3. (a) Define Negotiable Instrument. Name the Negotiable Instruments that are recognized by

statute and recognized by usage or custom. (b) What conditions are implied in arbitration agreement? (c) Differentiate between Common carriers and Private carriers.

[Marks: (5+5+5) = 15] Q. No. 4. (a) What are the distinctions between Bill of Exchange and Cheque. (b) What are the rules of Endorsement?

[Marks: (8 + 7) = 15] Q. No. 5. Write short notes on any 4(four) of the following: (a) Misrepresentation. (b) Undue influence. (c) Bill of Lading. (d) Trade Mark. (e) Promissory Note. (f) Doctrine of Caveat emptor.

[Marks: (5 x 4) = 20]

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 203. COMMERCIAL & INDUSTRIAL LAWS.

PART-B: INDUSTRIAL LAWS Q. No. 6. (a) What is lay off? Discuss the rate of compensation to workers for lay off. Under what

conditions laid off workers are not entitled to get any payment? (b) What are the procedures of retrenchment? Is an employer under any obligation bound to

reemploy a retrenched worker? [Marks: (8+7) = 15]

Q. No. 7. (a) Describe the provisions of (i) Interval for rest or meal and (ii) Weekly hours as per the BLA

– 2006. (b) Narrate shortly the provisions of Annual leave with wages as per the BLA – 2006.

[Marks: (8 + 7) = 15] Q. No. 8. Discuss the liability of a Garments Owner in respect of safety of the workers as per the BLA 2006.

[Marks: 15] Q. No. 9. (a) What are the functions of Labour Appellate Tribunal? (b) What is unfair labour practice? What are the unfair labour practices on the part of the

employer? [Marks: (8 + 7) = 15]

Q. No. 10. Write short notes on any 4(four) of the following: (a) Trade Union and CBA. (b) Strike & lockout. (c) Annual Leave. (d) Maternity benefit. (e) Temporary workers and Probationary workers.

[Marks: (4 x 5) = 20]

= THE END =

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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH CMA AUGUST– 2013 EXAMINATION

PROFESSIONAL LEVEL-II SUBJECT: 204. TAXATION

Time : Three hours Full Marks: 100 All questions are to be attempted. Show computations, where necessary. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet.

Q. No. 1. (a) Write short notes on the following:-

(i) Minimum tax for partnership firm; (ii) Amortization of Licence fees; and (iii) Changes in forms of Income Tax Return for assessment year 2013-14.

(b) Briefly explain the tax implications in following cases:- (i) Rental Power Company; and (ii) Investment in residential building and apartment u/s 19BBBBB.

[Marks: {(2+2+3) + (2x3)} = 13] Q. No. 2 (a) What incentives are given to SMEs through the Finance Act 2013? (b) What are the consequences if advance payment of tax is more or less than the required

amount? (c) Briefly explain the role of facilitator at ADR. How will his fees be determined? (d) Specify the requisite tax to be paid at every stage of first appeal, second appeal, reference

to the High Court Division and appeal to the Appellate Division of the Supreme Court. [Marks: (4 x 4) = 16]

Q. No. 3 From the following particulars compute the total income and tax liability of Mr. X for the income year ending 30 June, 2013:- (a) Salary Income :

Basic salary: Tk. 20,000 p.m. Entertainment allowance: 20% of basic salary Bonus: equivalent to 2 months’ basic salary Free accommodation (out of which 1 room was sub-let by Mr. X for Tk.3, 000 p.m.), rental value being Tk. 72,000 p.a. Medical allowance: Tk. 500 p.m. (actual expense Tk. 8,000) Conveyance allowance: Tk. 3,000 p.m. Subscription to RPF: 10% of basic salary (Employer also contributed the same).

(b) Interest on Securities : Interest on SEC approved debenture Tk. 10,000/- Interest on Government securities. 70,000/- (TDS @ 10% Tk. 7000/- under upfront system 3 years ago).

(c) Income from House Property : Mr. X has one residential house – one half of which is let out at a monthly rent of Tk. 50,000/- and the other half is self-occupied. Following actual expenditures were incurred by Mr. X for the full house:- Taka

Municipal tax 20,000 Repairs and maintenance 60,000 Insurance premium 12,000 Salary of caretaker 30,000 Interest on house building loan ( actually paid Tk. 50,000/-) 1,47,000

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CMA AUGUST– 2013 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 204. TAXATION Q. No. 3. (cont’d…….) (d) Income from Partnership Business :

50% share income from a partnership firm is Tk. 1,46,000 (after tax). Firm’s total income was Tk. 3,00,000/- (tax came at Tk. 8,000/-), but the firm did not pay any tax rather it preferred appeal and now it is pending at appeal stage.

(e) Capital Gain : Gain from sale of shares of listed companies Tk. 5,27,335/-.

(f) Income from Other Sources : Cash dividend (net of tax) from a listed company Tk. 45,000/- Stock dividend of 100 shares (Face value TK. 10 but market price on that day Tk. 1500/- per share). Interest (net of tax) on savings bank account Tk. 5,400/-.

(g) During the year Mr. X made the following investments:- (1) Life insurance premium at the name of his dependent old father Tk. 60,000 (Policy

Value TK. 500,000); (2) Investment in secondary shares of listed companies Tk. 1,00,000; (3) Donation to Prime Minister’s relief fund Tk. 10,000/-.

[Marks: 20] Q. No. 4. From the following Profit and Loss Account of PQ Ltd. for the year ended on 30 June 2013, determine total income and tax liability:

Profit and Loss Account Taka Taka Director’s Remuneration 46,000 Gross profit 4,75,000 Salaries & Wages 1,00,052 Dividend Income 30,000 Contribution to Provident Fund 8,800 Share Premium 30,000 Rent & Taxes 24,500 Sundry Income 13,000 Repairs and Operating Expenses 27,300 Capital gain on sale of machine 40,000 Electricity 17,500 Insurance 8,000 Legal Expenses 14,500 Audit Fee 5,800 Printing, Stationery and Postage 14,600 Compensation for Termination of a Staff 10,000 Typewriter 5,948 Advertisement 12,200 Entertainment 9,500 Provision for Bad Debt 4,400 Depreciation 46,600 Net Profit 2,32,300 5,88,000 5,88,000 Other Information: a) Rent and Taxes included Value Added Tax (VAT) of Tk. 4,200/- which was paid for

importing a machine and it was not used during the relevant year. b) Legal expenses included a sum of Tk. 10,000/- spent for income tax appeal. c) Provident Fund is recognized by the Income Tax Authority. d) Bad debt written off previously was recovered during the year Tk. 2,000/-.

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CMA AUGUST– 2013 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 204. TAXATION

Q. No. 4. (cont’d…….)

e) Allowable tax depreciation Tk. 58,400/- f) Repairs and operating expenses included Tk. 6,000/- spent fo installation of a second

hand air conditioner in the residence of Managing Director. g) Entertainment expenses included Tk. 2,000/- for which no clear explanation was available

and miscellaneous expenses of Tk. 5,276/- which proved to be personal expenses of a Manager.

h) Company declared dividend @ 22% on paid up capital for the shareholders. i) The Company is a trading company and not listed in any stock Exchange.

[Marks: 20] Q. No. 5. M/S. Asa Electronics has imported electronic parts which will be assembled and packed in Bangladesh. Due to increase in the last consignment price, the company needs to increase its product price, for which it has to submit VAT FORM-1 to the VAT authority. The imported consignment consisted of 10,000 units at a C&F (cost & freight) value of USD 60 per unit. The exchange rate was Tk. 78 for 1 US dollar. Applicable duties and tax were: Custom duty @ 12%, Supplementary duty @ 10%, Advance income tax @ 5%, VAT @ 15% and ATV @ 4%. Customs authority added 1% of C&F value as insurance cost and 1% of CIF value as landing charge to determine the assessable value. After importation, the company’s carrying and other cost was Tk. 40 per unit, labour cost Tk. 200 per unit and overhead 50% of labour cost. For assembling and packing, the company used 2 articles locally, article A at a cost of Tk. 80 per unit without any VAT for exemption and article B at a cost of Tk. 200 per unit plus 15% VAT therefor. As per management policy, the company’s mark up profit is 20% of cost. Required: Determine – (a) Assessable Value for Customs clearance. (b) Total duties and taxes, including VAT, AIT and ATV. (c) Per unit sales price for submission of VAT Form-1. (d) Output VAT per unit, Input VAT per unit and VAT liability per unit after input VAT credit.

[Marks: (4 x 4) = 20] Q. No. 6 (a) Briefly describe the PSI system for imposition of import duty under section 25B of the

Customs Act, 1969. Comment on the conversion of mandatory PSI into optional one with effect from 01 July, 2013.

(b) Who is required to pay VAT as per section 3 of the VAT Act, 1991? How is excise duty being collected now?

(c) Distinguish between tax avoidance and effective tax planning. Why should one consider the income tax authority as a party in a new project even if the project is exempt from tax?

[Marks: (4+4+3) = 11]

= THE END =

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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH CMA AUGUST – 2013 EXAMINATION

PROFESSIONAL LEVEL-III SUBJECT: 301. ADVANCED FINANCIAL ACCOUNTING-II


Q. No. 1. (a) MUTTAKEEN LTD. reported number of Shares outstanding 50,00,000 and Basic Earnings

per Share (EPS) is Tk. 2.00. The company has 10,00,000 of 12% convertible Debenture of Tk. 10 each (each debenture is convertible into 1 ordinary share). Tax Rate is 37.50%. Calculate the Basic EPS again and the Diluted Earnings Per Share of the company as per IAS-33.

(b) You are the CFO of MONYEM PHARMA AID LTD. and you are asked for prepare a management information system (MIS) report with the following data for the management for decision making based on IFRS-8.

Particulars Amount (Tk. in

millions)

Amount (Tk. in

millions) Sales: Food Products ……………………………………………………… Plastic & Packaging ……………………………………………….… Health & Scientific ………………………………………………… Others ……………………………………………………………..… Expenses: Food products………………………………………………………… Plastic & Packaging ……………………………………………….. Health & Scientific …………………………………………………. Others………………………………………………………………….. Other Items: General Expenses …………………………………………………… Income from Investments …………………………………………… Interest expenses ……………………………………………………. Identifiable Assets: Food Products ……………………………………………………….. Plastic & Packaging …………………………………………………. Health & Scientific …………………………………………………… Others ………………………………………………………………… General Assets ……………………………………………………….

5,650

625 345 162

6,782

4,182

562 132 65

10,355 722

3,335

425 222 200

7,320 1,320 1,050

665

Other Information: (i) Inter Segment Sales:

Food Products …………………………………………………………………. Tk. 55 millions Plastic & Packaging …………………………………………………………….Tk. 72 millions Health & Scientific ………………………………………………………………Tk. 21 millions Others …………………………………………………………………………… Tk. 7 millions

(ii) Opening profit includes Tk. 33 millions on inter-segment sales; (iii) Information about inter-segment expenses are not available. Required: Prepare a statement showing financial information about MONYEM PHARMA AID LTD.’s operation in different industry segments as per IFRS-8.

[Marks: (6 +14) = 20]

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 301. ADVANCED FINANCIAL ACCOUNTING-II Q. No. 2. On 1 July 2012, MMH Ltd acquired 80% of the share capital of Muaz Ltd for Tk.150,000 and Muaz Ltd acquired 60% of the share capital of Mahran Ltd for Tk.99,400. At that date, the shareholders' equity of Muaz Ltd and Mahran Ltd were as follows: Muaz Ltd Share capital …………………………………..

Mahran Ltd Tk. 100,000 Tk.100,000

General reserve ………………………………. 60,000 40,000 Asset revaluation reserve …………………… 4,750 3,000 Retained profits……………………………….. 25,000 10,000

At acquisition date, the assets and liabilities of Muaz Ltd and Mahran Ltd were recorded at carrying amounts equal to their fair values, the non-current assets being revalued immediately prior to the acquisitions of shares by MMH Ltd. and Muaz Ltd. The nonmonetary assets of Muaz Ltd at 1 July 2012 consisted of:

Plant …………………………………………….. Tk.120,000 Motor vehicles………………………………….. 40,000 Inventory………………………………………… 20,000

The motor vehicles and plant of Muaz Ltd were expected to have remaining useful lives of 5 and 10 years respectively. The inventory on hand at 1 July 2012 was all sold by 30 June 2013. Any goodwill acquired is amortized evenly over a 10-year period. At 1 July 2012, Mahran Ltd had recorded goodwill ofTk.9,000. the tax rate is 30%. Additional information (a) The profit and loss statements of MMH Ltd and its two subsidiaries, Muaz Ltd and Mahran

Ltd, for the year ended 30 June 2013 were as follows: MMH Ltd Muaz Ltd Sales revenue………………….………

Mahran Ltd Tk.400,000 Tk.350,00 Tk.320,000

Other revenue …………………………… 80,000 70,000 Total revenue

50,000 480,000 420,000 370,000

Cost of sales……………………………… 210,000 252,000 185,000 Other……………………………………… 180,000 141,800

165,000 390,000 393,800

Profit before income tax………………… 350,000

90,000 26,200 20,000 Income tax expense…………………… 22,000 8,700 Net profit

9,000 68,000 17,500 11,000

Retained profits as at 1/7/2012 …… 16,000 25,000

10,000 84,000 42,500

Interim dividend paid …………………… 21,000

7,500 2,500 1,000 Final dividend provided……………… 12,500 5,000

2,000 20,000 7,500

Retained profits as at 30/6/2013 …… 3,000

Tk.64,000 Tk.35,000 Tk.18,000 (b) During the year ended 30 June 2013, all dividends paid and provided were out of profits

earned since 30 June 2012, except for the Tk.1,000 interim dividend paid by Mahran Ltd, which was provided for out of profits for the year ended 30 June 2012.

(c) Inter-entity sales for the year: Muaz Ltd to Mahran Ltd. ……………………………..Tk.20,000 Mahran Ltd to MMH Ltd……………………………. 10,000

(d) Profits in ending inventory through inter-entity sales were: Inventory of Mahran Ltd. ……………………………. Tk.3,000 Inventory of MMH Ltd …………………………….. 500

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 301. ADVANCED FINANCIAL ACCOUNTING-II Q. No. 2.(contd…….) (e) On 1 January 2013, Mahran Ltd sold machinery to MMH Ltd for Tk. 42,000. Carrying

amount of the machinery on date of sale was Tk.43,500. MMH Ltd charged depreciation on machinery at the rate of 10% per annum on a straight-line basis.

(f) Net profit attributable to outside equity interests = Tk. 8,625 Required: Prepare the consolidated statement of financial performance at 30 June 2013 with notes.

[Marks: = 20] Q. No. 3. H Ltd. acquired a 70% interest in the equity shares of F. Ltd. for Tk. 750,000 on January 1, 2011. The abridged statement of financial position of both companies at the date of acquisition were as follows.

H. Ltd. Tk.(000) F. Ltd. (Tk.000) Identifiable assets 8200 2000 Investment in F. Ltd. 750

- 8950

Equity 2000

6000 1200 Identifiable liabilities 2950

800 8950 2000

The fair value of the identifiable assets of F. Ltd. amounts to Tk. 2800,000 and the fair value of the liabilities is Tk. 800,000. The non controlling interest will be measured as a percentage of net assets of the acquire. Demonstrate the results of the acquisition. (b) (i) A reportable segment is an operating segment or results from the aggregation of two or more operating segments that meets any of the quantitative threshold. Discuss. (ii) Hollier Inc is a diversified entity that operates in nine operating segments organized around differences in products and geographical areas. The following financial information relates to the year ending June 30, 2015.

$ 000 Nature of business Total Sales External Sales Total profits Beer

Total Assets 2,249 809 631 4,977

Beverages 1,244 543 -131 3,475 Hotels 4,894 4,029 714 5,253 Retail 3,815 3,021 -401 1,072 Packaging 7,552 5,211 1,510 Totals:

8,258 19,754 13,613 2,323 23,035

Geographical areas Total Sales External Sales Total profits Finland

Total Assets 7,111 6,841 1,536 9,231

France 1,371 1,000 -478 5,001 United Kingdom 3,451 2,164 494 3,667 Australia 7,821 3,608 771 Totals

5,136 19,754 13,613 2,323 23,035

As per IFRs- 8 identify the reportable operating segments on the basis of the reports mentioned above.

[Marks: (6+4+10) = 20]

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 301. ADVANCED FINANCIAL ACCOUNTING-II Q. No. 4. (a) Define National Income of Country and how it is computed? (b) The following data relates to the national Income Account of a Country for the year-2012.

Total domestic expenditure at market price

Taka in million 37,250

Capital consumption 2,720 Property income received in abroad 1,730 Indirect taxes 6,550 Import of goods and services 6,970 Property Income paid abroad 1,230 Subsidies 2,500 Export of goods and services 6,350 Capital grant by government to government 1,500

Compute: (i) Gross domestic product at factor cost. (ii) Gross National product at factor cost. (iii) National Income.

[Marks: (5 + (3 x 5) = 20] Q. No. 5. On January 1, 2009, R & Co. purchased 80 percent of S & Co.'s ordinary shares for Tk. 56,000. At acquisition, S & Co. reported net assets of Tk. 60,000. Trial balance for the two companies on December 31, 2012 were as follows: R & Co. Items

S & Co. Dr. Cr. Dr.

Cash Cr.

26,060 2,000 Accounts Receivable 16,000 14,000 Inventory 34,000 22,000 Buildings & Equipment 120,000 80,000 Investment in S & Co.'s ordinary shares 60,800 Cost of Goods Sold 83,200 40,400 Depreciation & amortization 6,000 4,000 Other Expenses 4,800 3,600 Dividends Declared 10,000 5,000 Accumulated Depreciation 62,000 24,000 Accounts Payable 20,000 3,040 Bonds Payable 60,000 20,000 Bond Premium 960 Ordinary Shares 40,000 20,000 Share Premium 4,000 Retained Earnings, January 1, 2012 69,180 43,000 Sales 100,000 50,000 Other income 4,080 6,000 Income from Subsidiary 5,600 360,860 360,860 171,000 171,000

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 301. ADVANCED FINANCIAL ACCOUNTING-II Q. No. 5.(contd…….) Additional information: 1) The purchase differential is assigned to buildings and equipment that had a remaining 10-

year economic life at the date of combination with a salvage value of zero. 2) R & Co. regularly purchases inventory from S & Co. During 2011, S & Co. sold inventory

Costing Tk. 8,000 to R & Co. for Tk. 12,000 and R & Co. resold 60% of the inventory in 2011 and 40% in 2012 to non affiliates.

3) During 2012, S & Co. sold inventory costing Tk. 6,000 to R & Co. for Tk. 9,000, and R & Co. resold before end of year 2012, one-third of the inventory purchased from S & Co. to non-affiliates.

4) R & Co. sold equipment purchased at Tk. 15,000 to S & Co. for Tk. 10,000 on December 31, 2010. Accumulated depreciation over the 12 years of use before the intercorporate sale was Tk. 9,000. The estimated remaining life at the time of transfer was eight years. Straight line depreciation is used by both companies.

5) R & Co. owes to S & Co. Tk. 2,000 on account on December 31, 2012. Required (apply either Parent Company approach or Entity approach): (a) Give all journal entries recorded by R & Co. with regard to its investment in S & Co. during

2012 under equity method. (b) Give all eliminating entries needed to prepare consolidated financial statements for the

year 2012. (c) Prepare equity method consolidated workpaper as of December 31, 2012.

Marks: (3+6+11) = 20]

= THE END =

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PROFESSIONAL LEVEL-III SUBJECT: 302. ADVANCED COST ACCOUNTING

Time: Three Hours Full Marks:100 All questions are to be attempted. Show computations, where necessary. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet. Q. No. 1. a) Express an opinion as to the usefulness of data, derived from process costing, for the

control of costs. b) Western Corporation has two producing departments, Fabricating and Finishing. In the

Fabricating Department, Polyplast is prepared from Miracle Mix and Bypro. In the finishing Department, each unit of Polyplast is converted into six Tetraplexes and three Uniplexes. Service Department provides services to both producing services. The Fabricating and Finishing Departments use process cost procedures. Actual production costs, including factory overhead, are allocated monthly.

Service Department expenses are allocated to producing departments as follows:

Expenses Fabricating Finishing Building Maintenance Tk. 30,000.00 Tk. 15,000.00 Timekeeping and Personnel Tk. 16,500.00 Tk. 11,000.00 Others Tk. 19,500.00 Tk. 19,500.00

Materials inventory and work in process are costed on a FIFO basis. The Fabricating Department’s records for December show:

Particulars Units In process, December 1 3,000 Started in process 25,000 Total units to be accounted for 28,000 Transferred to Finishing Department 19,000 In process, December 31 6,000 Normal Losses throughout the process 3,000 Total units accounted for 28,000

Particulars Amount in Taka Work in process, December 1 13,000 Material 17,500 Labor 21,500 Factory Overhead 52,000

Current period costs: Direct Labor Cost 154,000 Departmental Factory Overhead (excluding service department allocation)

132,000

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 302. ADVANCED COST ACCOUNTING

Q. No. 1.(contd……)

Polyplast work-in -process at the beginning and end of the month was partially completed as follows:

Particulars Materials Labor and Factory Overhead

December 01 66% 50% December 31 100% 75% Material inventory records for December indicate:

Particulars Miracle Mix Bypro Quantity (unit) Amount (Taka) Quantity (unit) Amount (Taka)

Balance, December 01 62,000 62,000.00 265,000 18,550.00 Purchase: December 12 39,500 49,375.00 December 20 28,500 34,200.00 Fabricating Department usage

83,200 50,000

Requirement: (1) Compute the equivalent number of units of Polyplast for materials and conversion costs. (2) (i) Determine the total Fabricating Department cost to be accounted for.

(ii) Compute the unit costs of materials, labor and factory overhead for the Fabricating department. (iii) Compute the cost transferred to the Finishing Department, and the cost of ending

work in process inventory in the Fabricating Department. (3) Complete requirements (1) and (2) above assuming that work in process inventory is

costed using the average method. (Round unit costs to the nearest Taka)

[Marks: {5+ (5+7+8)} = 25] Q. No. 2. (a) “Companies should always make and sell all products whose selling prices exceeded

variable cost”. Do you agree with the statement? Explain. (b) The Ottobi India manufactures filling small cabinets in two operations: Machining and

finishing. It provides the following information: Machining Annual Capacity

Finishing 100,000 units 80,000 units

Annual Production 80,000 ” 80,000 ” Fixed Operating Costs Tk. 64,00,000 Tk. 40,00,000 Fixed Operating Cost per unit produced Tk. 80 per unit Tk. 50 per unit

Each Cabinet Sell for Tk. 720 and has direct material cost of Tk. 320 incurred at the start of the machining operation Ottobi has no other variable costs. Ottobi can sell whatever output it produces. Required: (i) Ottobi is considering using some modern Jigs and Tools in the finishing operation

that would increases annual output by 1,000 units. The annual cost of these Jigs and tools is Tk. 3,00,000. Should Ottobi acquire these tools? Show with Calculation.

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(ii) The Production Manager of the machining department has submitted a proposal to do faster setups that would increase the annual capacity of the machining department by 10,000 units and would cost Tk. 50,000 per year. Should Ottobi implement the change?

(iii) An outside contractor offers to do the finishing operation for 12,000 units at Tk. 100 per unit that is the double of Tk. 50 per unit that it costs Ottobi to do the finishing in house. Should the Ottobi accept the subcontractors’ offer?

(iv) The Mumbai Corporation offers to machine 4,000 units at Tk. 40 per unit that is the half of Tk. 80 per unit that it costs Ottobi to do the machining in house. Should Ottobi accept Mumbai Corporation’s offer?

(c) Vision Enterprises manufactures converter boxes for high definition TVs. All processing is initiated when an order is received. For March there were no beginning inventories. Conversion Costs and Direct Materials are the only manufacturing cost accounts. Direct Materials are purchased under a just-in-time system. Back-flush costing is used with a finished goods trigger point. Additional information is as follows:

Actual conversion costs Tk. 435,000 Standard materials costs per unit Tk. 115 Standard conversion cost per unit Tk. 85 Units produced 7,900 Units sold 7,600 Required: Record all Journal entries for the monthly activities related to the above transactions if back-flush costing is used.

[Marks: (5+12+8) = 25] Q. No. 3. (a) Define Scraps, Wastage, Spoilage and Defectives and state how they are treated in Cost

Accounting? (b) Eastern Refinery produces Gasoline Heating Oil and Jet Fuel from Crude Oil which is

processed in Department-A. At the end of the process in Department-A, three partially completed products emerge: Gasoline, Heating Oil and Jet Fuel. These three products later are being processed in Department-B, C and D respectively for refinement. The following data relates to the production of these goods during a particular period:

Department Input and output Cost Incurred Disposable cost Price per gallon (In Gallon) Tk. Tk. Tk.

A (“Crude Oil) 3,28,000 8,20,000 - - B (Gasoline) 2,80,000 1,00,000 8,000 2.30 C (Heating Oil) 3,40,000 60,000 2,000 2.00 D (Jet Fuel) 2,00,000 70,000 2.80 10,000 8,20,000 5,58,000 20,000 Required: (i) A statement showing the allocation of Joint Cost applying NRV method.

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(ii) Statement showing total cost of production of each product and profit earned on each product assuming all units are sold out.



(c) The Chittagong Timber Company prepares lumber for companies who manufacture furniture. The main product is finished lumber with a byproduct of wood shavings. The byproduct is sold to plywood manufacturers. For July, the manufacturing process incurred Tk. 332,000 in total costs. Eighty thousand board feet of lumber were produced and sold along with 6,800 pounds of shavings. The finished lumber sold for Tk. 6.00 per board foot and the shavings sold for Tk. 0.60 a pound. There were no beginning and ending inventory of lumber. However, 1,800 pounds of shavings remain unsold at the end of the month.

Required: Prepare an income statement showing the byproduct (a) as a cost reduction during production, and (b) as a revenue item when sold. Put comments on any differences between the margin under two methods.

[Marks: (5+12+8) = 25] Q. No. 4. (a) Lexington Company manufactures stone tiles for kitchen counters and floors. Its strategy

is to manufacture high quality products at reasonable prices and to rapidly deliver products following sales. Lexington sells to both hardware store and contractors. To avoid holding large inventories of finished goods, Lexington manufactures products based on orders from customers. The factory set up enables workers to perform multiple functions, including receiving orders, running different machines, inspecting for quality, packaging, and shipping the final product. Given Lexington’s strategy, describe the financial and nonfinancial measures that you would include in its balanced scorecard-based management control system.

(b) The marketing department at Barnic Manufacturing has an idea for a new product that is expected to have a life cycle of 5 years. After conducting market research, the company has determined that the product could sell for Tk. 250 per unit in the first 3 years of life and Tk. 175 per unit for the last 2 years. Units expected to sale are as follows:

Year 1 Year 2 Year 3 Year 4 Year 5

3,000 units 4,500 units 4,800 units 5,000 units 1,500 units

Per unit variable selling cost are estimated at Tk. 30 through the product’s life, annual fixed selling and administrative costs are expected to be Tk. 3,50,000. Bernic Manufacturing desires a profit margin of 20% of selling price per unit.

Requirement: (i) Complete the life cycle target cost to manufacture the product. (ii) If the company expects the product to cost Tk. 65 to manufacture in the first year what is

the maximum manufacturing cost can be in the following 4 years. (iii) Assume Bernic Manufacturing engineers conclude that the expected manufacturing cost

per unit is Tk. 70. What action might the company take to reduce this cost? [Marks: (10 + 15) = 25]

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= THE END =

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PROFESSIONAL LEVEL-III SUBJECT: 303. CORPORATE LAWS, GOVERNANCE & SECRETARIAL PRACTICES.

Time: Three Hours Full Marks:100 Answer SIX questions taking any THREE from each part, including compulsory question

No. 5 and 10. Answer must be brief, relevant, neat and clean. Use a fresh sheet for answering each question. Start answering each question from a fresh sheet

PART-A: CORPORATE LAWS Q. No. 1. (a) Who are the signatories of Memorandum and Articles of Association of a Public Limited

Company (PLC)? How these two documents can be amended, if required? (b) A Public Limited Company decided to raise its capital. Discuss the procedures to be taken in this

respect. [Marks: (7+8) = 15]

Q. No. 2. (a) What are the restrictions imposed on the borrowing powers of the Board of Directors? (b) Briefly mention the provisions of the Companies Act 1994 relating to the appointment and re-

appointment of Statutory Auditors.

[Marks: (7+8) = 15] Q. No. 3. (a) Who are considered to be related party? What disclosures are required in the Annual Report of

a listed company regarding related party transactions? (b) Recently Bangladesh Securities Exchange Commission (BSEC) has made mandatory holding

of at least two percent shares of paid up capital by each of the sponsor director of a listed company. Explain its merits and demerits. Do you think it will have a positive impact in the stock exchanges of Bangladesh?

[Marks: (8+7) = 15] Q. No. 4.

(a) “A company is an artificial person created by law with a perpetual succession and a common seal”. Explain this statement and point out the basic features of a company registered with RJSC.

(b) A company’s object clause is of fundamental importance not only to members but also to non-members. Explain this statement.

[Marks: (8+7) = 15] Q. No. 5. Write short notes on the following: (a) Price sensitive information; (b) Prospectus; (c) Annual General Meeting; (d) Casual Vacancy of a Director; (e) Appointment of an Independent Director.

[Marks: (5 X 4) = 20]

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 303. CORPORATE LAWS, GOVERNANCE & SECRETARIAL PRACTICES.

PART-B: GOVERNANCE & SECRETARIAL PRACTICES

Q. No. 6. (a) A Company Secretary is an eye witness to the Board. Do you agree with the statement? Explain in

details. (b) Discuss the role of a Company Secretary in Corporate Governance.

[Marks: (7+8) =15]

Q. No. 7. (a) What are the procedures to offer right shares of a public limited company? (b) How the interest of small investors can be protected in the share market?

[Marks: (8+7) =15] Q. No. 8. (a) What do you mean by share market index? (b) Explain the procedures for calculating Index. (c) What are the factors responsible for declining share prices?

[Marks: (5+5+5) =15]

Q. No. 9. (a) Draft a notice for the forthcoming Annual General Meeting of a Public Limited Company with

common agendas. (b) What are the provisions that have to be complied in carrying out Cost Audit in a large Textile

Industry? [Marks: (7+8) =15]

Q. No. 10 Write Short notes on the following: (a) Quorum for a meeting; (b) Record date; (c) Proxy; (d) Insider Trading; (e) CDBL.

[Marks: (5 x 4) = 20]

= THE END =

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PROFESSIONAL LEVEL-III SUBJECT: 304. AUDITING.

Time: Three Hours Full Marks:100 All questions are to be attempted. Show computations, where necessary. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet. Q. No. 1. (a) Explain the concept of assurance and briefly describe the reasonable assurance and

limited assurance engagement. (b) Who may act as an auditor of a company? Who may appoint and fixed up remuneration of

auditor? Write briefly mentioning related section of Companies act 1994. (c) What are the statutory duties and responsibilities of the auditor? (d) Define internal control system? Who is responsible for implementation of IC system? If IC

are effective then it can reduce the risk of auditor – Explain. [Marks: (4+4+3+4) = 15]

Q. No. 2. At the time of audit during 2013, you encountered the following situations: (a) The audited financial statements of Asian Trading Ltd. were approved by the Shareholders

at the AGM held on 3rd June 2012. On 7th June 2012, the Managing Director discovered a petty cash fraud by the cashier. It transpired that the fraud has been carried out over a period of year. Cashier made out and signed Cash Expenses vouchers which were charged to motor vehicle expenses. No receipts were attached to the Petty Cash Vouchers. The Managing Director signs all cheques for reimbursing Petty Cash float. The company’s turnover was Tk. 20 crore and profit before tax was Tk. 1.50 crore. The Partner-in-charge of the audit decided, at planning stage, that no audit worked need be carried out on petty cash, as he concluded that petty cash expenditure (on imprest float) was small, so the risk of material error or fraud was also small. (i) You are required briefly to state auditor’s responsibilities for detecting fraud and error

in financial statements. (ii) Consider whether your firm would be negligent if the fraud was Tk. 15 lac.

(b) “An auditor is expected to have an absolute basis for the expression of an opinion.” Do you agree? Why or why not?

[Marks: (10+5) = 15] Q. No. 3. (a) Auditor’s integrity, objectivity and independence are subject to various threats and that

safeguards must be in place to counter these. Please explain in brief the threats and safeguards of it’s?

(b) Conflicts of interest and confidentiality are related matters. Where a conflict of interest arises, one of key issues is whether it will be possible to keep information confidential. Explain.

(c) Explain the situations where an auditor may disclose confidential information about a client.

[Marks: (5+5+5) = 15] Q. No. 4. (a) What do you mean by Subsequent event? In which ways they are treated differently in

Financial Statement. (b) Define related Parties. What factors should be considered in judging the related parties

transaction during the time of audit? (c) Explain the meaning of ‘Analytical Procedure’ and discuss its significance for an auditor.

Do you think, Analytical procedure may increase or decrease the risk of an auditor – Explain in your own word?

[Marks: (5+5+5) = 15]

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 304. AUDITING. Q. No. 5. (a) “Auditor should obtain sufficient appropriate audit evidence to be able to draw reasonable

conclusions on which to base the audit opinion.” What do you mean by Sufficient and appropriate?

(b) What is meant by a significant risk? What are the three components of audit risk and how they defined with example?

(c) What do you mean about Management representation? Do you think that Management representation will reduce the risk of an Auditor? Write briefly in favour your answer.

(d) Distinguish between Auditing Standards and Auditing procedures? [Marks: (3+4+5+3) = 15]

Q. No. 6. You are the audit manager in Alam & Co, a firm of Chartered Accountants. Recently, you have been assigned specific responsibility for undertaking annual review of existing clients. The following situations have arisen in connection with three client companies: (a) Alam & Co was appointed auditor & tax advisor to ABM Co. a limited liability company, last

year and has recently issued an unmodified opinion on the financial statements for the year ended 30 June 2012. To your surprise, the tax authority has just launched an investigation into the affairs of ABM Co. on suspicion of under declaring income.

(b) The chief executive of ABM Co., an exporter of specialist equipment, has asked for advice on the accounting treatment and disclosure of payments made for security consultancy services. The payments, which aim to ensure that consignments are not impounded in the destination country of a major customer, may be material to the financial statements for the year ended 30 June 2012. ABM Co. does not treat these payments as tax deductible.

(c) Your firm has provided financial advice to the Abdul Hai family for many years and this has sometimes involved your firm in carrying out transactions on their behalf. The eldest son, Yusuf, is to take up a position as a senior government official to a foreign country next month. Required: Identify and comment on the ethical and other professional issues raised by each of these matters and state what action, if any, Alam & Co should now take.

[Marks: (7+4+4) = 15] Q. No. 7. (a) What is sampling risk? Explain the importance of Audit Sampling. (b) You are the audit manager for ABC & Co. One of your new clients this year is Data Soft

Ltd., a company having net assets of Tk. 150 million. The audit work has been completed, but there is one outstanding matter that you are investigating; the directors have decided not to provide depreciation on building in the financial statement, although Bangladesh Accounting Standard suggests that depreciation should be provided. Required: State the additional audit procedures and actions you should now take in respect of above matter.

[Marks: (5 x 2) = 10]

= THE END =

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PROFESSIONAL LEVEL-IV SUBJECT: 401. FINANCIAL MANAGEMENT


Q. No. 1. MN Ltd. is comprised of only four major investment projects, details of which are as follows:- Project % of Company

Market Annual % return during

last five years Risk % standard

deviation Correlation with

the market 1 28 10 15 0.55 2 17 18 20 0.75 3 31 15 14 0.84 4 24 13 18 0.62

The risk-free rate is expected to be 5% per year, the market return 14% per year and the standard deviation of market return 13%. Required: (a) Assume the MN Ltd.’s shares are currently priced based on the assumption that the last

five years experience of returns will continue for the foreseeable future. Evaluate whether or not the share price of MN Ltd. is undervalued or overvalued.

(b) Discuss why your results in (a) above might not correctly identify whether or not the share price of MN Ltd. is undervalued or overvalued.

[Marks: (12+8) = 20] Q. No. 2. The following information are provided relating to the acquiring Company Efficient Ltd. and the target Company Healthy Ltd.

Efficient Ltd. Healthy Ltd. Nos. of Shares (F.O. Tk. 10 each 10 lacs 7.5 lacs Market Capitalization 500 lacs 750 lacs P/E Ratio (times) 10 5 Reserves and surplus 300 lacs 165 lacs Promoters holdings (No. of Shares) 4.75 lacs 5 lacs Board of Directors of both the companies have decided to give a fair deal to the shareholders and accordingly for swap ratio the weight are decided as 40%; 25% and 35% respectively for earnings. Book value and Market price of shares of each company. Required: (i) Calculate the swap ratio and also calculate promoter’s holding percentage after

acquisition. (ii) What is the EPS of Efficient Ltd. after acquisition of Health Ltd.? (iii) What is the expected market price per share and market capitalization of Efficient Ltd.

after acquisition assuming P/E ratio of firm Efficient Ltd. remains unchanged. (iv) Calculate free float market capitalization of the merged firm.

[Marks: (6+5+6+3) = 20] Q. No. 3. SRP is a market leader in the design, manufacture and installation of large scale equipment to customer-specified performance criteria. Although it sells its products worldwide, all its manufacturing capacity is in the Bangladesh and its shares are listed on Dhaka stock exchange.

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 401. FINANCIAL MANAGEMENT

Q. No. 3. (contd………)

SRP was formed by the amalgamation of three smaller companies in 1979 and many of its current shareholders previously owned shares in those companies. Small, individual investors own around 30% of the total shares in issue. Approximately 65% of the shares are owned by large institutional investors such as pension funds and the remaining 5% are owned by the directors and employees of SRP. Financial objectives SRP’s principal financial objective is to maximize shareholder wealth. It also has the following additional specific financial objectives:

• Annual increase in earnings per share (EpS) and dividend per share (DpS) of at least 3% on average over a rolling 3 year period.

• Maintain gearing, based on book values, below 30%. Gearing is defined as net debt to net debt plus equity where net debt is long term borrowings less surplus cash. SRP’s forecast statement of financial position as at 31 March 2013 before taking into account the dividend of Tk. 89.6 million that is due to be paid on 10 March is shown below:

Tk million Assets Non-current assets 1,650 Current assets Cash and cash equivalents 215 Other Total assets

210 2,075

EQUITY and LIABILITIES Equity Share capital (Tk. 1 ordinary shares) 350 Reserves 950 Non-current liabilities Secured 7% loan 550 Current liabilities Total equity and liabilities

225 2,075

Additional information: • Forecast revenue and earnings for SRP for the year ending 31 March 2013 are Tk. 2,500

million and Tk. 280 million respectively. • SRP’s shares are currently trading at Tk 4.78 per share cum div and the underlying ex div

price is not expected to change before 31 March. • The secured loan is from a consortium of banks and is not traded. It is repayable at par on

31 March 2017. Surplus cash The company has been highly profitable in recent years having successfully tendered for a number of very large contracts around the world. As a consequence, SRP has substantial amounts of cash either on deposit or invested in short term securities (shown in the financial statements as cash equivalents). Even after the planned dividend, the directors consider that a significant portion of the forecast cash and cash equivalents balance as at 31 March 2013 is surplus to requirements and are considering how to deal with this surplus cash.

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 401. FINANCIAL MANAGEMENT


Three proposed strategies for dealing with surplus cash are as follows: 1. Continue to hold the surplus cash in a bank account and/or as short-term securities. 2. Arrange a programme to repurchase a proportion of the company’s shares. 3. Pay bonuses on a one-off basis to directors and employees. For this purpose, surplus cash is defined as all forecast cash and cash equivalents as at 31 March 2013 after paying the planned dividend and setting aside Tk. 15 million for the support of on-going operations. Returns on short-term cash can be assumed to be negligible. Required: (a) Calculate forecasts of the following for SRP, after paying the dividend but before disposing

of surplus cash remaining: • EpS and DpS for the year ending 31 March 2013. • Gearing based on book values as at 31 March 2013. • Gearing based on market values as at 31 March 2013.

(b) Calculate the likely impact on EpS, DpS, and gearing of each of the three proposed strategies for dealing with surplus cash.

(c) Evaluate each of the three proposed strategies for dealing with surplus cash. In your answer, take into account likely impact of each strategy on: • Attainment of financial objectives. • Shareholder wealth in both the short and long term.

[Marks: (6+6+8) = 20] Q. No. 4. Lancaster Engineering Inc.(LEI) has the following capital structure, which it considers to be optimal: Debt 25% Preferred Stock 15% Common Equity

Project

60% 100% LEI’s expected net income this year is Tk. 34,285.72; its established dividend payout ratio is 30 percent; its marginal tax rate is 40 percent; and investors expect earnings and dividend to grow at constant rate nine percent in the future. LEI paid a dividend of Tk. 3.60 per share last year, and its stock currently sells at a price Tk. 60 per share. LEI can obtain new capital in the following ways: Common : New Common stock has a floatation cost of 10 percent for up to Tk. 12,000 of new stock and 20 percent for all common stock over Tk. 12,000. Preferred : New Preferred stock with a dividend of Tk. 11 can be sold to the public at a price of Tk. 100 per share. However, floatation cost costs of Tk. 5 per share will be incurred for up to Tk. 7,500 of preferred stock, floatation cost will rise to Tk. 10 per share, or 10%, on all preferred stock over Tk. 7,500. Debt: Up to Tk. 5000 of debt can be sold at an interest rate of 12 percent; debt in the range of Tk. 5,001 to Tk. 10,000 must carry an interest rate of 16 percent. LEI has the following independent investment opportunities:

Cost AT t= 0 Annual Net Cash Flow Project Life IRR A Tk. 10,000 Tk. 2,191.20 7 years 12.0% B Tk. 10,000 Tk. 3,154.42 5 years 17.4% C Tk. 10,000 Tk. 2,170.18 8 years 14.2% D Tk. 20,000 Tk. 3,789.48 10 years 13.7%

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E Tk. 20,000 Tk. 5,427.84 6 years ? CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 401. FINANCIAL MANAGEMENT


a. Find the break points in the MCC schedule b. Determine the cost of each capital structure component. c. Calculate the weighted average cost of capital in the internal between each break in the

MCC schedule. d. Calculate the IRR for Project E. e. Which project should LEI accept?

[Marks: (5+5+5+3+2) = 20] Q. No. 5. The following statement and operating results of AB Ltd. revealed the following position as on 31 December, 2012:

1 Equity Share Capital (Tk. 100 per share fully paid) Tk. 200,000 2 Working Capital 1,56,000 3 Bank Overdraft 24,000 4 Current Ratio 2.5 5 Quick Ratio 1.5 6 Proprietary Ratio (Fixed Assets to Equity) 0.6 7 Gross Profit Ratio 20% 8 Stock Velocity 5 times 9 Debtors Velocity 1 month 10 Net Profit to Sales 10% Expenses included depreciation Tk. 26,000. Closing stock was 25% higher that the opening stock. There were also free reserves brought forward from earlier years. Current assets included Stock, Debtors and Cash at Bank only. Current liabilities consisted of Bank Overdraft and Creditors. There were no Fictitious Assets. The following information would be gathered from the books and records for the year ended 31 December, 2013: (1) From 1st

(2) Stock level was raised to Tk. 1,80,000 from January and maintained at that level thought the year.

January 2010 the sales price was enhanced by 5%. Further, sales for the year were 10% & higher in volume as compared to the previous year.

(3) Percentage of gross profit on turnover has gone up from 20% to 25%. (4) Depreciation on fixed assets to be provided at 10% on written down value method. Full

year’s depreciation is to be provided on additions. (5) Expenses outstanding on 31.12.2010 Tk. 5000.

(6) Ratio of net profit to sales 12 % (7) Debtors velocity was same and creditors were Tk. 1,00,000. (8) Bank Overdraft was fully discharged. (9) Fixed assets acquired Tk. 40,000. From the above information prepare (1) Income Statement for the year ended 31.12.2013 and Balance Sheet on that date.

[Marks: (10+10) = 20]

= THE END =

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PROFESSIONAL LEVEL-IV SUBJECT: 402. STRATEGIC MANAGEMENT ACCOUNTING.


Q. No. 1. (a) “Sunk costs are easy to spot. They’re simply the fixed costs associated with a decision.”

Do you agree? Explain. (b) “Variable costs and differential costs mean the same thing.” Do you agree? Why? (c) In an unbalanced minimization transportation problem, with positive unit transport costs

from 3 factories to 4 destinations, it is necessary to introduce a dummy destination to make it a balanced transportation problem. How will you find out if a given solution is optimal?

[Marks: (3+2+5) = 10] Q. No. 2. The Information Technology division (IT) of RJ Business Consulting Group provides consulting services to its clients as well as to other divisions within the group. Consultants always work in teams of two on every consulting day. Each consulting day is charged to external clients at Tk.750 which represent cost plus 150% profit mark up. The total cost per consulting day has been estimated as being 80% variable and 20% fixed. The director of the Human Resources (HR) division of RJ Business Consulting Group has requested the services of two teams of consultants from the IT division on five days per week for a period of 48 weeks, and has suggested that she meets with the director of the division in order to negotiate a transfer price. The director of the IT division has responded by stating that he is aware of the limitations of using negotiated transfer prices and intends to charge the HR division Tk.750 per consulting day. The IT division always uses ‘state of the art’ video-conferencing equipment on all internal consultations which would reduce the variable costs by Tk.50 per consulting day. Note: this equipment can only be used when providing internal consultations. Required: (a) Calculate and discuss the transfer prices per consulting day at which the IT division should

provide consulting services to the HR division in order to ensure that the profit of the RJ Business Consulting Group is maximized in each of the following situations: (i) Every pair of consultants in the IT division is 100% utilized during the required

48-week period in providing consulting services to external clients, i.e. there is no spare capacity.

(ii) There is one team of consultants who, being free from other commitments, would be available to undertake the provision of services to the HR division during the required 48-week period. All other teams of consultants would be 100% utilized in providing consulting services to the external clients.

(iii) A major client has offered to pay the IT division Tk. 2,64,000 for the services of two teams of consultants during the required 48-week period.

(b) Briefly explain three limitations of negotiated transfer prices. [Marks: {(8+6+5) + 6} = 25]

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 402. STRATEGIC MANAGEMENT ACCOUNTING.

Q. No. 3. (a) When activity-based costing is used, why are manufacturing overhead costs often shifted

from high-volume products to low-volume products? (b) ABC Ltd. manufactures and sells three types of products P, Q and R. The company has

been following conventional method of costing and wishes to shift to Activity-Based Costing system. Following data are given for a month:

Products P Q R

Sales (in units) 50,000 1,12,000 54,000 Selling price (per unit) Tk. 18.00 Tk. 14.00 Tk. 12.00 Prime cost (per unit) Tk. 12.00 Tk. 9.00 Tk. 8.00 Gross production units/production run 5,040 5,620 6,020 No. of defective units/production run 40 20 20 Set up cost/production run Tk. 400 Tk. 600 Tk. 500 Inspection hours/production run 6 8 8 Machine hours/production run 40 24 60 Overhead costs : Amount (Tk.)

Set-up 20,500 Inspection 146,000 Machines 284,000 Selling 324,000

The following additional information is given: (i) No accumulation of inventory is considered. All good units produced are sold. (ii) Included in the total selling overhead is advertisement cost of Tk.166,000. This cost

is incurred only for products Q and R. However product P needs no advertisement. (iii) Product Q needs special packing and Tk.108,000 is the amount on packing which is

included in the total selling overhead cost given above. You are required to present: (i) Product-wise profitability statement under the conventional system assuming all

manufacturing and selling overheads are allocated on the basis of unit sold. (ii) Product-wise profitability statement as per Activity-Based Costing system.

[Marks: 20] Q. No. 4. X Ltd. is specialized in the production and sale of biscuits. The biscuit division of this group is Chocolaty. The divisional profitability statement for the month of December 2012 is given below:

ACTUAL BUDGET BDT BDT BDT Sales (50% on credit terms) 1,140,000 1,200,000 Divisional Expenses:

Materials 800,000 Manufacturing cost 70,000 Marketing 93,000 Divisional administration 58,000 1,021,000 1,000,000

Divisional Contribution 119,000 200,000 Allocated Head Office expenses 100,000 100,000

Net Profit 19,000 100,000

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 402. STRATEGIC MANAGEMENT ACCOUNTING.

Q. No. 4. (cont’d……..)

The Balance Sheet for the division after analysis shows the divisional net investment as follows: Particulars Amount (BDT) Amount (BDT)

Traceable Assets: Building 600,000 Motor Car 30,000 Plant 510,000

1,140,000 Stock:

Material 900,000 Finished goods 160,000 Debtors 900,000 Current liabilities (320,000) 1,640,000

Net traceable assets 2,780,000 Proportion of centrally administered assets:

Cash 10,000 Other 60,000 70,000

Divisional net investment 2,850,000 The biscuit industry does not experience seasonal fluctuation. The month of December is typical of all the other months in the year so far as performance is concerned. The cost capital for the Group is 15%. Required (a) Evaluate the performance of the management of Chocolaty division using:

(i) Contribution; (ii) Net Income; (iii) Return of Investment; (iv) Residual Income Methods. Also indicate the limitations of the above methods you have employed. (b) How would your method of evaluation of the performance of this division differ if the

evaluation were made to check economic rather than managerial performance? [Marks: (15+5) = 20]

Q. No.5. (a) Can an investment with a profitability index of less than 1.00 be an acceptable

investment? Explain. (b) Ice-Time Ltd. (ITL) manufactures a range of sports equipment used in a variety of winter-

sports in Snowland. Development engineers within ITL have recently developed a prototype of a small engine-propelled bobsleigh named the ‘Snowballer’ which has been designed for use by young children. The directors of ITL recently spent Tk.2,00,000 on market research, the findings of which led them to believe that there is a good market for the Snowballer. The marketing director has suggested that ITL should use the ‘Olympic’ brand in order to market the Snowballer. The finance director of ITL has gathered relevant information and prepared the following evaluation relating to the proposed manufacture and sale of the Snowballer. 1. Sales are expected to be 3,200 units per annum at a selling price of Tk.2,500 per

unit. 2. Variable material, labor, and overhead costs are estimated at Tk.1,490 per unit. 3. In addition, a royalty of Tk.150 per unit would be payable to Olympic plc, for the use

of their brand name.

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CMA AUGUST – 2013 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 402. STRATEGIC MANAGEMENT ACCOUNTING. Q. No. 5. (cont’d……..)

4. Fixed overheads are estimated at Tk.9,00,000 per annum. These overheads cannot be avoided until the end of the year in which the Snowballer is withdrawn from the market.

5. An initial investment of Tk.5 million would be required. A government grant to 50% of the initial investment would be received on the date investment is made. However, because the Snowballer would be classified as a luxury good, no tax allowances would be available on this initial investment. The estimated life cycle of the Snowballer is six years.

6. Corporate tax at the rate of 30% per annum is payable in the year in which profit occurs.

7. All cash flows are stated in current prices and, with the exception of the initial investment and the government grants, will occur at the end of each year.

8. The nominal cost of capital is 15.44%. Annual inflation during the period is expected to amount to 4%.

Required: (i) Calculate the net preset value (NPV) of the Snowballer proposal and recommend whether

it should be undertaken by the directors of ITL. (ii) Using sensitivity analysis, estimate by what percentage of the annual contribution would

need to change before the recommendation in (i) above is varied. (iii) Using sensitivity analysis, estimate by what percentage the life cycle of the Snowballer

would need to change before the recommendation in (i) above is varied. (iv) Comment on the factors other than NPV that the directors of ITL should consider when

deciding whether to manufacture the Snowballer. [Marks: (5+20) = 25]

= THE END =

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PROFESSIONAL LEVEL-IV SUBJECT: 403. STRATEGIC MANAGEMENT AND ORGANIZATIONAL BEHAVIOUR.

Time: Three Hours Full Marks:100

Answer any THREE questions from Group ‘A’ and TWO questions from Group ‘B’. All questions carry equal marks. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet.

GROUP – A : STRATEGIC MANAGEMENT (TOTAL MARKS-60)

Q. No. 1. (a) What is Strategy? (b) As a manager if you want to attain a sustainable competitive advantage, what strategic

approaches would you select and why? (c) “Strategy is partly proactive and partly reactive.” Explain.

[Marks: (4+8+8) = 20] Q. No. 2. (a) How does a strategic vision differ from a mission statement? (b) Explain how would link the vision statement with company values. (c) Identify the need for a balanced scorecard.

[Marks: (6+6+8) = 20] Q. No. 3. (a) What is Strategic Alliance? (b) Why and how Strategic Alliances are advantages? (c) What are the risks of Strategic Alliances with foreign partners?

[Marks: (6+7+7) = 20] Q. No. 4. (a) What lead to successful entrepreneurship in Bangladesh? Discuss. (b) What may be the entrepreneurial start-up strategies? (c) Discuss the future challenges of new generation entrepreneurs in Bangladesh.

[Marks: (8+5+7) = 20] Q. No. 5. Write short notes on any four of the following: (a) First mover strategy. (b) Benchmarking. (c) Emergent Strategies. (d) Divesting strategy. (f) Core Competency.

[Marks: (5 x 4) = 20]

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 403. STRATEGIC MANAGEMENT AND ORGANIZATIONAL BEHAVIOUR.

GROUP – B : ORGANIZATIONAL BEHAVIOUR (TOTAL MARKS-40) Q. No. 6. (a) How can you asses ‘OB’ as a significant field of study in management? (b) What are the major issues of ‘OB’ to-day? (c) As a CMA how can you contribute to mitigate these issues?

[Marks: (7+7+6) = 20] Q. No. 7. (a) What is spiritual organizational culture? (b) How does culture influence negotiation? (c) Discuss how to create customer responsive culture.

[Marks: (6+7+7) = 20] Q. No. 8. (a) What is perception? (b) Identify and explain the factors that may influence the formation of perception. (c) Identify the characteristics of ‘Type A’ and ‘Type B’ personality.

[Marks: (4+7+9) = 20] Q. No. 9. (a) What constitutes ‘Conflict Management’? (b) Differentiate between functional conflicts and dysfunctional conflicts. (c) Explain the effective process of ‘Conflict Management’.

[Marks: (7+6+7) = 20]

= THE END =

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PROFESSIONAL LEVEL-IV SUBJECT: 404. COST AND MANAGEMENT AUDITING.

Time: Three Hours Full Marks:100 All questions carry equal marks. Answer must be brief, relevant, neat and clean. Start answering each question from a fresh sheet.

PART – A : COST AUDITING (MARKS – 50)

Q. No. 1. (a) State the provisions of the Companies Act 1994, regarding cost audit in the case of limited

companies. Do these provisions of the Act apply to all companies engaged in manufacture or similar activities?

(b) In the context of Bangladesh, what factors should be considered for the development of cost audit practice in the private sector manufacturing concern? Briefly discuss.

(c) “Cost Audit of industries should follow a uniform pattern”. Do you agree? [Marks: (5+5+4) = 14]

Q. No. 2. You, as a Cost Auditor, have proposed in your persuasive letter to a manufacturing company’s Managing Director that Cost Audit can help achieve the following: (a) Determine the efficiency of operations; (b) Enables implementation of structured Cost Reduction Programmes; (c) Improves Performance Governance as a part of Corporate Governance; (d) Enables negotiation of a fair price with the buyer; (e) Supports the management decision making process by ensuring the credibility of cost

based Information; and (f) Ensures that wastages in the operations are identified and reduced. The Managing Director has asked you to justify them. Justify each of the above with one example.

[Marks: (6 x 2) = 12] Q. No. 3. (a) A publicly listed textile mills is incurring losses over the years. The Bangladesh securities

and Exchange Commission, as a regulator of the listed companies of the country, has appointed you as Cost Auditor to investigate and find out the real reasons of loss. What would be your responsibility to find out the reasons?

(b) A plastic goods manufacturing company produces and markets various types of consumer products at market price. The management is not aware of which products are contributing to earn profit an which are not. The management, in a bid to improve shareholders’ wealth, has decided to drop the losing products, if any. Failing to get the desired information from its existing financial account has appointed you to study and identify the profit and loss earning products. Do you think that you can help management in this regard? If so, how would you distinguish the products in terms of profit and loss earning?

[Marks: (6+6) = 12] Q. No. 4. (a) Why it is important to have Cost Accounting Standards while there are IAS and IFRS in

practice? (b) Discuss the importance of the following for a practicing Cost Auditor:

(i) Professional ethics (ii) Professional Competence.

(c) Do you think that Cost Audit can yield results for a trading organization? If yes, identify some areas where it can help reap the benefits.

[Marks: (3+4+5) = 12]

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CMA AUGUST 2013, EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 404. COST AND MANAGEMENT AUDITING.

PART – B : MANAGEMENT AUDITING (MARKS – 50) Q. No. 5. (a) What is Management Audit? How would you distinguish Management Audit from Cost

Audit? Explain. (b) As per IFAC, “value creation is a part of Performance Governance process”. Explain how

performance governance helps create value to the organization and shareholders’ wealth. (c) Explain how value erosion takes place in and organization. As a Management Accountant

how would you recommend to change from value erosion to value creation in the organization?

[Marks: (4+5+4) = 13] Q. No. 6. (a) Efficiency and effectiveness are the two important elements of management in an

organization. Explain how you would measure them while doing the management audit of an organization.

(b) What do you understand by Management Control System of an organization? Describe how you would evaluate them in an organization.

[Marks: (6+5) = 11] Q. No. 7. (a) Describe scope of Corporate Development Audit. (b) Zeal Pharmaceuticals Company Limited has been spending a substantial amount of

money for last three years in Research and Development (R&D). You have been appointed as a Management Auditor of the Company. How would you evaluate R & D activities of the Company.

[Marks: (5+7) = 12] Q. No. 8. (a) Modhumoti Bank is one of the newly licensed banking companies and they have taken

decision to start their operation very soon. You have been appointed as Consultant to design General Banking Division of the bank. How would you suggest the bank in designing control system of General Banking Division with a separate covering letter to the Managing Director.

(b) Mention salient features of changes in Banking Companies Act as per Banking Company (amendment) Act 2013. Do you think that such changes will improve corporate governance in banking Companies?

[Marks: (9+5) = 14]

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