Gujarat University
MCA Semester II
ACFM
Date: 26th July, 2001 Marks:50
Instructions:
1. Attempt both the sections in separate answer-books.
2. Right-hand figures indicate marks.
Section I
Q-1 a) Answer the following:
State the divisions of a journal and explain its importance. [3]
OR
a) Briefly explain the errors not disclosed by the trial balance. [3]
b) Answer the following (any two): [5]
(1) Following details relate to the ABC Ltd.
Opening Balance Closing Balance
Raw materials 190 210
Work-in-progress 80 100
Finished goods 200 240
Additional information:
i. Total purchases Rs.3,600
ii. Total manufacturing expenses including depreciation Rs. 720.
iii. Total administrative expenses Rs.420.
Assuming 360 operating days calculate:
(i) RM waiting period ii) Process time iii) Delay in dispatching the finished goods
(2) Following details relate to the PQR Ltd.:
2000 2001
Sales Rs. 40,000 60,000
Profits Rs.8,000 16,000
Answer the following:
i) Calculate the amount of the fixed cost.
ii) Calculate the profit-volume ratio
iii) Calculate the break-even point in rupees.
(3) The following details relate to the RST Ltd.:
Standard Cost Actual Data
0.250 Kg. Per unit Production = 40,000 units
Price: Rs.20 per kg. Total purchases = Rs.2,18,400
Total purchases = 10,400 units
Calculate the following:
i) Materials cost variance
ii) Materials price variance
iii) Material usage variance
Q-2 The trial Balance of the IT Ltd. as on 31-3-01 is as under: [8]
Particulars Dr. Balance(Rs.) Cr.Balance(Rs.)
Share Capital - 12,000
Reserves - 6,500
15% Debentures (raised on 1-1-01) - 30,000
Fixed Assets 70,000 -
Purchases and Sales 30,000 1,00,000
Carriage Inwards 8,000 -
Carriage Outwards 1,800 -
Administrative Exp. 19,300 -
Debtors & Creditors 9,700 11,000
Stock (1-4-00) 9,800 -
Cash and Bank 10,000 6,000
Commission 400 1,000
Investments 7,500 -
--------- ----------
Total 1,66,500 1,66,500
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Additional Information:
1. The closing stock was 10,000
2. Unpaid administrative expenses Rs.1,000.
3. Commission received in advance Rs.200.
4. Depreciation to be provided on fixed assets @10%.
5. Provide 2% as provision for bad debt on debtors.
Prepare the final accounts.
OR
Q-2 Answer the following any two: [8]
1. Briefly explain the following methods of pricing materials issued to production:
i) Briefly explain the following methods of pricing materials issued to production:
i) LIFO ii) FIFO iii) Weighted Average
ii) Distinguish between straight line and written down value method of depreciation.
iii) Briefly explain the significance of the computerized accounting in the modern business.
Q-3 Following condensed financial statements relate to the XYZ Ltd. [8]
Dr. Rs. Cr. Rs.
To Opening Stock 9,000 By Sales 30,000
To Purchases 20,000 By closing Stock 5,000
To Gross Profits 6,000
--------- ----------
35,000 35,000
--------- ----------
To Adm Exp. 1,500 By Gross Profit 6,000
To Depreciation 1,000
To Interest 800
To Taxes 1,200
To Net profits 1,500
-------- ----------
6,000 6,000
===== =====
Balance Sheet as on 31-3-01
Liabilities Rs. Assets Rs.
Share Capital 8,000 Net Fixed Assets 15,000
Reserves 3,000 Current Assets :
10% Debentures 8,000 Stock 5,000
Current Liab. 6,000 Debtors 4,000
Cash in Bank 1,000
--------- ----------
25,000 25,000
===== ======
Calculate the following ratios:
(i) Current Ratio (ii) Quick Ratio (iii) Net profit Ratio
(iv) Rate of return on investment (v) Debt equity ratio
(vi) Interest Coverage ratio (vii) Total Assets Turnover
(viii) Inventory turnover
OR
Q-3 Answer the following (any two): [8]
1. Explain the limitations of ratio analysis.
2. Explain any four factors affecting working capital needs.
3. Briefly explain the managerial uses of the break-even analysis.
Section II
Q-4 Answer the following (any three): [9]
(1) A firms after tax cost of capital of the specific source is as follows:
Cost of debt 8%
Cost of preference capital 14%
Cost of equity 17%
The following is the capital structure:
Debt Rs.3,00,000
Preference share capital Rs.2,00,000
Equity capital Rs.5,00,000
----------------
Rs. 10,00,000
Calculate the weighted average cost of capital.
(2) How would you distinguish between traditional and sophisticated techniques of capital budgeting?
(3) What is budget? Explain its significance.
(4) Calculate the cost of preference share capital of Dolly Ltd.
· 14% preference share capital is Rs.5,00,000 (Share of Rs. 50 each)
· payable at par after 10 years
· the issue cost is 5% on face value
· corporate tax rate is 50%.
(5) “Only Retained Earning” is cost free source of finance. Do you agree with this statement? Why?
(6) Distinguish between net present value and Internal rate of Return.
Q-5 For production of 10,000 units of electronic automatic irons, the following are budgeted expenses: [8]
Per unit Rs.
Direct Material 60
Direct Labour 30
Variable Overheads 25
Fixed Overheads (Rs. 1,50,000) 15
Variable expenses (Direct) 05
Selling expenses 15 (10% fixed)
Administrative expenses 05 (Rs.50,000 rigid all level of production)
Distribution expenses 05 (20% fixed)
-----
Total cost of sale per unit 160
-----
Prepare a flexible budget for production 10,000 units and 6,000 units.
OR
Q-5 M/s ABC limited wishes to arrange overdraft facilities with its bankers during the period April-June, 2001.
Prepare a cash budget for the above period from the following data, indicating the extent of the bank facilities
the company will require at the end of each month. [8]
Month Total Sales (Rs) Purchases (Rs.) Wages (Rs.)
February 1,80,000 1,80,000 12,000
March 1,92,000 1,44,000 14,000
April 1,08,000 2,43,000 11,000
May 1,74,000 2,46,000 10,000
June 1,26,000 2,68,000 15,000
Additional information:
1. 50% of the credit sales are realized in the month following the sale and the remaining 50% in the second month following the sales. The cash sales is 20% of Total sales of each month.
2. Creditors are paid in the month following the month of purchase.
3. Assume total wages are paid on 1st of next month.
4. Cash at bank on 1st April, 2001 is Rs. 25,000.
OR
Q-5 Write a note on the advantages and limitations of budgeting. [6]
Q-6 A company is considering an investment proposal to install new milling controls. The project will cost Rs.
50,000. The facility has a life expectancy of 5 years and no salvage value. The company’s tax rate is 55%. The
firm uses straight-line depreciation. The estimated cash flow before tax & depreciation from the proposed
investment proposal are as follows:
Year CFBS &T
1 Rs. 10,000
2 ” 11,000
3 “ 15,000
4 “ 16,000
5 “ 30,000
Compute the following:
i. Pay back period
ii. Accounting Rate of return
iii. Net present value @10%
iv. Profitability index
Year 1 2 3 4 5
0.909 0.826 0.751 0.683 0.621
OR
Q-6 What is pay back period? Is it calculated using after-tax profit or cash flows? Why? What are the merits of pay
back period?
OR
Q-6 What is internal Rate of return? Explain this technique with appropriate example.
