In this post, we are going to solve the paper of Principles of Accounting, Solved Paper 2017 Annual, ICOM II, FBISE, MCQS, Short Questions, Extensive Questions. Principles of Accounting, Solved Paper 2018 Supplementary, ICOM II of FBISE has already posted. Principles of Accounting, Solved Paper 2018 Annual, ICOM II, FBISE also posted. Practical problems of Chapter 6 Partnership Accounts Profits Distribution, Chapter 7 Partnership Accounts Admission of a Partner for ICOM II, DCOM, DBA have already posted. This post will also be helpful for the students of BCOM, ADP Commerce and other disciplines related to business, finance and commerce. In other posts, all other chapters related to partnership will be discussed and also solved papers of Principles of Accounting for ICOM II for FBISE, BISE Lahore, BISE Rawalpindi will be presented to you. Solved Papers of Business Statistics are already posted on the website.
Solved by Iftikhar Ali, M.Sc Economics, MCOM Finance Lecturer Statistics, Finance and Accounting
Principles of Accounting, Solved Paper 2017 Annual, ICOM II, FBISE, MCQS, Short Questions, Extensive Questions
Table of Contents
MCQS
Q. 1 Circle the correct option i.e. A / B / C / D. Each part carries one mark.
| 1) | Premium on issue of shares is shown on: | |||
| A | Debit side of trading account | B | Debit side of profit and loss account | |
| C | Asset side of balance sheet | D | Liability side of balance sheet | |
| 2) | The forwarding letter sent by consignor to consignee is a substitute of: | |||
| A | Voucher | B | Journal | |
| C | Invoice | D | Consignment account | |
| 3) | In consignee’s book, the payment of expenses by consignee should be debited to: | |||
| A | Consignment account | B | Consignor account | |
| C | Cash account | D | Expenses account | |
| 4) | A receipts and payments account is similar to: | |||
| A | An income and expenditure account | B | A statement of affairs | |
| C | A cash or a bank account | D | A profit or loss account | |
| 5) | The amount paid to persons who are invited to deliver lectures in a club is known as | |||
| A | Salary | B | Wages | |
| C | Honorarium | D | Income | |
| 6) | The closing balance of creditors can be ascertained by preparing the: | |||
| A | Bills receivable account | B | Bills payable account | |
| C | The debtors account | D | The creditors account | |
| 7) | The physical deterioration in assets due to use in business is called | |||
| A | Depletion | B | Obsolescence | |
| C | Wear and tear | D | Accident | |
| 8) | Current accounts of the partners should be opened when the capitals are: | |||
| A | Fluctuating | B | Fixed | |
| C | Either fixed or fluctuating | D | Variable | |
| 9) | The debit balance of interest on loan account is transferred to: | |||
| A | Partner’s capital account | B | Profit or loss account | |
| C | Partner’s loan account | D | Trading account | |
| 10) | When the incoming partner pays the firm for goodwill in cash, the amount should be debited in firm’s books to: | |||
| A | Goodwill account | B | Capital account of the incoming partner | |
| C | Cash account | D | Old partners’ capital accounts | |
| 11) | In case of death of a partner, the amount received from insurance company is equal to: | |||
| A | 50% of policy amount | B | 25% of policy amount | |
| C | 75% of policy amount | D | 100% of policy amount | |
| 12) | In case of dissolution, the payment of liabilities should be credited to: | |||
| A | Realization account | B | Cash account | |
| C | Profit and Loss account | D | Liabilities account | |
| 13) | In case of dissolution, the transfer of undivided profit should be debited to | |||
| A | Realization account | B | Revaluation account | |
| C | Profit and loss account | D | Partners’ capital account | |
| 14) | Donations Rs 9000.4/5th capitalized, the an1ounl which should be credited to income and expenditure account is: | |||
| A | Rs.1800 | B | Rs. 7200 | |
| C | Rs.8500 | D | Rs. 900 | |
| 15) | A person who is elected to run the club is called: | |||
| A | Treasurer | B | Secretary | |
| C | Chairperson | D | President | |
| 16) | If cost of goods sold Rs 350,000/-, gross profit on cost 15%, then the value of sales will be: | |||
| A | Rs.425,000 | B | Rs.402,500 | |
| C | Rs.422,500 | D | Rs.405.000 | |
| 17) | Debenture suspense account is shown on: | |||
| A | Asset side of balance sheet | B | Liability side of balance sheet | |
| C | Credit side of profit and loss account | D | Debit side of profit and loss account | |
| 18) | The conversion of debentures into debenture stock is made by: | |||
| A | Promoters | B | Shareholders | |
| C | Directors | D | Underwriters | |
| 19) | Which one of the following is a tangible asset? | |||
| A | Goodwill | B | Trademark | |
| C | Copyright | D | Machinery | |
| 20) | ____ is paid to agent to work hard to push a new line of product in market. | |||
| A | Commission | B | Del-credre commission | |
| C | Overriding commission | D | Ordinary commission | |
SECTION – B (Marks 30)
Short Questions
Q. 2 Attempt any TEN parts. The answer to each part should not exceed 3 to 4 lines. (10×3=30)
(i) What do you mean by Legacy?
Answer:
Legacy
Legacy is property that is received according to the will of the deceased person after his/her death. Legacy is considered as capital receipt.
(ii) What is unlimited company?
Answer:
Unlimited Company
Unlimited Company is a company in which liabilities of the stake holders is unlimited and they are liable to pay all debts of the company out of their assets with full extent.
(iii) What is obsolescence?
Answer:
Obsolescence
When asset becomes obsolete or outdated and useless, this state is called obsolescence.
(iv) What are the rules, which are applicable in absence of agreement in partnership?
Answer:
- Profits and Losses are to be shared equally
- No salary will be given to the partners
- No commission will be given to the partners
- 6% interest will be given to the partner for the loan amount given by him/her.
- No interest on capital will be given to the partners
- No interest on drawing will be charged on partner’s drawings
- New partner should be admit according the consent of all partners.
(v) What is revaluation account?
Answer:
Revaluation Account
Revaluation account is prepared to record the changes in assets and liabilities at the time of the admission, retirement or death of the partner and its balance is transferred to the partner’s capital accounts.
(vi) Differentiate between “gaining ratio’ and “”sacrifice ratio”
Answer:
Gaining Ratio
Gaining ratio is a ratio at which remaining partners share profit or loss after the exit of retiring partner.
Sacrifice Ratio
Sacrifice ratio is equals to the subtraction of old ratio and new ratio of the partners after the admission of the new partner. It is according to the sacrifice of the old partners that is suffered by the old partners due to new partner.
(vii) What is Garner vs Murray decision?
Garner vs Murray Decision
According to this decision, the deficiency of the insolvent partner is borne by the solvent partners according to the ratio of their last agreed capitals.
(viii) Show the formula to calculate the value of adjusted per unit cost in case of normal loss.
Answer:
![\[ \mathbf{Adjusted\ Per\ Unit\ Cost = \ }\frac{\mathbf{Original\ Cost + Direct\ Expenses\ }}{\mathbf{Total\ Units - Units\ Lost}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-2f1194fb235ffa24cf53230d55116e6f_l3.png "Rendered by QuickLaTeX.com")
(ix) Define the following.
(a) Commission (b) Delcredre commission (c) Overriding commission
Answer:
(a) Commission
Commission is a percentage sales monetary reward given by consignor to consignee for selling products. Under simple commission, consignor is responsible for any abnormal loss.
(b) Del-credere Commission
Del Creder commission is percentage on sales remuneration paid by consignor to consignee for his/her selling services in which consignee is liable for any bad debt.
(c) Overriding Commission
In consignment, overriding commission is an extra commission which is given by consignor to consignee to promote extra effort to sell the products.
(x) What is scrap value of Asset?
Answer: Scrap Value, Residual Value, Salvage Value or Break-up Value is estimated selling price value of scrap of asset after charging full depreciation.
(xi) What is meant by Non-profit making concerns?
Answer:
Non-Profit Making Concern
NPO’s nonprofit making organizations or sometimes NGO’s non-governmental organizations are entities those basic motive is not to earn profit but to serve the community or society such as education organizations, literary societies, libraries, welfare organizations etc. They enjoy tax exemptions and donations also.
(xii) Define conversion method in Single Entry system.
Answer:
Conversion Method
Conversion method is a method in which record of single entry is converted to double entry system and finally leads to the preparation of financial statements such as final account.
SECTION – C (Marks 50)
(Part I)
Note: Attempt any one question (1×20=20)
Extensive Questions
Q.3 Tahir and Salman carrying on business in partnership and sharing profits and losses in the ratio of 3:2 and their balance sheet stood as follows…..
Q.3 Tahir and Salman carrying on business in partnership and sharing profits and losses in the ratio of 3:2 and their balance sheet stood as follows:
| Assets | Rs. | Liabilities | Rs. |
| Cash | 1500 | Creditors | 11800 |
| Stock | 28000 | Tahir’s Capital | 51450 |
| Debtors | 19500 | Salman’s Capital | 36750 |
| Furniture | 2500 | ||
| Machinery | 48500 | ||
| 100,000 | 100,000 |
They admit Sadees into partnership and give him 1/8th share in future profits on the following terms:
(a) Goodwill of the entire firm be valued at twice the average of the last three year’s profits which amounted to Rs. 21,000, Rs. 24,000 and Its. 25,560.
(b) Sadees to bring in cash for the amount of his share of goodwill.
(c) He is to bring in cash Rs. 15,000 as his capital.
Give journal entries and draw out the balance sheet of the new firm and state the future profit sharing ratio.
Solution:
Journal
| Date | Particulars | L.F | Dr. Amount | Cr. Amount |
| Cash A/C | 20,880 | |||
| Sadees’s Capital A/C | 15,000 | |||
| Goodwill A/C | 5880 | |||
| (Sadees introduced Goodwill & Capital into business W:2) | ||||
| Goodwill A/C | 5880 | |||
| Tahir’s Capital A/C | 3528 | |||
| Salman’s Capital A/C | 2352 | |||
| (Goodwill transfers to Partner’s capital with ratio 3:2) |
Tahir, Bilal & Sadees
Adjusted Balance Sheet
As on ________________
| Assets | Rs. | Liabilities | Rs. |
| Cash (1500 + 15,000 + 5880) | 22380 | Creditors | 11800 |
| Stock | 28000 | Tahir’s Capital (51450 + 3528) | 54978 |
| Debtors | 19500 | Salman’s Capital (36750 + 2352) | 39102 |
| Furniture | 2500 | Sadees’s Capital | 15,000 |
| Machinery | 48500 | ||
| 120880 | 120880 |
New Profit Sharing Ratio is given in Working 2
W 1: Calculation of New Profit Sharing Ratio
![\[ \mathbf{Tahi}\mathbf{r}^{\mathbf{'}}\mathbf{s\ Old\ Ratio =}\frac{\mathbf{3}}{\mathbf{5}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-5b5a3b2497d1856599f72eec198cf98a_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Salma}\mathbf{n}^{\mathbf{'}}\mathbf{s\ Old\ Ratio}\mathbf{=}\frac{\mathbf{2}}{\mathbf{5}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-4c6acb9a1119320c8dbfc0f56d9ce498_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Sadee}\mathbf{s}^{\mathbf{'}}\mathbf{s\ Ratio}\mathbf{=}\frac{\mathbf{1}}{\mathbf{8}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-e31492e8695f9c7e29d093e9c06c341d_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{1 -}\frac{\mathbf{1}}{\mathbf{8}}\mathbf{=}\frac{\mathbf{7}}{\mathbf{8}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-74f77d0d0169db501471cbc82e3f1a08_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Tahir's\ New\ Ratio\ =}\frac{\mathbf{7}}{\mathbf{8}}\mathbf{\ \times}\frac{\mathbf{3}}{\mathbf{5}}\mathbf{=}\frac{\mathbf{21}}{\mathbf{40}}\mathbf{\ }\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-5802fb4073534dd85bed22b7ed1465c9_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Salman's\ New\ Ratio\ =}\frac{\mathbf{7}}{\mathbf{8}}\mathbf{\ \times}\frac{\mathbf{2}}{\mathbf{5}}\mathbf{=}\frac{\mathbf{14}}{\mathbf{40}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-6dcb06f7178f4ea72a10079c356a7a29_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Sadees's\ New\ Ratio\ =}\frac{\mathbf{1}}{\mathbf{8}}\mathbf{\times}\frac{\mathbf{5}}{\mathbf{5}}\mathbf{=}\frac{\mathbf{5}}{\mathbf{40}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-8c05096f0da8be67e025f89b1d45097a_l3.png "Rendered by QuickLaTeX.com")
![\[ \textbf{New Ratio of Tahir, Salman \& Sadees = 21:14:5} \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-d5e40a7d443ddb021b9d871dcb189507_l3.png "Rendered by QuickLaTeX.com")
W 2: Calculation of Goodwill of Entire Partnership Firm & Sadees’s share of Goodwill
![\[ \mathbf{Average\ profit =}\frac{\mathbf{21,000 + 24,000 + 25,560}}{\mathbf{3}}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-03138d0a8f6e3bdbd820f9e0197e6b0e_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Average\ profit = =}\frac{\mathbf{70,560}}{\mathbf{3}}\mathbf{= 23,520}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-cc7912382c0ffab6608890bec77dd796_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Whole\ Goodwill}\mathbf{\ = \ 23,520\ \times \ 2\ = 47040}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-e18a6a3375e07e9a5a34b1d824c695e5_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Sadees's\ share\ of\ Goodwill\ = 47040\ \times}\frac{\mathbf{5}}{\mathbf{40}}\mathbf{= 5880\ }\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-d5bafcbd01af958f4e37b949deecea2c_l3.png "Rendered by QuickLaTeX.com")
Q.4 Saleem, Tahir and Ali were partners sharing profits and losses in the ratio 3:2: 1. Their balance sheet on 31.12.2015 was as follows…..
Q.4 Saleem, Tahir and Ali were partners sharing profits and losses in the ratio 3:2: 1. Their balance sheet on 31.12.2015 was as follows:
| Assets | Rs. | Liabilities | Rs. |
| Cash at bank | 3500 | Creditors | 15000 |
| Bills receivable | 2000 | Bills payable | 5000 |
| Investment | 6500 | Capital: | |
| Debtors | 6000 | Saleem | 10000 |
| Stock | 5000 | Tahir | 10000 |
| Furniture | 2000 | Ali | 10000 |
| Buildings | 25000 | ||
| 50,000 | 50,000 |
Ali retired on the above date and the partners agreed that:
- Goodwill should be calculated on the basis of two years profit of the average of the profits for the years 2012, 2013 and 2014 which were Rs. 16000, Rs.12000 and Rs. 14000 respectively.
- Rs. 510 to be provided for doubtful debts.
- Stock to be reduced by 10%.
- There was appreciation in the value of building by 5%.
Required: Show necessary ledger accounts and the balance sheet of the continuing partners.
Solution:
Revaluation Account
| Detail | Rs. | Detail | Rs. |
| Reserve for bad & doubtful debts | 510 | Buildings | 1250 |
| Stock | 500 | ||
| Balance transferred to: | |||
| Saleem’s Capital W:2 | 120 | ||
| Tahir’s Capital W:2 | 80 | ||
| Ali’s Capital W:2 | 40 | ||
| 1250 | 1250 | ||
Saleem’s Capital Account
| Detail | Rs. | Detail | Rs. |
| Balance c/d | 24,120 | Balance b/d | 10,000 |
| Revaluation A/c | 120 | ||
| Goodwill A/c W:1 | 14,000 | ||
| 24,120 | 24,120 | ||
Tahir’s Capital Account
| Detail | Rs. | Detail | Rs. |
| Balance c/d | 19,413 | Balance b/d | 10,000 |
| Revaluation A/c | 80 | ||
| Goodwill A/c W:1 | 9,333 | ||
| 19,413 | 19,413 | ||
Ali’s Capital Account
| Detail | Rs. | Detail | Rs. |
| Balance c/d | 14,707 | Balance b/d | 10,000 |
| Revaluation A/c | 40 | ||
| Goodwill A/c W:1 | 4,667 | ||
| 14,707 | 14,707 | ||
Goodwill Account
| Detail | Rs. | Detail | Rs. |
| Saleem’s Capital W:1 | 14,000 | Balance c/d | 28,000 |
| Tahir’s Capital W:1 | 9,333 | ||
| Ali’s Capital W:1 | 4,667 | ||
| 28,000 | 28,000 | ||
Ali’s Loan Account
| Detail | Rs. | Detail | Rs. |
| Balance c/d | 14,707 | Ali’s Capital A/c | 14,707 |
| 14,707 | 14,707 | ||
Updated Balance Sheet
| Liabilities | Rs. | Assets | Rs. |
| Cash at bank | 3500 | Creditors | 15000 |
| Bills receivable | 2000 | Bills payable | 5000 |
| Investment | 6500 | Capital: | |
| Debtors 6000 | Saleem | 24120 | |
| Less Provision (510) | 5490 | Tahir | 19413 |
| Stock (5000 – 500) | 4500 | Ali’s Loan | 14,707 |
| Furniture | 2000 | ||
| Buildings (25,000 + 1250) | 26250 | ||
| Goodwill W:1 | 28000 | ||
| 78,240 | 78,240 | ||
W 1: Calculation of Goodwill
![\[ \mathbf{Average\ of\ Profits = \ }\frac{\mathbf{16,000 + 12,000 + 14,000}}{\mathbf{3}}\mathbf{= 14000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-c65f8a1501696d7a19f91c94fc1e4d54_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Goodwill\ of\ the\ whole\ firm = 14,000\ \times 2 = 28,000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-9b69fa76a491c6e2fa9177d469f521b8_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Saleem'}\mathbf{s\ Goodwill = 28,000\ \times}\frac{\mathbf{3}}{\mathbf{6}}\mathbf{= 14,000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-b563c095ac5bb847096feb0919579a23_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Tahir'}\mathbf{s\ Goodwill = 28,000\ \times}\frac{\mathbf{2}}{\mathbf{6}}\mathbf{= 9,333}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-41fc989c1ad16d665f9f7db0b8f66aac_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Ali'}\mathbf{s\ Goodwill = 28,000\ \times}\frac{\mathbf{1}}{\mathbf{6}}\mathbf{= 4,667}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-99caa5386393fe1466f2793556b404c6_l3.png "Rendered by QuickLaTeX.com")
W 2: Calculation of Revaluation Balance to Partner’s Ratio
1250 – 510 – 500 = 240
![\[ \mathbf{Saleem'}\mathbf{s\ Share = 240\ \times}\frac{\mathbf{3}}{\mathbf{6}}\mathbf{= 120}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-efd9734b4d3de3282fd737c00247c507_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Tahir}\mathbf{'s\ Share = 240\ \times}\frac{\mathbf{2}}{\mathbf{6}}\mathbf{= 80}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-f31b328fb62884f46152882a4e64625e_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Ali}\mathbf{'s\ Share = 240\ \times}\frac{\mathbf{1}}{\mathbf{6}}\mathbf{= 40}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-6fc76e64afbed8daddfc00aadb7fa37a_l3.png "Rendered by QuickLaTeX.com")
(PART- II)
Note: Attempt any THREE questions. (3 x 10 = 30)
Q.5 Nadeem keeps his books on single entry system. His financial position was as follow…..
Q.5 Nadeem keeps his books on single entry system. His financial position was as follow:
| January 1st 2015 (Rs). | December 31st 2015 (Rs.) | |
| Sundry Debtors | 4250 | 7000 |
| Cash in Hand | 100 | 150 |
| Cash at Bank | 1500 | 1000 |
| Stock | 10000 | 9500 |
| Machinery | 900 | 900 |
| Motor Vehicles | 7000 | 7000 |
| Furniture | 8000 | 8000 |
| Sundry Creditors | 11000 | 14500 |
During the year, he withdrew for personal use Rs.7000 He introduced additional capital on 1st July 2015 Rs 9000. Charge depreciation on machinery, motor vehicle and furniture @ 10% pa Allow interest on capital @ 6% p a.
Requirement: Ascertain the profit or loss made by him under Net worth Method for the year ended: 31st Dec. 2015
Solution:
Mr. Nadeem
Statement of Affairs
As at 1st Jan 2015
| Assets | Amount (Rs.) | Liabilities | Amount (Rs.) | |
| Sundry Debtors | 4250 | Sundry Creditors | 11000 | |
| Cash in Hand | 100 | |||
| Cash at Bank | 1500 | |||
| Stock | 10000 | Capital (Balancing Figure) | 20,750 | |
| Machinery | 900 | |||
| Motor Vehicles | 7000 | |||
| Furniture | 8000 | |||
| 31,750 | 31,750 | |||
Mr. Nadeem
Statement of Affairs
As at 31st Dec 2015
| Assets | Amount (Rs.) | Liabilities | Amount (Rs.) |
| Sundry Debtors | 7000 | Sundry Creditors | 14500 |
| Cash in Hand | 150 | ||
| Cash at Bank | 1000 | ||
| Stock | 9500 | ||
| Machinery 900 | |||
| Less Depreciation: | |||
| (900 x 0.10) (90) | 810 | ||
| Motor Vehicle 7000 | |||
| Less Depreciation: | |||
| (7000 x 0.10) (700) | 6300 | ||
| Furniture 8000 | Capital (Balancing Figure) | 17460 | |
| Less Depreciation: | |||
| (8000 x 0.10) (800) | 7200 | ||
| 31,960 | 31,960 | ||
Mr. Nadeem
Statement of Profit & Loss
For Year ended 31st Dec 2015
| Capital 31st Dec 2015 | 17460 |
| Add Drawings | 7000 |
| Less Additional Capital 1st Jul 2015 | (9000) |
| Adjusted Capital | 15460 |
| Less Opening Capital 1st Jan 2015 | (20,750) |
| Net Loss before interest on Capital | (5290) |
| Less Interest on Capital W:1 | (1515) |
| Loss After Charging Interest on Capital | (6805) |
W:1 Calculation of interest on Capital
![\[ \mathbf{Interest\ on\ Opening\ Capital = 20750 \times}\frac{\mathbf{6}}{\mathbf{100}}\mathbf{= 1245}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-0908444f458e90cf488f9d93a6b6e6ba_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Interest\ on\ }\mathbf{Additional}\mathbf{\ Capital =}\mathbf{9000}\mathbf{\times}\frac{\mathbf{6}}{\mathbf{100}}\mathbf{\times}\frac{\mathbf{6}}{\mathbf{12}}\mathbf{=}\mathbf{270}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-9d5606efdbbd7a6a7d7eac1122bf6beb_l3.png "Rendered by QuickLaTeX.com")
![\[ \textbf{Total Interest on Capital = 1245+270 = 1515} \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-fe6b85cbf702735c83abe777baf14adc_l3.png "Rendered by QuickLaTeX.com")
Q.6 Zahid & Co. purchased a machinery for Rs.160, 000 on 1st July 2010. The books are closed on 31st December every year on 30th June 2013, it was sold for Rs.70, 000 and new machinery was purchased for Rs. 180,000 on the same date……
Q.6 Zahid & Co. purchased a machinery for Rs.160, 000 on 1st July 2010. The books are closed on 31st December every year on 30th June 2013, it was sold for Rs.70, 000 and new machinery was purchased for Rs. 180,000 on the same date. Depreciation is charged at the rate of 15% p.a on original cost method.
Requirement: Prepare the machinery account up to 2013 in the books of company.
Solution:
Machine Account
| Date | Detail | Rs. | Date | Detail | Rs. |
| 1st Jul, 2010 | Cash A/C | 160,000 | 31st Dec, 2010 | Depreciation A/C W:2 | 12,000 |
| 31st Dec, 2010 | Balance c/d | 148,000 | |||
| 160,000 | 160,000 | ||||
| 1st Jan 2011 | Balance b/d | 148,000 | 31st Dec, 2011 | Depreciation A/C W:2 | 24,000 |
| 31st Dec, 2011 | Balance c/d | 124,000 | |||
| 148,000 | 148,000 | ||||
| 1st Jan 2012 | Balance b/d | 124,000 | 31st Dec, 2012 | Depreciation A/C W:2 | 24,000 |
| 31st Dec, 2012 | Balance c/d | 100,000 | |||
| 124,000 | 124,000 | ||||
| 1st Jan 2013 | Balance b/d | 100,000 | 30th Jun, 2013 | Depreciation A/C W:2 | 12,000 |
| 30th Jun 2013 | Cash A/C | 180,000 | 30th Jun, 2013 | Cash A/C | 70,000 |
| 30th Jun, 2005 | P&L A/C (Loss) W:1 | 18,000 | |||
| 31st Dec, 2013 | Depreciation A/C W:2 | 13,500 | |||
| 31st Dec, 2013 | Balance c/d | 166,500 | |||
| 280,000 | 280,000 |
W:1 Calculation of Profit or Loss
| Cost | 160,000 |
| Less Depreciation for 2010 | (12,000) |
| Less Depreciation for 2011 | (24,000) |
| Less Depreciation for 2012 | (24,000) |
| Less Depreciation for 2013 | (12,000) |
| Book Value at the time of Sale | 88,000 |
| Selling Price Realized | (70,000) |
| Loss | 18,000 |
W:2 Calculation of yearly Depreciation
![\[ \mathbf{For\ 2010 = 160,000 \times}\frac{\mathbf{15}}{\mathbf{100}}\mathbf{\times}\frac{\mathbf{6}}{\mathbf{12}}\mathbf{= 12000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-014340b9d281a8d233b4dcf6f042e053_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{For\ }\mathbf{2011}\mathbf{= 160,000 \times}\frac{\mathbf{15}}{\mathbf{100}}\mathbf{=}\mathbf{24}\mathbf{000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-195982cc33089727062063cd143a8ac2_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{For\ 201}\mathbf{2}\mathbf{= 160,000 \times}\frac{\mathbf{15}}{\mathbf{100}}\mathbf{= 24000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-012e395b2eaacd8e73d77c2162418fa8_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{For}\mathbf{\ 30}\mathbf{th\ June}\mathbf{\ }\mathbf{2013}\mathbf{= 160,000 \times}\frac{\mathbf{15}}{\mathbf{100}}\mathbf{\times}\frac{\mathbf{6}}{\mathbf{12}}\mathbf{= 12000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-66a06fb46e885508d4ba1c23c421a314_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{For\ 3}\mathbf{1st\ Dec}\mathbf{\ 2013}\mathbf{= 180,000 \times}\frac{\mathbf{15}}{\mathbf{100}}\mathbf{\times}\frac{\mathbf{6}}{\mathbf{12}}\mathbf{=}\mathbf{1}\mathbf{3500}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-d26297e94c470d18e535d6995997aac7_l3.png "Rendered by QuickLaTeX.com")
Q.7 MS. Kaleem Traders sent 100 machines to Habeeb on consignment. The cost of each machine was Rs.12000. The expenses of MS. Kaleem traders were, Freight Rs.7000 and insurance Rs.3000…..
Q.7 MS. Kaleem Traders sent 100 machines to Habeeb on consignment. The cost of each machine was Rs.12000. The expenses of MS. Kaleem traders were, Freight Rs.7000 and insurance Rs.3000. During transit one machine was destroyed and the insurance company admitted Rs.9000 towards that claim. Habeeb sold 7 machines at Rs.15000 each and paid for storage and insurance Rs. 3400 Habeeb then accepted a bill for Rs 90,000 at 3 months drawn by MS. Kaleem traders, which they discounted immediately with their bank at 6% p.a It was agreed that Habeeb is to get 5% commission.
Requirement: Give the consignment account in the books of MS. Kaleem Traders.
Solution:
Consignment to Habib A/C
| Date | Particulars | Amount | Date | Particulars | Amount |
| Goods Sent on Consignment | 1200,000 | Habib’s A/C (Sales) | 105,000 | ||
| Cash A/C (Consignor’s Expenses) | 10,000 | Stock on Consignment A/C W:1 | 111,3200 | ||
| Habib’s A/C (Consignee’s Expenses) | 3400 | Profit & Loss (Abnormal Loss W:2) | 3100 | ||
| Habib’s A/C (Consignee’s Commission) (105,000 x 0.05) | 5250 | Insurance A/c | 9000 | ||
| Profit Transferred to Profit & Loss A/C | 11650 | ||||
| 12,30,300 | 12,30,300 | ||||
W:1 Calculation of Stock
Cost of Unsold Machines 92 x 12000 = 1104,000
![\[ \mathbf{Proportionate\ Direct\ Expenses = 10,000\ \times}\frac{\mathbf{92}}{\mathbf{100}}\mathbf{= 9200}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-5df612b510648a09fe3bbcc27673a0ed_l3.png "Rendered by QuickLaTeX.com")
Total Cost of Unsold Stock = 1104000 + 9200 = 1113200
W:2 Calculation of Abnormal Loss
Cost of lost Machine 1 x 12000 = 12000
![\[ \mathbf{Proportionate\ Expenses\ of\ Consignor = 10,000\ \times}\frac{\mathbf{1}}{\mathbf{100}}\mathbf{= 100}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-44b1b7f1e706ed24c789621fe81016ab_l3.png "Rendered by QuickLaTeX.com")
Insurance Claim = 9000
Total Abnormal Loss = 12000 + 100 – 9000 =3100
Q.8 lmran Textile Ltd. acquired the business of M/S Noor & Sons. The assets and liabilities of M/S Noor & Sons at book value are given below….
Q.8 lmran Textile Ltd. acquired the business of M/S Noor & Sons. The assets and liabilities of M/S Noor & Sons at book value are given below:
| Assets | Rs. | Liabilities | Rs. |
| Land & Building | 50,000 | Sundry Creditors | 10,000 |
| Machinery | 40,000 | ||
| Furniture | 14,000 | ||
| Debtors | 5000 |
The purchase consideration is to be paid by the company in fully paid up shares of Rs. 10 each. Pass
Journal entries if the shares are issued:
(a) At Par
(b) At 10% Discount
(c) At 10% Premium
Solution:
Journal
| Date | Detail | L.F | Dr. | Cr. |
| Land & Building A/c | 50,000 | |||
| Machinery A/c | 40,000 | |||
| Furniture A/c | 14,000 | |||
| Debtors A/c | 5000 | |||
| Sundry Creditors | 10,000 | |||
| M/S Noor & Sons A/c | 99,000 | |||
| (Assets & liabilities acquired for purchase consideration) | ||||
| (a) | Shares issued at par | |||
| M/S Noor & Sons A/c | 99,000 | |||
| Ordinary Share Capital A/c | 99,000 | |||
| (9900 shares issued at Rs. 10 at par for purchase consideration) | ||||
| (b) | Shares issued at 10% discount | |||
| M/S Noor & Sons A/c | 99,000 | |||
| Discount on issuance of shares A/c | 11,000 | |||
| Ordinary Share Capital A/c | 110,000 | |||
| (11000 shares issued at 10% discount for purchase consideration W:1) | ||||
| (c) | Shares issued at 10% premium | |||
| M/S Noor & Sons A/c | 99,000 | |||
| Premium on issuance of shares A/c | 9000 | |||
| Ordinary Share Capital A/c | 90,000 | |||
| (9000 shares issued at 10% premium for purchase consideration W:2) |
Working 1: Issuance of shares at 10% discount
![\[ \frac{\mathbf{99000}}{\mathbf{10 - 1}}\mathbf{= 11,000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-7896b3696930016f76dbf8ba1c6632d7_l3.png "Rendered by QuickLaTeX.com")
![\[ \textbf{Ordinary Shares issued = 99000 + 11000 = 110,000} \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-00500b4d9ce690c05c2e3093dde43657_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Total\ Shares\ issued\ =}\frac{\mathbf{110000}}{\mathbf{10}}\mathbf{= 11,000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-05f334e2388617374d0784d88893cb0d_l3.png "Rendered by QuickLaTeX.com")
Working 2: Issuance of shares at 10% premium
![\[ \frac{\mathbf{99000}}{\mathbf{10}\mathbf{+}\mathbf{1}}\mathbf{=}\mathbf{9}\mathbf{,000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-91f97d59a38d2e395ace9b1da3c5acdb_l3.png "Rendered by QuickLaTeX.com")
![\[ \textbf{Ordinary Shares issued = 99000 -- 9000 = 90,000} \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-764e5d18db880a60d22eeb65240c3b43_l3.png "Rendered by QuickLaTeX.com")
![\[ \mathbf{Total\ Shares\ issued\ =}\frac{\mathbf{90}\mathbf{000}}{\mathbf{10}}\mathbf{=}\mathbf{9}\mathbf{000}\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-9ba3f8fef18643cf59c595c13d4ffd45_l3.png "Rendered by QuickLaTeX.com")
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