ACC501 Assignment Solution

ACC311 Assignment No. 1 solution

Semester “Fall 2010”

“Auditing (ACC311)”

Assignment No. 01 Marks: 20

Question 1:

MR. A is a newly inducted trainee student in the audit firm. He thinks that auditor should

conduct an audit with a detective approach and should look only for frauds. Principal, Mr. X

tells him that audit has to be conducted with an approach of professional skepticism. The

principal has asked you to explain the concept of professional skepticism to Mr. A. (10)

Question 2

Explain Auditor’s responsibilities with respect to confidentiality of information. (10)

Important Tips

1. This Assignment can be best attempted from the knowledge acquired after

watching video lecture no. 1 to lecture no.8 and reading handouts as well as

recommended text book).

2. Video lectures can be downloaded for free from Online VU Lectures.

Schedule

Opening Date and Time October 26, 2010 At 12:01 A.M. (Mid-Night)

Due Date and Time October 29, 2010 At 11:59 P.M. (Mid-Night)

solution

professional skepticism is conducting the audit with a questioning mind and ensuring critical assessment of the audit evidence. this means that the firm should neither go into the audit thinking that the client is very honest nor thinking that he is absolutely dishonest

.......

Basic principles governing an audit
SA 200 “Basic Principals Governing an Audit”, describes the basic principles which govern
the auditor’s professional responsibilities and which should be complied with wherever an
audit is carried. They are described below:
(i) Integrity objectivity and independence: An auditor should be honest, sincere,
impartial and free from bias. He should be a man of high integrity and objectivity.
(ii) Confidentiality: The auditor should respect confidentiality of information acquired
during the course of his work and should not disclose the information without the
prior permission of the client, unless there is a legal duty to disclose.
(iii) Skill and competence: The auditor must acquire adequate training and experience.
He should be competent, skillful and keep himself abreast of the latest developments
including pronouncements of ICAI on accounting and auditing matters.
(iv) Work performed by others: If the auditor delegates some work to others and uses
work performed by others including that of an expert, he continues to be responsible
for forming and expressing his opinion on the financial information.
(v) Documentation: The auditor should document matters which are important in
providing evidence to ensure that the audit was carried out in accordance with the
basic principles.
(vi) Planning: The auditor should plan his work to enable him to conduct the audit in an
effective, efficient and timely manner. He should acquire knowledge of client’s
accounting system, the extent of reliance that could be placed on internal control and
coordinate the work to be performed.
(vii) Audit evidence: The auditor should obtain sufficient appropriate evidences through
the performance of compliance and other substantive procedures to enable him to
draw reasonable conclusions to form an opinion on the financial information.
(viii) Accounting System and Internal Control: The management is responsible for
maintaining an adequate accounting system incorporating various internal controls
appropriate to the size and nature of business. He auditor should assure himself that
the accounting system is adequate and all the information which should be recorded
has been recorded. Internal control system contributes to such assurance.
(ix) Audit conclusions and reporting: On the basis of the audit evidence, he should review
and assess the audit conclusions. He should ascertain:

.............

Acc501 Assignment Announced

Assignment # 01 Marks: 20
“Accounting Ratios”
ABC Manufacturing Company had sales amounting Rs. 40,000,000 in fiscal year 2009. Given below are some ratios of the ABC Company. Use this information to determine the Rupee values of various income statement and balance sheet accounts as requested.

ABC Manufacturing Company
Year ended December 31, 2009
Sales Rs.80,000,000
Gross profit margin 80%
Operating profit margin 35%
Net profit margin 8%
Return on total assets 16%
Return on common equity 20%
Total assets turnover 2
Average collection period 70 days

Calculate the values for the following;
• Gross profit
• Cost of goods sold
• Operating profit
• Operating expenses
• Earnings available for common stockholders
• Total assets
• Total common equity
• Accounts receivable
(Assume360 days in a financial year)

solution:

Gross Profit 64,000,000
COGS 16,000,000
Operating Profit 28,000,000
Operating Expenses 36,000,000
Earning Available for common stockholder's 3,200,000
Total assets 40,000,000
Total common equity 1,280,000
Accounts recievable 41,120,000

MGT402 Assignment # 1 solution

Semester “FALL 2010” 


“ Cost & Management Accounting (MGT402) ” 


Assignment No. 01 Marks: 15


PROBLEM: 
On March 01, 2008, FC Corporation had 250 gallons of material in store at Rs. 5.00 per gallon. 


Following were the receipt and issues during March: 
March 03: Purchased 1,200 gallons . Rs. 10 per gallon. 
March 07: Issued 650 gallons to job #2325 
March 13: 150 gallons were returned to store room. 
March 29: Returned to supplier 80 gallons which was purchased on March 3. 


Additional Information: 
During that period, factory worked for 1,000 direct labour hours. Direct labour was Rs. 9,325 
and factory overhead applied rate is Rs. 6.00 per direct labour hour. Actual factory over head 
for that period was Rs. 7,500. 
Following are the year end inventories: 
Work in process Rs. 2,450 
Finished goods Rs. 4,530 
There were no beginning inventories for Work in process and finished goods. 


Required: 
1. Prepare Material Ledger Card under FIFO costing method. (10 Marks) 
2. Prepare Cost of Goods Sold Statement under FIFO. (5 Marks) 
Note: Cost of Goods Sold for the period is adjusted for under or over applied factory overhead.

solution:


Question No 1.
date
Received
Issued
Balance
Gallons of material
Unit cost
amount
Gallons of material
Unit cost
amount
Gallons of material
Unit cost
amount
2008
Rs
Rs
Rs
Rs
Rs
Rs
MAR.1
250
5.00
1250
MAR.3
1200
10
12000
250
1200
5.00
10
1250
12000
MAR.7
250
400
650
5.00
10
1250
4000
800
10
8000
MAR13
150
10
1500
150
800
10
10
1500
8000
80
10
800
70
800
10
10
700
8000
MAR29
MAR29
870
10
8700
CLOSING INVENTORY ACCORDING TO FIFO IS RS 8700.

Question No   2

2. RUPEES
OPNING INVENTORY =250*5=1250
ADD. NET PURCHASES =(1200*10)-(80*10)
=12000-800
=11200
MATERIAL AVAILABLE FOR USE =1250+11200=12450
LESS. CLOSING INVENTORY =12450-8700
DIRECT MATERIAL CONSUMED =3750
ADD.DIRECT LABOUR COST =3750+9325
PRIME COST =13075
ADD.F.O.H =13075*(1000*6)
TOTAL FACTORY COST =19075
COST OF GOODS TO BE MANUFECTURED=19075
LESS.CLOSING WORK IN PROCESS =19075-2450
COST OF GOODS MANUFECTURED =16625
COST OF GOODS TO BE SOLD= =16625
LESS.CLOSING FINISHED GOODS =16625-4530
COST OF GOOD TO SOLD AT NORMAL=12095
ADD UNDER APPLIED FACTORY OVERHEADS=12095+1500
COST OF GOOD SOLD AT ACTUAL =13595

SUPPORTING CALCULATION
ACTUAL FACTORY OVERHEADS =7500
APPLIED FACTORY OVERHEADS =6000
UNDER APPLIED FACTORY OVERHEADS =1500

ACC501 - Business Finance GDB solution

Capital structure of ABC Company has a mixture of debt and equity. The company is considering a restructuring that would involve issuing more debt and using proceeds to buy back some of the outstanding equity. How it will effect on financial leverage?

Below is the idea to solve subject GDB. Kindly don't copy as it is, take idea from here and make it in your own style / words. 

1. Issuing More Debts means that we are issuing bonds / debentures etc. 

2. Buy back some outstanding equity means we are invoking Call Provision for our shares. 

3. Effect on financial leverage shall be positive. 

Kindly review related lectures for a better understanding.

ACC501 Gdb solution

Question:
Approches         NPV             Payback period

Project A         -1,280                 2.88


Project B           2,560                 3.2


Project C          2,560                  2.88


Project D          -2,240                2.89



Solution:

Project : C
Reason: Because it has the lowest payback period

ACC501 Assignment Solution

ACC GDB # 2 solution

ACC GDB # 2 Solution:

Following are the techniques of audit testing: 
Inspection 
Observation 
Inquiry 
Confirmation
Computation 
Analytical review
If an Auditor studies significant ratios and compares financial information with prior periods and investigates unusual fluctuations, his technique of audit testing will fall into which of the above given techniques?

Answer: 
yes neo You r right " It is Analytical Review"
Analytical Review
Compare amounts and ratios (e.g., effective tax rates) for the current period with the prior year. Investigate significant fluctuations. Test ratios and other calculations, as necessary.

Acc311 GDB Solution

Following are the techniques of audit testing: 

Inspection
Observation
Inquiry
Confirmation
Computation
Analytical review
If an Auditor studies significant ratios and compares financial information with prior periods and investigates unusual fluctuations, his technique of audit testing will fall into which of the above given techniques?
 

Answer:-

Analytical review

ACC311 current paper (May 2010)

28 mcqs 
enlist the categories of risk assessment procedure ( 3 marks)
definition of internal control and enlist the procedure of audit ? (3 marks)
what is the purpose of substantive procedure and define the "timing"? (5 marks)
what is the information system and what is the importance in the accounting systems (5 marks)

ACC311 current paper (May 2010)

Today Paper (26-05-2010)

28 mcqs
Enlist the categories of risk assessment procedure ( 3 marks)
definition of internal control and enlist the procedure of audit ? (3 marks)
what is the purpose of substantive procedure and define the "timing"? (5 marks)
what is the information system and what is the importance in the accounting systems (5 marks)

ACC501 - Business Finance current paper

What is WACC? (3 Marks)

What re the primary shortcoming of the Payback Period (3 Marks)

Difference between Temporary Currents assets and permanent Current assets
(5 Marks)

One is about market value and book value (5 marks)

In one find the NPV of given data which I don’t remember (5 marks)


10 marks

(i) Calculate the Payback Period for each project.
(ii) Calculate the Net Present Value (NPV) of each project.



10 Marks Question

Book Example

For example, the terms of 2/10, net 30 may be quoted for a certain customer.
– This means that the customer has 30 days from invoice date to pay the full
amount.
– If payment is made within 10 days, a 2% discount can be taken
• A buyer places an order for $1,000 under the terms 2/10, net 60. He has the option of
– paying $1,000 x (1 - .02) = $980 in 10 days, or
– paying the full $1,000 in 60 days.
• In general, the credit terms are interpreted as:
(take this discount off the invoice price)/(if you pay in this many days ), (else pay the
full amount in this many days)

Mgt402 - Solution

Solution:

Bell Computers, LTD.,

Cost of Production Report

For the Month of Jan

1. Quantity Schedule

Units of open work in process 10,000

Units put into the process 58,000

68,000

Units of closing work in process 8,000

Units completed and transferred 60,000

68,000



2. Cost Accumulated in the process

Material Cost (18,000+114,000) 132,000

Conversion Cost (8,800+61,600) 70,400

Total Cost 202,400

3. Equivalent unit Produced

Material Cost (60,000+8000*75%) 66,000

Conversion Cost (60,000+8000*50%) 64,000

4. Per Unit Cost

Material Cost (132,000/66,000) = 2

Conversion Cost (70,400/64,000) = 1.1

Total per Unit Cost 3.1

5. Cost Apportionment

Units completed and transferred

(60,000*3.1) 186,000

Closing work in process

Material Cost (6,000*2) 12,000

Conversion Cost (4000*1.1) 4,400 16,400

202,400



Required:

1. How many units were started and completed during January?

Answer:

Unit Started in Jan. = 68,000

Unit Completed in Jan. = 60,000

2. What were the equivalent units for January for material and conversion costs?

Answer:

Equivalent units for January for material costs = 66,000

Equivalent units for January for conversion costs = 64,000



3. What were the costs per equivalent unit for January?

Answer:

Material Cost (132,000/66,000) = 2

Conversion Cost (70,400/64,000) = 1.1

Total per Unit Cost 3.1



4. Verify the accountant’s ending work in process inventory figure (£16,400) given in the report.

Answer:

Closing work in process

Material Cost (6,000*2) 12,000

Conversion Cost (4000*1.1) 4,400 16,400

5. What criticism can be made of the unit costs that have been computed weighted –Average Method by the company and which method is superior computing unit cost under process costing based on your criticism?

Answer:

Comparison of Both methods is under as equivalent production and per unit costs.

Weighed Average Method FIFO Method

Equivalent production per unit costs Equivalent production per unit costs

Material Cost (60,000+8000*50%)

66,000 (132,000/66,000)

2 (1000+50,000+6000)

57,000 (114,000/57,000)

2

Conversion Cost (60,000+8000*75%)

64,000 (70,400/64,000)

1.1 (2000+50,000+4000)

56,000 (61,600/56,000)

1.1

Total 130,000 3.1 113,000 3.1

In comparison we see that the equivalent unit in both methods is different but per unit cost has same. FIFO method is complex than Weighted Average method, so Average method is superior because of less complexity and due to:

1. There are fewer chances to complete the unit which produced first it means first in first, because Authorities prefer to complete the open units and there may be delay in new units to put into the process.

2. Accountants will refer to Average method due to less time consuming and complexity.

Mgt101 - Solution

[[NOTE:- We always try our best to upload 100% correct solution BUT it is requested that you kindly review it before submission, please.]] Hyper Star Traders
Income Statement
As of Dec 31, 2009
				Amount in Rs.
	Sales		924,000
	Return Inwards		8,000
	Net Sales			916,000
	Cost of Sales
	Opening Stock		120,000
	Purchases	680,000
	Return Outwards	4,800
	Net Purchases	675,200	675,200
	Total Stock available for sale		795,200
	Closing Stock		200,000
	Net Cost of Sales			595,200
	Gross Profit			320,800
	Operating Expenses
	Salaries			48,000
	Wages			45,200
	Carriage out			3,600
	Commission			2,000
	Insurance Paid			2,800
	House Rent			5,000
	Bank Charges			150
	Interest on Loan			500
	Bad Debts on Sundary Debtors			5,000
	Written off Plant Value - wear& Tear			40,000
	Total Operating Expenses			152,250
	Operating Income
	Interest Received			(800)
	Dividend Income			(2,000)
	Total Operating Income			(2,800)
	Net of Total Operating Income/Expense			149,450
	Net Profit Transferred to Balance Sheet			171,350

....................................................

Hyper Star Traders
Balance Sheet
As of Dec 31, 2009
Liabilities & Owner's Equity				Assets
Current Liabilities		Amount in Rs.		Current Assets		Amount in Rs.
Bills Payable		20,000		Cash in Hand		4,000
Sundary Creditors		160,000		Bank Balance		36,000
Bank Charges/Interest Due		650		Sundary Debtors	100,000
				Bad Debts	5,000
				Net Sundary Debtors	95,000	95,000
				Bills Receivables		44,000
				Dividend Receivable recorded		(2,000)
				Closing Stock		200,000
Total current Liabilities		180,650		Total current Assets		377,000
Owners Equity				Fixed & Long Term Assets
				Long Term Investment		60,000
Capital	280,000			Furniture		40,000
Drawing (Credited)	5,000			Plant	200,000
Net Capital	285,000	285,000		Wear & Tear of plant	40,000
				Net Plant Value	160,000	160,000
Net Retained Earning from P&L		171,350
Total Capital & Retained Earning		456,350		Total Fixed & Long Term Assets		260,000
Total Liabilities & Owners Equity		637,000		Total Assets		637,000

.....................................

Hyper Star Traders
Adjustment Entries
As of Dec 31, 2009
	Amount in Rs.
Adjustment Entry # 1
Account	Dr	Cr
Bad Debts on Sundary Debtors	5,000
Sundary Debtors		5,000
Recording the bad debts on sundary debtors (100,000 x 5 % = 5,000)
Adjustment Entry # 2
Account	Dr	Cr
House Rent Expense	5,000
Capital		5,000
Adjustment Entry for recording the House rent paid from Owners personal Account
Adjustment Entry # 3
Account	Dr	Cr
Writen Off Value - Plant	40,000
Plant		40,000
Adjustment Entry for the Written off the plant value
Adjustment Entry # 4
Account	Dr	Cr
Bank Charges	150
Interest on Loan	500
Due Bank Charges		150
Due Interest on loan		500
	650	650
Adjustment Entry to record the due payment not yet recorded in the bank books
Adjustment Entry # 5
Account	Dr	Cr
Accrued dividend Receivable	2,000
Dividend Income		2,000
Adjustment Entry for the dividened accured receivable on Dec 31,09