Sample Set 1

Sample Question Set 1 – Financial Accounting

1. Depreciation and Amortization: On 1^st April 2006: A ltd started business with capital of AED 100,000 and 6% Loan of 200,000. Purchased plant for 80,000, stock of goods for 100,000; patented design for 50,000. All for cash. Converted the goods into finished products and sold during the year 200,000 for cash. Rent for the period 20,000 but paid 12,000. Prepare the financial statements for the year with the following accounting assumptions:

i. Depreciation: 20% on RBM

ii. Patent to be amortized over 5 years

iii. Interest to be paid every six month on 1^st October and 1^st April (financial year ends on 31^st March, so Interest of April 1^st is NOT considered in BS)

Balance Sheet			IS		CFS
Source of Funds	Opening BS	Closing BS	Income		Receipts
Capital	100000	100000	Goods Sold	200000	Opening Cash Balance	70000
Retained Profit		48000			Goods Sold	200000
Loan (@6%)	200000	200000
Rent Payable		8000
Total	300000	356000	Total	200000	Total	270000
Application of Funds			Expense		Payment
			Interest	6000	Interest Paid	6000
Cash in Hand	70000	252000	COGS	100000
Plant	80000	64000	Rent for the period	20000	Rent Paid	12000
Goods	100000	0	Patent Amortization	10000
Patent	50000	40000	Depreciation	16000
Total	300000	356000	Total	152000	Total	18000
			Profit	48000	CIH (Cash in Hand)	252000

2. Profit and Tax: Refer to the above financial statements.

i. Show the effect on tax @ 30% on profit.

ii. Find Book value per share

iii. Find Earning per share

PBT (Profit Before Tax)	48,000
Tax (@ 30%)	14,400
PAT (Profit after Tax)	33,600
Capital	100,000
PAT	33,600
Net Worth or BV	133,600
No. of Shares (Assumption)	10,000
BV per share	13.36
EPS (Earnings per share)	3.36

3. Operating and Non-operating Incomes: Capital =100,000; 10% loan =50,000; Stock =50,000; Shares of XY ltd = 80,000 and balance as cash. Prepare the financial statements after the following transactions:

i. Sold entire stock for 80,000

ii. Sold 50% of the share for 80,000

Balance Sheet			IS		CFS
Source of Funds	Opening BS	Closing BS	Income		Receipts
Capital	100000	100000	Sale of Goods	80000	Opening Cash Balance	20000
Retained Profit	0	70000	Sale of Shares	80000	Sale of Goods	80000
Loan (@10%)	50000	50000			Sale of Shares	80000
Total	150000	220000	Total	160000	Total	180000
Application of Funds			Expense		Payment
Cash in Hand	20000	180000
Stock of Goods	50000	0	COGS	50000
Shares (XY ltd)	80000	40000	COSS	40000
Total	150000	220000	Total	90000	Total	0
			Profit	70000	CIH (Cash in Hand)	180000