24/01/2016
dear student - 1st batch civil-3rd semester, find the refreshments for your principles of accounting!
Principles of accounting (HUM:303)
Refreshments
1. What is accounting? Discuss two major types of accounting and their functions? 2. What are various types of accounts and how they affected by the accounting golden rules? 3. What steps are involved in an exhaustive accounting procedure? 4. Discuss the accounting transactions and show how they affect accounting equation? 5. What is the accounting equation? Show the all possible effects of following transactions in the accounting equation- ABC International engages in the following series of transactions: i. ABC sells shares to the investors for $10,000. ii. ABC buys inventory of $4,000 from a supplier. iii. ABC sells inventory of $6,000 to a customer. iv. ABC collects cash from the customer to which it sold the inventory. 6. What is journal entry? What features should journal entries have -exemplify? 7. What procedures would you follow to make journal entries for the following- Brad has following transactions for the Month of January 2014, i. Purchased goods for cash $ 10,000 date 1.1.2014 ii. Purchased stationery for cash $ 500 date 12.1.2014 iii. Purchased furniture for cash $ 2,000 date 13.1.2014 iv. Sold goods for cash $ 100,000 date 17.1.2014 v. Sold goods to James $ 4,000 date 21.1.204 vi. Paid rent $ 800 date 24.1.2014 vii. Paid salary of $ 8,000 date 31.1.2014 8. What is T-Accounting? Make various possible T-Accounts and a trial balance for above transactions. 9. What are financial statements? Why it is important to make financial statements? 10. What is cash flow forecasting? What is its implication in business? 11. Make a cash flow forecast/statement from the followings-
Williams Ltd produce children’s games which they sell to the retail trade. The budgeted profit and loss figures for the company for the period of July-December are as follows:
July ($ '000') August (Tk '000') September ($ '000') October ($ '000') November ($ '000') December (Tk '000')
Sales 80 120 200 240 320 400
Direct Costs:
Materials 60 70 80 80 70 40
Labour 30 36 40 56 36 32
Overheads
Production 32 38 44 48 36 24
Sales 12 12 20 30 30 40
Admin 16 20 20 24 16 20
As management accountant for the company, you have been asked to prepare a cash flow forecast for the period of October to December. You are provided with the following information: i. Wages are paid in the current month while supplies of the direct materials give two months credit; ii. Production overheads are paid in the month in which they occur and include depreciation of $ 10000; iii. 10 percent of sales are cash sales, the reminder are credit sales, 90 percent of which are paid one month in arrears with the remainder being paid the following month; iv. Administration overheads are paid one month in arrears; v. Sales overheads include a sales commission of 10 percent payable one month in arrears, the remaining sales overheads are paid in the current month; vi. The cash balance for the company on 1 October was $ 16000; vii. A dividend of $ 50000 is payable during October viii. A mortgage of company property will raise $100000 in November, repayment of $ 5000 per month will begin in December; ix. A new production machine costing $ 40000 will be installed at the beginning of November, 10 percent of the price is payable at that time and the remainder will due for three month later; 12. What is a profit and loss account? Give an example for a profit and loss account. 13. What is balance sheet? Explain briefly the contents of a business balance sheet? 14. What is cost accounting? What is its objectives? 15. What is fixed and variable cost- explain? Find the solution of costing for the followings-
Stanley Brown a transport manager of a food company has been provided with the following information of cost per vehicle by his assistant-
Purchase Cost $25 000
Expected Sales Value after two years $7 000
Vehicle License per annum $500
Insurance per year $500
Maintenance (each six month service) $250
Replacement parts (per 100 miles) $75
Tyre replacement after 25 000 miles- 6 tyres @ $80 each
Average mileage per annum 30 000
Diesel fuel per gallon $2.50
Average mpg 15
Stanley needs to classify this data in some way in order to be able to arrive at an estimated running cost per mile for his vehicles so that he can determine the cost of delivery to his customers.
16. Explain overhead cost with example. Find the overhead cost from following information –
Warburton Ltd produces several products which pass through two production departments in its factory. These two departments are concerned with cutting and finishing. The company also has two service departments, maintenance and canteen.
Service department costs are allocated as follows:
Maintenance:
Cutting 75%
Finishing 20%
Canteen 5%
Canteen:
Cutting 60%
Finishing 30%
Maintenance 10%
During the period just ended actual overheads were as follows:
Cutting £ 71 500
Finishing £ 47 300
Maintenance £ 25 100
Canteen £ 24 300
Allocate all overheads in order to calculate the overheads costs absorbed by the two production departments. Justify the overheads distribution and finally show the overhead cost consumed by each production unit.
17. What is Unit Contribution Margin? Explain it from the cost-volume-profit/breakeven point analysis. 18. Solve the problems below using CVP/breakeven analysis formula -
Steve Poplack owns a service station in Walnut Creek. Steve is considering leasing a machine that will allow him to offer customers the mandatory California emissions test. Every car in the state must be tested every two years. The machine costs $6,000 per month to lease. The variable cost per test (i.e., per car inspected) is $10. The amount that Steve can charge each customer is set by state law, and is currently $40.
i. How many inspections would Steve have to perform monthly to break even from this part of his business? ii. How many inspections would Steve have to perform monthly to generate a profit of $3,000 from this part of his business? 19. What is targeted profit? Solve the problems from the following accounting information- Alice Waters (age 9) runs a lemonade stand in the summer in Palo Alto, California. Her daily fixed costs are $20. Her variable costs are $2 per glass of ice-cold, refreshing, lemonade. Alice sells an average of 100 glasses per day. i. What price would Alice have to charge per glass, in order to generate profits of $200 per day? ii. What price would Alice have to charge per glass, in order to generate a total contribution margin of $200 per day? iii. Assume that Alice wants to charge $3 per glass of lemonade, and at this price, Alice can sell 110 glasses of lemonade daily. Applying target costing, what would the variable cost per glass have to be, in order to generate profits of $200 per day? 20. What is breakeven-point? -show in a graph? Solve the BEP problems with the information given below- Caring product Ltd sold 180 000 units of its product last year at a price of £20 each, out of a total production of 20 000 units, the capacity of the plant. Variable costs of production amount to £14 (£10 for manufacturing and £3 for selling). Fixed cost amounted to £500 000 for manufacturing costs and £292 000 for administrative costs, and were incurred evenly throughout the year.
Calculate the followings:
i. Profit for the year ii. Breakeven point in terms of units and sales value iii. If labor costs amount to 50 per cent of variable costs and 20 percent of fixed costs, calculate the changed breakeven point if wages are increased by 10 percent. [Note: VC increased by (due to labor wage) = 10% of (50% of £14), FC increased by (due to labor wage) = 10% of (20% of £792000)]
21. Explain marginal costing and its assumptions? What are the limitations of marginal cost? 22. Explain a marginal cost curve with imaginary figures and table? 23. Show the relations among fixed cost, variable cost, average cost and marginal cost? 24. Solve the following problem-
Suppose the marginal cost is: MC = 12 + 8x with C(10) = 1020. Find the fixed and total cost of producing 80 units.
25. Show the maximum profit and minimum cost in graph? Given revenue function 264q - 0.6q2, find out the quantity for maximum profit and minimum cost?
26. What is job costing? How you calculate it?
27. What is process costing? What the basic steps are for calculating process cost?
28. What is capital budgeting? Explain various types of calculating methods used in capital budgeting?
29. What is ARR? How do you calculate it? Why it is superior to PBP in selecting projects?
30. What is NPV? How do you calculate it? What is the significance of different value of NPV for selecting particular business plan?
31. What is IRR and why it is more consistence for choosing alternative business investments?
32. Work out the problems for following accounting information of a company-
Dog food plc is a quoted company manufacturing pet foods. It currently has funding to undertake some capital investment in its manufacturing process. Two alternatives have been identified:
Option 1
This is to build a canning plant at a cost of $ 3500000. It is expected that this plant will have a useful life of 10 years, after which it will have no salvage/residual value. It is expected that this equipment will generate additional sales revenue 0f $ 2350000 per annum. Variable cost of production amount to 60 percent of total sales revenue and this proportion will be unchanged if this new equipment is purchased.
Option 2
This is to install energy recovery equipment which will cost $ 800000. This equipment will have a life expectancy of 5 years, after which it will have no residual value.
Estimated benefits from this equipment are as below:
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Reduced energy Reduced direct labor Increased raw material cost
Cost $ (‘000) Cost $ (‘000) Cost $ (‘000)
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Year 1 385 50 25 Year 2 275 35 25
Year 3 190 30 20
Year 4 145 25 20
Year 5 80 20 20
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The company depreciates its plant using a straight – line basis and charges depreciation at the end of each year. It normally uses a discount rate of 12 percent. As the basis for evaluation of capital investment projects. The managing director is keen to show the social and environmental awareness of the company and therefore favors the energy recovery equipment project.
i. Calculate Straight-line and Annuity depreciation for Option 1 of Dogfood plc?
ii. Calculate PBP for both options of Dogfood plc?
iii. Calculate ROI for both options of Dogfood plc?
iv. Calculate ARR for both options of Dogfood plc?
v. Calculate NPV for both options of Dogfood plc?
vi. Calculate IRR for both options of Dogfood plc?
Love for all
