Certificate in Accounting and Finance Stage Examinations

School of October 09, 2019

Accountancy 40 minutes – 20 marks
Additional reading time – 5 minutes

Financial Accounting and Reporting 1

Q.1. (a) A building is revalued upwards by Rs.2 million. It was acquired five years ago for Rs.10 million.
Its useful life remains same as 20 years. What is the incremental depreciation charge for the
year?
(a) Rs.100,000 (b) Rs.133,333
(c) Rs.166,667 (d) Rs.200,000 (01)
(b) A business purchased an asset on 1 January 2016 costing Rs.5,000,000 having a useful
life of 10 years with nil residual value. On 1 January 2018 balance of accumulated depreciation
was Rs.1,000,000. Asset is revalued to Rs.4,500,000 on 1 January 2018 (start of the year).
Business has a policy to charge straight line depreciation. What is the depreciation charge for the
year ended 31 December 2018? Rs. ______________ (01)

Q.2. FAM had the following tangible fixed assets at 31 December 2014.
Cost Depreciation NBV
Rs. 000 Rs. 000 Rs. 000
Land 500 - 500
Buildings 400 80 320
Plant and machinery 1,613 458 1,155
Fixtures and fittings 390 140 250
Assets under construction 91 - 91
2,994 678 2,316
In the year ended 31 December 2015 the following transactions occur.
(1) Further costs of Rs.53,000 are incurred on buildings being constructed by the company
and a building costing Rs.100,000 is completed during the year.
(2) A deposit of Rs.20,000 is paid for a new computer system which is undelivered at the
year end.
(3) Additions to plant are Rs.154,000.
(4) Additions to fixtures, excluding the deposit on the new computer system, are Rs.40,000.
(5) The following assets are sold.
Cost Depreciation brought forward Proceeds
Rs. 000 Rs. 000 Rs. 000
Plant 277 195 86
Fixtures 41 31 2
(6) Land and buildings were revalued at 1 January 2015 to Rs. 1,500,000, of which land is
worth Rs. 900,000. The revaluation was performed by Messrs Jackson & Co, Chartered
Surveyors, on the basis of existing use value on the open market.
(7) The useful economic life of the buildings is unchanged. The buildings were purchased ten
years before the revaluation.
(8) Depreciation is provided on all assets in use at the year end at the following rates.
Buildings 2% per annum straight line
Plant 20% per annum straight line
Fixtures 25% per annum reducing balance
Required:
Show the disclosure under IAS 16 in relation to fixed assets in the notes to the published accounts
for the year ended 31 December 2015. (18)
 Certificate in Accounting and Finance Stage Examinations
School of Test 2 (October 16, 2019)
Accountancy 40 minutes – 21 marks
Additional reading time – 5 minutes

Financial Accounting and Reporting 1

Q.1. (a) A company revalued its property on 1 April 2009 to Rs.20m (Rs.8m for the land). The property
originally cost Rs.10m (Rs.2m for the land) 10 years ago. The original useful economic life of
40 years is unchanged. The company’s policy is to make a transfer to realized profits in respect
of excess depreciation.
What is amount of balance in revaluation surplus account as at 31 March 2010?
(a) Rs.12 million (b) Rs.10 million
(c) Rs.9.8 million (d) Rs.11.8 million (02)

(b) An asset is impaired if:

(a) Its carrying amount equals the amount to be recovered through use (or sale) of the asset
(b) Its carrying amount exceeds the amount to be recovered through use (or sale) of the asset
(c) The amount to be recovered through use (or sale) of the asset exceeds its carrying amount
(d) If it has been damaged. (01)

Q.2. The following information pertains to property, plant and equipment of Orchid Limited (OL), a listed
company:
Subsequent
Date of Cost Rs. in Original Depreciation
Description measurement
purchase million useful life method
model
Buildings 1-Jan-15 600 30 years Straight line Revaluation
Plant 1-Jan-15 475 25 years Straight line Cost
Buildings
The revalued amount of buildings as determined by Shabbir Associates, an independent valuer, on 31
December 2015 and 2017 was Rs.700 million and Rs.463 million respectively.
On 30 June 2017 a building having original cost of Rs.66 million was sold to Baqir Limited for Rs.85
million. It was last revalued at Rs.87 million. OL incurred a cost of Rs.2 million on disposal.
OL transfers the maximum possible amount from revaluation surplus to retained earnings on an annual
basis.
Plant
On 31 December 2016 the recoverable amount of the plant was assessed at Rs.360 million with no
change in useful life.
During 2017, OL has decided to change the depreciation method for plant from straight line to reducing
balance. The new depreciation rate would be 10%.
Required:
Prepare following notes (along with comparative figures) to be presented in the financial statements of
OL for the year ended 31 December 2017 in accordance with the requirements of relevant IFRSs and
Companies Act, 2017:
(a) Property, plant and equipment
(b) Change in depreciation method (18)
 Certificate in Accounting and Finance Stage Examinations
School of Test 3 (October 23, 2019)
Accountancy 27 minutes – 15 marks
Additional reading time – 3 minute

Financial Accounting and Reporting 1

Q.1 Shabih fisheries has a boat that was purchased for a total amount of Rs. 30,000 on 1 January 2016.
The cost of transporting boat to the dam was Rs. 7,000, and the cost of varnishing the boat with
marine varnish (to protect against rotting in the water) was Rs. 13,000.
1. The boat is depreciated over its estimated useful life of 4 years on the straight-line basis.
2. It is revalued to Rs. 120,000 on 1 January 2017.
3. At 31 December 2017 the boat collided with boundary of the dam. The market value of boat
dropped to Rs. 14,000 as a result, before taking into account expected selling cost of Rs.8,000.
4. Expected cash flows of the boat in next 2 years are assessed on 31 December 2017 and are as
follows:
2018 2019
Net operating cash inflows 1,200 2,900

Expense incurred to improve the boats - 200

Extra benefit from improvement `- 300

Interest to be paid on loan raised for purchasing boats 50 100

Estimated sale proceeds of above boats - 2,000

Costs of disposal the above boats - 220

5. Pre-tax discount rate is 12%. Post tax discount rate is 9%.

6. There was no need of impairment test on 31 December 2018.
Required: Pass journal entries for year ended December 31, 2016, 2017 and 2018. (10)

Q.2 (a) Which TWO of the following could be an indication that an asset may be impaired
according to IAS 36 Impairment of Assets?
(a) Decrease in market interest rates.
(b) Increase in market values for the asset.
(c) Damage caused to the asset.
(d) Management intention to reorganise the business. (01)

(b) Which of the following is NOT an indicator of impairment?

(a) Advances in the technological environment in which an asset is employed have an
adverse impact on its future use.
(b) An increase in interest rates which increases the discount rate an entity uses.
(c) The carrying amount of an entity’s net assets is higher than the entity’s number of
shares in issue multiplied by its share price.
(d) The estimated net realisable value of inventory has been reduced due to fire
damage although this value is greater than its carrying amount. (01)
(c) Fine Limited (FL) received a Rs.10 million loan at 7.5% on 1 April 2017. The loan was
specifically issued to finance the building of a new store.
Construction of the store commenced on 1 May 2017 and it was completed and ready for
use on 28 February 2018 but did not open for trading until 1 April 2018.
How much should be recorded as finance costs in the statement of profit or loss for the year
ended 31 March 2018?
(a) Rs.250,000 (b) Rs.750,000
(c) Rs.125,000 (d) Rs.625,000 (01)
(d) Which of the following is not a condition to commence capitalisation of borrowing costs?
(a) Expenditures are being incurred
(b) Borrowing costs are being incurred
(c) Repayment of borrowings has commenced
(d) Activities to produce the asset for its intended use or sale have commenced (01)
(e) Which of the following is not a “qualifying asset” under IAS 23?
(a) Mass produced inventory (b) Manufacturing plants
(c) Made to order inventory (d) Investment property (01)
 Certificate in Accounting and Finance Stage Examinations
School of Test 4 (November 6, 2019)
Accountancy 27 minutes – 15 marks
Additional reading time – 3 minute

Financial Accounting and Reporting 1

Q.1. On 1 July 2017, Mr. Naseem took over a running business namely GO Traders (GOT). Proper books of
account are not maintained for GOT. Following information has been gathered for preparation of statement
of profit or loss for the year ended 30 June 2018'

(i) Balances of certain assets and liabilities:

Assets and liabilities 30-Jun-2018 l-Jul-2017
Rs. in 000
Equipment 4,000 4,000
Furniture and fixtures 2,500 2,500
Trade debtors 1,600 -
Inventory 2,400 2,800
Unused miscellaneous supplies 400 300
Unpaid suppliers’ bills 2,800 1,850
Shop rent payable 400 200
(ii) Summary of bank payments for the year ended 30 June 2018:
Rs. in '000
Suppliers 13,600
Repair and maintenance 950
Shop rent 2,000
Miscellaneous supplies 800
Utilities 1,200
(iii) Payments made out of cash sales before being deposited into the bank:
Rs. in ’000

Salaries and wages 1,800

Purchase of inventory 3,000
Part payment of sales commission to riders 90
(iv) Unpaid suppliers’ bills as at 30 June 2018 include a bill of Rs.320,000 which was mistakenly
taken at Rs.230,000.
(v) During the year, goods costing Rs.540,000 were withdrawn by Naseem for personal use.
(vi) Inventory as at 30 June 2018 includes goods costing Rs.250,000 which were badly damaged in an
accident and have no sales value.
(vii) Mark-up on goods sold are as follows:
Mark-up on cost
50% of goods - sold on cash counter 35%
20% of goods - sold for cash through riders 40%
30% of goods - sold for credit 45%
(viii) The riders are entitled to 3% commission.
(ix) Fixed asset at 30 June 2018 are to be depreciated at 10% per annum
(x) Salaries and wages for June 2018 amounting to Rs. 165,000 were paid on 5 July 2018.

Required:
Prepare a statement of profit or loss for the year ended 30 June 2018. (15)
 Certificate in Accounting and Finance Stage Examinations
School of November 20, 2019
Accountancy 45 minutes – 24 marks
Additional reading time – 5 minutes

Financial Accounting and Reporting 1

Q.1 Faheem Traders (FT) is engaged in the business of supplying Blenders and Juicers. FT
purchases its products from Sigma Electronics. FT is presently negotiating with a bank for a long
term loan and has been asked to provide the latest financial statements. Since FT does not
maintain proper accounting records, you are requested to prepare the financial statements
from the following information:
(i) Assets and liabilities as on 1 January 2018:
Rs ‘000’
Equipment (40% depreciated) 2,490
Stock (stock value of Blenders was double of the Juicers) 3,705
Prepaid rent up to 30 April 2018 280
Trade debtors (only for Blenders) 1,410
Payable to Sigma Electronics 3,600
Salaries payable 98
Bank overdraft 740
(ii) Sales of Blenders are made on credit while Juicers are sold on cash basis.
(iii) Upto last year, FT was earning a gross profit of 30% on cost of Blenders and 35% on
sale value of Juicers. With effect from 1 January 2018:
 FT increased sales prices of both the products by 20%; and
 Sigma Electronics increased the prices of Juicers only by 40%.
(iv) 60% of the amount of purchases made during the year represents blenders.
(v) Summary of bank transactions during the year:
Rs ‘000’
Receipts:
From credit customers 6,570
Payments:
Sigma Electronics 8,850
Insurance for one year starting 1 February 2018 204
Rent 826
Equipment 550
Salaries and wages 685
11,115
(vi) Debtors amounting to Rs. 138,000 are considered as irrecoverable.
(vii) Rent of the premises was increased by 30% with effect from 1 September 2018.
(viii) Following payments were made from cash sales and remaining amounts were
deposited into the bank:
Rs ‘000’
Repairs and maintenance 186
Salaries and Wages 124
Drawings 477
787
(ix) Equipment is depreciated at 8% on cost.
(x) Some balances ascertained as at 31 December 2018:
Rs ‘000’
Stock- Juicers 975
-Belenders 2,597
Payable to Sigma Electronics 2,420
Salaries Payables 134
*Comprises of stock purchased in 2018
Required:
(a) Prepare statement of profit or loss account for the year ended 31 December 2018. (11)
(b) Prepare statement of financial position as at 31 December 2018. (09)
Q.2 (a) Which TWO of the following could be an indication that an asset may be impaired
according to IAS 36 Impairment of Assets?
(a) Decrease in market interest rates
(b) Increase in market values for the asset
(c) Damage caused to the asset
(d) Management intention to reorganise the business (01)
(b) IAS 36 Impairment of Assets suggests how indications of impairment might be
recognised.
Which TWO of the following would be external indicators that one or more of an entity's
assets may be impaired?
(a) An unusually significant fall in the market value of one or more assets
(b) Evidence of obsolescence of one or more assets
(c) A decline in the economic performance of one or more assets
(d) An increase in market interest rates used to calculate value in use of the assets (01)
(c) Ghani Limited (GL) is constructing an office building and is capitalising borrowing costs
in accordance with IAS 23. The office is almost complete; the only remaining work is to
install furniture. Is GL allowed to continue capitalising the borrowing costs?
(a) Yes (b) No
(c) Don’t know (d) None of the above (01)
(d) When items of property, plant and equipment are stated at revalued amounts the
following must be disclosed:
(i) The effective date of the revaluation
(ii) Whether an independent valuer was involved
(iii) The methods and significant assumptions applied in estimating the items’ fair values
(iv) The extent to which the items’ fair values were determined directly by reference to
observable prices in an active market or recent market transactions on arm’s length
terms or were estimated using other valuation techniques
(v) For each revalued class of property, plant and equipment, the carrying amount that
would have been recognised had the assets been carried under the cost model;
(vi) The revaluation surplus, indicating the change for the period and any restrictions on
the distribution of the balance to shareholders.
(a) (i), (ii) and (vi) only (b) (i), (ii), (v) and (vi) only
(c) (i), (ii), (iii) and (iv) only (d) (i) to (vi) all (01)

Good Luck
 Certificate in Accounting and Finance Stage Examinations
School of November 27, 2019
Accountancy 28 minutes – 16 marks
Additional reading time – 2 minutes

Financial Accounting and Reporting 1

Q.1 The treasurer of the Gulzar Golf Club has prepared the following receipts and payments account for the
year ended 31 March 2016.
Rs.(000) Rs.(000)
Balance at 1 April 2015 682 Functions 305
Subscriptions 2,930 Repairs 146
Functions 367 Telephone 67
Sale of land 1,600 Extension of club house 600
Bank interest 60 Furniture 135
Bequest (legacy) 255 Heat and light 115
Sundry income 46 Salary and wages 2,066
Sundry expenses 104
Balance at 31 March 2016 2,402
5,940 5,940
(a) Subscriptions received included Rs. 65,000 which had been in arrears at 31 March 2015
and Rs. 35,000 which had been paid for the year commencing 1 April 2016.
(b) Land sold had been valued in the club's books at cost Rs. 500,000.
(c) Accrued expenses
31 March 2015 31 March 2016
Rs. (000) Rs. (000)
Heat and light 32 40
Wages 12 14
Telephone 14 10
58 64
(d) Depreciation is to be charged on the original cost of assets appearing in the books at 31
March 2016 as follows:
Buildings 5%
Fixtures and fittings 10%
Furniture 20%
(e) The following balances are from the club's books at 31 March 2015:
Land at cost 4,000
Buildings at cost 3,200
Buildings allowance for depreciation 860
Fixtures and fittings at cost 470
Fixtures allowance for depreciation 82
Furniture at cost 380
Furniture allowance for depreciation 164
Subscriptions in arrears 80
(including Rs. 15,000 irrecoverable - member had emigrated)
Subscriptions in advance 30
Required:
Prepare an income and expenditure account for the year ended 31 March 2016 and a statement
of financial position as at that date. (16)
Good Luck
 Certificate in Accounting and Finance Stage Examinations
School of (Test no 8) December 18, 2019
Accountancy 32 minutes – 18 marks
Additional reading time – 3 minutes

Financial Accounting and Reporting 1

Q.1 The following balances were extracted from the financial statements of Spanish Limited for the
years ended 30 June 2012 and 2013.
2013 2012
----Rs. in 000----
Sales 60,000 40,000
Interest expense 27 30
Profit after tax 7,800 4,800
Property, plant and equipment 9,000 8,100
Stock in trade 6,970 6,800
Trade debtors 9,000 8,000
Provision for doubtful debts 500 360
Trade creditors 5,000 4,700
Accrued expenses 300
Interest payable 12 14
Current tax payable 55 38
Additional information
o New machine costing Rs. 1,800,000 was purchased during the year. A machine with a
carrying amount of Rs. 200,000 was sold for Rs. 250,000
o The tax rate applicable to the company is 35%.
Required:
Prepare operating activities section of the statement of cash flows for the year ended 30 June
2013 using the Direct Method. Show all necessary workings. (15)

Q.2 (a) A company has following balances on 1 January 2019:

Rs. m
Share capital (Rs. 100 each) 100
Share premium 30
Revaluation surplus 20
Retained earnings 35
The company made a bonus issue of 2 for 5 shares already held.
What amount of share premium shall be presented in statement of changes in equity as at
31 December 2019?
Rs. ____________ (02)

(b) Gigantic Limited opening retained earning balance was Rs.150 million. It made a net
profit for the year ended 31 March 2020 of Rs.30 million. During that year, an ordinary
dividend of Rs.50 paisa per share was paid on 40 million ordinary shares. What was the
retained profit for the year ended 31 March 2020?
(a) Rs.150 million (b) Rs.160 million
(c) Rs.165 million (d) Rs.170 million (01)

Good Luck

Umair Sheraz Utra, ACA. Page 1

 Certificate in Accounting and Finance Stage Examinations
School of (Test no 9) January 01, 2020
Accountancy 32 minutes – 18 marks
Additional reading time – 3 minutes

Financial Accounting and Reporting 1

Q.1 Snake Limited is in the construction industry. It constructs buildings for resale, for leasing and for
private use.
 A building that snake limited had constructed in Islamabad (at a cost of Rs. 1,000,000) had
been on the market for 2 years and was still not sold. On 1 March 2015, Snake Limited took it
off the market and leased (rented out) it instead. It was leased on 1 March 2015. Its fair value
was Rs. 1,500,000 on December 31, 2015 and Rs. 1,000,000 on December 31, 2014.
 The fair value of a building in Balochistan (rented out to tenants) has never been
determinable and this building was completed on 1 January 2012 at a cost of Rs. 5,000,000.
Its total estimated useful life is 10 years and its residual value Rs.1,000,000. Both estimates
have remained unchanged.
 On 30 September 2015, snake limited evicted the tenants from a building in Karachi and
moved its head office into to building instead. On this day the fair value was Rs. 4,000,000
the remaining useful life was 5 years and residual value was Rs. 500,000. The fair value of
this building was Rs. 3,000,000 on 31 December 2014.
 On 30 September 2015, Snake Limited leased out the old head office building in Lahore. The
original cost was Rs. 4,000,000 (acquired on 30 September 2013). On which date the total
useful life was 10 years and its residual value was nil. The fair value was Rs. 3,700,000 on 31
December 2015. The fair value on 30 September 2015 was equal to its carrying amount.
 Rentals earned from the investment properties totaled Rs. 2,000,000.
 Snake limited applies the fair value model to its investment properties and the cost model to
its property plant and equipment.

Required: Show the investment property note in snake Limited’s financial statements for the
year ended 31 December 2015. (Ignore tax and comparatives) (15)

Q.2 (a) ABC company receives a government grant of Rs. 500,000 on 1 April 2017 to facilitate
purchase on the same day of an asset which costs Rs. 750,000. The asset has a five-year
useful life and is depreciated on a 30% reducing balance basis. Company policy is to
account for all grants received as deferred income.
What amount of income will be recognised in respect of the grant in the year to 31 March
2019? Rs. ___________ (02)
(b) Which of the following is not a correct treatment of government grants related to an
asset?
(a) Deferred income
(b) Credit to income in period received
(c) Deducting the grant from the carrying amount of the asset
(d) None of the above (01)

Good Luck

Umair Sheraz Utra, ACA. Page 1

 Certificate in Accounting and Finance Stage Examinations
Rise (test 10)January 22, 2020
School of 30 minutes– 12 marks
Accountancy Additional reading time –5 minutes

Financial Accounting and Reporting 1

Q.1 (a) Kashmir Limited (KL) sells five products A, B, C, D and E. It made a contract with a customer
Basheer Limited at a contract price of Rs. 45,000 as a package of all 5 products. These five products are
also being sold separately at following stand alone price

PRODUCT PRICE Rs.

A 10,000
B 9,000
C 11,000
D 12,500
E 8,500
KL also regularly sells product B&C for Rs. 18,000 and D&E for Rs. 19,000 as a package.
Required: Calculate the transaction price allocated to each individual products as per IFRS-15
(05)

(b) Waseem Industries (WI), entered into a 1-year contract with Alif Noon (AN) on 1st April 2019 to
supply small Generators which are used normally in offices/shops. The contract states that price per
Generator will be adjusted retroactively once customer reaches.
Cumulative annual sales (Generator) Price (Rs.)

0-400 50,000

401-800 47,000

801 and above 45,000

The contract also states that the payment will be made after 10 days of delivery.
Based on past experience and knowledge of customer, WI estimates that sales volume for the year will be
600 Generator. By the end of May, AN purchased only 120 Generator at a price of Rs. 50,000 per
Generator.

On 15 June WI received an order of 250 Genertors to be provided during the June. Now WI estimates that
cumulative sale volume for the year will be more than 800 Generators. WI sent the generators on 28 June.
AN paid the amounts as agreed.

Required:
Pass Date wise journal entries for execution of the contract as per IFRS-15 (07)