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CSS Accountancy and Auditing Paper I Past Paper 2017

CSS Accountancy and Auditing Paper I 2017 carries 100 marks over 3 hours. It has 7 questions.

Marks
100
Time
3 hours
Questions
7

Years

How to attempt: Attempt ONLY FOUR questions from PART-II, selecting TWO questions from EACH SECTION. ALL questions carry EQUAL marks.

Questions

Question 1 (Part I) is the paper's MCQs, which are not reproduced here.

SECTION-I

  1. Q. 2
    Bella Beauty Salon's unadjusted trial balance for the current year follows:
    (20)
    Bella Beauty Salon Trial Balance December 31
    Cash$ 4,200
    Prepaid insurance1,480
    Shop supplies990
    Shop equipment3,860
    Accumulated depreciation shop equipment$ 770
    Building57,500
    Accumulated depreciation–building3,840
    Land55,000
    Unearned rent1,600
    Long-term notes payable50,000
    Bella Hanson, Capital49,860
    Rent earned2,400
    Fees earned23,400
    Wages expense3,200
    Utilities expense690
    Property taxes expense600
    Interest expense4,350
    Totals$131,870$131,870

    Additional information:

    • (a)
      An insurance policy examination showed $1,240 of expired insurance.
    • (b)
      An inventory count showed $210 of unused shop supplies still available.
    • (c)
      Depreciation expense on shop equipment, $350.
    • (d)
      Depreciation expense on the building, $2,220.
    • (e)
      A beautician is behind on space rental payments, and this $200 of accrued revenues was unrecorded at the time the trial balance was prepared.
    • (f)
      $800 of the Unearned Rent account balance was earned by year-end.
    • (g)
      The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
    • (h)
      Three months' property taxes, total $450, have accrued. This additional amount of property taxes expense has not been recorded.
    • (i)
      One month's interest on the note payable, $600, has accrued but is unrecorded.

    Required: Based on the above information, prepare the adjusting journal entries for Bella's Beauty Salon and adjusted trial balance for Bella's Beauty Salon.

  2. Q. 3
    (20)
    • (A)
      A corporation had stockholders' equity on January 1 as follows: Common Stock, $10 par value, 1,500,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $2,500,000. Required: Prepare journal entries to record the following transactions:
      Feb. 15The board of directors declared a 10% stock dividend to stock holders of record on March 1, to be issued on April 15. The stock was trading at $8 per share prior to the dividend.
      March 30Sold 100,000 shares of common stock for $11 per share.
      March 31Issued the stock dividend.
    • (B)
      Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $42,300. The machine’s useful life is estimated at 10 years, or 363,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 35,000 units of product. Required: Determine the machine’s second-year depreciation under the straight-line method.
  3. Q. 4
    The following financial data were taken from the annual financial statements of Smith Corporation:
    (20)
    Details200720082009
    Current assets$ 450,000$ 400,000$ 500,000
    Current liabilities390,000300,000340,000
    Sales1,450,0001,500,0001,400,000
    Cost of goods sold1,180,0001,020,0001,120,000
    Inventory280,000200,000250,000
    Accounts receivable120,000110,000105,000

    Required:

    • (A)
      Based on these data, calculate the following for 2008 and 2009:
      • (1)
        Working capital
      • (2)
        Current ratio
      • (3)
        Acid-test ratio
      • (4)
        Accounts receivable turnover
      • (5)
        Merchandise inventory turnover
      • (6)
        Inventory turnover in days
    • (B)
      Evaluate the results of your computations in regard to the short-term liquidity of the firm.

SECTION-II

  1. Q. 5
    The marketing department of Graber Corporation has submitted the following sales forecast for the upcoming fiscal year.
    (20)
    1st Quarter2nd Quarter3rd Quarter4th Quarter
    Budgeted unit sales .16,00015,00014,00015,000

    The selling price of the company’s product is $22.00 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $66,000. The company expects to start the first quarter with 3,200 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 3,400 units. Required:

    • (1)
      Prepare the company’s sales budget and schedule of expected cash collections.
    • (2)
      Prepare the company’s production budget for the upcoming fiscal year.
  2. Q. 6
    Valenko Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials):
    (20)
    Selling expenses$215,000
    Purchases of raw materials$260,000
    Direct labor?
    Administrative expenses$160,000
    Manufacturing overhead applied to work in process$340,000
    Total actual manufacturing overhead costs$350,000

    Inventory balances at the beginning and end of the year were as follows:

    Beginning of YearEnd of Year
    Raw materials$50,000$40,000
    Work in process?$33,000
    Finished goods$30,000?

    The total manufacturing costs for the year were $675,000; the cost of goods available for sale total $720,000; the unadjusted cost of goods sold total $665,000; and the net operating income was $35,000. The company’s over-applied or under-applied overhead is closed entirely to cost of goods sold. Required: Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. (Hint: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.)

  3. Q. 7
    Linden Company manufactures and sells a single product. Cost data for the product as follows:
    (20)
    Variable costs per unit:
    Direct materials$ 6
    Direct labor12
    Variable factory overhead4
    Variable selling and administrative3
    Total variable costs per unit$25
    Fixed costs per month:
    Fixed manufacturing overhead$240,000
    Fixed selling and administrative180,000
    Total fixed cost per month$420,000

    The product sells for $40 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

    Units ProducedUnits Sold
    May30,00026,000
    June30,00034,000

    Income statements prepared by the accounting department, using absorption costing, are presented below:

    MayJune
    Sales$1,040,000$1,360,000
    Cost of goods sold780,0001,020,000
    Gross margin260,000340,000
    Selling and administrative expenses258,000282,000
    Net operating income$ 2,000$ 58,000

    Required:

    • (1)
      Determine the unit product cost under:
      • (a)
        Absorption costing.
      • (b)
        Variable costing.
    • (2)
      Prepare contribution format variable costing income statements for May and June.
    • (3)
      Reconcile the variable costing and absorption costing net operating incomes.
  4. Q. 8
    The PVC Company manufactures a high-quality plastic pipe that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May:
    (20)
    Production data:
    Pounds in process, May 1: materials 100% complete; conversion 90% complete70,000
    Pounds started into production during May350,000
    Pounds completed and transferred to the next department.?
    Pounds in process, May 31: materials 75% complete; conversion 25% complete40,000
    Cost data:
    Work in process inventory, May 1:
    Materials cost$86,000
    Conversion cost$36,000
    Cost added during May:
    Materials cost$447,000
    Conversion cost$198,000

    The company uses the weighted-average method. Required:

    • (1)
      Compute the equivalent units of production.
    • (2)
      Compute the costs per equivalent unit for the month.
    • (3)
      Determine the cost of ending work in process inventory and of the units transferred out to the next department.
    • (4)
      Prepare a cost reconciliation report for the month.
  1. Part-II is to be attempted on the separate Answer Book.
  2. Attempt ONLY FOUR questions from PART-II, selecting TWO questions from EACH SECTION. ALL questions carry EQUAL marks.
  3. All the parts (if any) of each Question must be attempted at one place instead of at different places.
  4. Candidate must write Q. No. in the Answer Book in accordance with Q. No. in the Q.Paper.
  5. No Page/Space be left blank between the answers. All the blank pages of Answer Book must be crossed.
  6. Extra attempt of any question or any part of the attempted question will not be considered.
  7. Use of Calculator is allowed.