ICMA Questions Dec 2011

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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH

CMA DECEMBER, 2011 EXAMINATION

FOUNDATION LEVEL

SUBJECT: 001. PRINCIPLES OF ACCOUNTING.

Time: Three hours Full Marks: 100

� All questions are to be attempted. � Show computations, where necessary. � Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

Q. No. 1. The following is the 10 months pre-audit income statement of STAR CYCLE Company ended on 31st December 2010, which started its operations on March 1, 2010.

STAR CYCLE COMPANY Income Statement

For Period Ended December 31, 2010

Sales Tk.49,70,000 Cost of goods sold:

Completed units 50,000 Tk.40,10,000 Ending inventory 10,000 Tk.8,02,000 Tk.32,08,000

Gross profit on sales Tk.17,62,00 Selling expenses:

Advertising Tk.1,32,000 Miscellaneous selling expenses Tk.6,00,000 Tk.7,32,000

General and administrative expenses: Officers salaries Tk.3,21,000 Miscellaneous general and administrative expenses Tk. 33,000 Depreciation expenses Tk.1,69,000 Tk.5,23,000 Tk.12,55,000

Income before income tax Tk.5,07,000

During the course of the year-end audit, the auditors observed the following: (a) Factory depreciation of Tk.1,12,000 was included in general and administrative expenses. (b) Sales return and allowances of Tk.27,500 were not recorded. (c) Accrued sales commission of Tk.52,300 was not recorded of December 31, 2010. (d) Advertising expenses of Tk.1,32,000 paid on March 1, 2010, was for newspaper ads appearing

each month for the next 12 months. (e) Income tax was charged at a 40% rate.

Required: Prepare a corrected Income Statement. [Marks: 20]

Q. No. 2.

(a) The use of cost or market, whichever is lower, is an archaic continuation of conservative Accounting. Comment on this view.

(b) STAR Manufacturing began operations five years ago. On August 13, 2010, a fire broke out in the warehouse destroying all inventories and manufacturing records relating to the inventory. The information available is presented below. All sales and all purchases are on account.

Jan.1, 2010 August 13, 2010 Inventory Tk.25,71,800 Tk. ………… Accounts Receivable Tk.26,11,800 Tk.21,46,400 Accounts Payable Tk.17,62,800 Tk.24,57,000

Collection on accounts receivables, January 1- August 13 Tk.1,39,45,000 Payment to suppliers, January 1—August 13 Tk.97,50,000 Goods out on consignment at August 13, at cost Tk.9,00,000

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CMA DECEMBER, 2011 EXAMINATION FOUNDATION LEVEL SUBJECT: 001. PRINCIPLES OF ACCOUNTING.

Q. No. 2. (Contd..)

Summary of previous years’ sales:

2007 2008 2009

Sales Tk.1,25,20,000 Tk.1,35,00,000 Tk.1,36,00,000

Gross profit on sales Tk.40,06,400 Tk.35,10,000 Tk.43,52,000

Required: Determine the inventory loss suffered as a result of the fire. [Marks: (5+15) = 20]

Q. No. 3.

The Bank Balance as per book of M/s. Philips Bangladesh Ltd. showed a Balance of Tk.378,085 on 30.06.11. The Bank Statement as on that date showed a Balance of Tk.4,99,720. While compared the difference in Cash Book and Bank Statement the following facts were discovered:

(a) A Customer cheque No.600312 amounting to Tk.15,000 deposited in the Bank on 26.06.11 discounted by the Customers Bank due to insufficient balance in the account.

(b) An amount of Tk. 3,500 credited by the Bank on Account of interest for the period.

(c) Cheque No. 1864 and 5038 for total amount of Tk. 8,960 entered in the cash book on 28.06.11 given to the office bearer to deposit in the Bank but erroneously kept in his pocket up to 02.07.11.

(d) Bank Account debited by an amount of Tk. 365 for bank charges on collection of cheques and remittances.

(e) An amount of Tk. 95,000 transferred by a Customer on 29.06.11 from Rajshahi in settlement of invoice No. R-1015 dated 25.05.11. The intimation has not been reached to the cashier as yet.

(f) The following cheques were issued by the company not yet presented to the Bank for payment.

Cheque No. 30113 Tk. 25,600

” ” 30117 Tk. 7,900

” ” 30118 Tk. 18,200

” ” 30126 Tk. 3,000

(g) As per standing order bank is paying Tk. 35,000 to Mr. Rahman on the last working day of every month which has not been recorded by the Cashier.

(h) Cheque No. 30130 issued to M/S Habib & Sons A/C payee only for an amount of Tk. 25,000 on 28.06.2011 reported to be lost by an employee of Mr. Habib. This has been informed to the Bank by a written statement which was finally caught by the Bank on 07.07.2011 and reported to the police. However the depositor of the stolen cheque could not be traced yet. The case is under investigation.

(i) An amount Tk. 9,600 deposited to the Bank on 30.06.2011 which was credited in the bank account correctly but cashier Mr. Anis debited the cash book erroneously for Tk. 6,900.

Required:

(i) Prepare a Bank Reconciliation statement showing the corrected Bank balance as on 30.06.11.

(ii) Make Journal entries in order to bring the Cash Book in agreement with the Bank Balance. [Marks: (14+6) = 20]

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Q. No. 4.

The following trial balance and additional data are of Mr. X’s.

Mr. X’s Trial Balance

As at December 31, 2011

Accounts Titles Debit(Taka) Credit(Taka)

Cash 8,000 -

Accounts Receivable 40,000 -

Inventory, December 31, 2010 23,000 -

Land 80,000 -

Buildings 200,000 -

Accumulated depreciation-Buildings - 42,000

Equipments 240,000 -

Accumulated depreciation-Equipments - 59,500

Accounts Payable - 38,000

Accrued Interest Payable - -

Accrued Salaries Payable - -

Bonds Payable 12% - 100,000

Capital Stock - 200,000

Retained Earnings, December 31, 2010 - 75,200

Dividends 25,000 -

Sales - 806,000

Salaries Expenses 55,200 -

Purchases 479,500 -

Selling Expenses 120,000 -

General and Administrative expenses 40,000 -

Interest Expenses 10,000 -

Total 1,320,700 1,320,700

Additional data:

(a) Allowance for doubtful accounts of Taka 3,000.

(b) The Building is being depreciated on the straight-line basis-economic life is 40 years and the residual value is zero.

(c) The Equipment is being depreciated on the straight-line basis-economic life is 15 years and the residual value is Taka 15,000.

(d) Interest on the Bonds Payable is paid on May 01 and November 01.

(e) Salaries Payable Taka 6,000.

(f) Income taxes are estimated to be Taka 17,000.

(g) Inventory December 31, 2011 Taka 28,000.

Required:

(i) A 12 column worksheet.

(ii) Use the worksheet as a source for preparation of closing entries.

(iii) Prepare reversing entries. [Marks: (12+6+2) = 20]

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Q. No. 5.

(a) Depreciation is a process of allocating cost, not a process of valuation – Explain.

(b) What are Matching Principle and Revenue Recognition Principle?

(c) PLATINUM Company, a wholesaler, uses the aging method to estimate bad debt losses. The following schedule of aged accounts receivable was prepared at December 31, 2010.

Age of Accounts Amount

0-30 days Tk.9,22,400

31-60 days Tk.3,92,200

61-90 days Tk.1,67,200

91-120 days Tk.37,000

More than 120 days Tk.16,800

Tk.15,35,600

The following schedule shows the year-end receivable balance and uncollectible account experience for the previous five years.

Year Year-End

Receivables

Loss Experience – Percent of Uncollectible Accounts

0-30 days 31-60 days 61-90 days 91-120 days Over 120 days

2009 Tk.15,71,400 0.5% 1.0% 10.2% 49.1% 77.6%

2008 15,00,800 0.4 1.1 9.8 51.9 77.3

2007 13,61,800 0.7 1.2 11.0 51.7 79.0

2006 13,96,400 0.5 0.8 10.1 48.8 78.5

2005 14,39,000 0.4 0.9 8.9 49.2 77.6

The unadjusted Allowance for Doubtful Accounts balance on December 31, 2010 is Tk.61,394.

Required: Compute the correct balance for the allowance account based on the average loss experience for the last five years and prepare the appropriate end-of-year adjusting entry.

[Marks: (2+4+14) = 20]

= THE END =

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FOUNDATION LEVEL

SUBJECT: 002. BUSINESS COMMUNICATION AND OFFICE MANAGEMENT.


� Answer THREE questions from each part, where Q. No. 4 and Q.No.8 are compulsory. � Answer must be brief, relevant, neat and clean. � Use a fresh sheet for answering each question. � All questions must be answered in English.

PART-A: BUSINESS COMMUNICATION

Q. No. 1.

(a) Draft a Notice for holding the Annual General Meeting (AGM) of a publicly listed company.

(b) Write a letter to the Register of Joint Stock Company to allow three months time extension to hold the AGM of your company.

(c) Draft a letter to the authority of an insurance company for an insurance claim.

[Marks: (5+5+5) = 15] Q. No. 2.

(a) What is Business Communication?

(b) How can Communication increase efficiency of management of an organization?

(c) Differentiate between communication model and Communication Process.

[Marks: (4+5+6) = 15]

Q. No. 3.

(a) Define Business Report.

(b) Discuss the procedures of report writing and factors to be considered for drafting a report.

(c) Draft a director’s report of a public limited company.

[Marks: (3+7+5) = 15]

Q. No. 4.

Write short notes on any FIVE of the following:

(a) Credit Rating.

(b) SEC.

(c) Credit Note.

(d) Automated Teller Machine (ATM).

(e) Merchant Banking.

(f) Google.

(g) World Trade Organization (WTO).

(h) Non-verbal Communication. [Marks: (5 x 4) = 20]

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PART-B: OFFICE MANAGEMENT

Q. No. 5.

(a) What do you mean by selection of office location?

(b) What are the factors to be considered in selecting office building site?

(c) Discuss the effects of the office environment on Employees.

[Marks: (3+6+6) = 15]

Q. No. 6.

(a) What are the major functions of office management?

(b) Discuss the importance of office filling system of a company.

(c) Describe the different types of office manuals and their importance.

[Marks: (5+5+5) = 15]

Q. No. 7.

(a) What is motivation?

(b) Do you think motivation for the office employees is necessary? If so, why?

(c) Explain “Good Relationship between employer and employee is must.”

[Marks: (3+6+6) = 15]

Q. No. 8.

Write short notes on any FIVE of the following:

(a) Business Ethics.

(b) Share Market.

(c) Scientific Office Management.

(d) Indexing.

(e) Organization Chart.

(f) Job Description.

(g) Cost Control of an Office.

(h) Record Management.

[Marks: (5 x 4) = 20]

= THE END =

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FOUNDATION LEVEL

SUBJECT: 003. QUANTITATIVE TECHNIQUE.


� Answer any TEN questions, FIVE from each part. � All questions carry equal marks. � Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

PART-A: BUSINESS MATHEMETICS

Q. No. 1. (a) Let the universal set, U = {a, b, c, d, e, f, g}, A = {a, b, c, d, e},

B= {a, c, e, g} and C= {b, e, f, g}. Find (i) B' (ii) B'UC (iii) (A-C)' (iv) C'∩A (v) (A – B)'.

(b) Solve 32x – 3 x+1 +2 = 0. [Marks: (5+5) = 10]

Q. No. 2. (a) If a bill of Tk. 1000 is due after 10 years at simple interest 5% p.a. What is true discount,

banker’s discount and banker’s gain.

(b) Find θ, where, 0 < θ < π/2 , satisfying cot θ + tan θ = 2 cosec θ. [Marks: (5+5) = 10]

Q. No. 3. (a) If Tk. 100 is deposited in an account at the end of every quarter for the next 10 years, how much

will be in the account at the time of the final deposit if interest is 8% compounded quarterly? (b) Margin is to be 33% of retail price and other variable cost is estimated at Tk. 0.13 per taka of

sales. Fixed cost is estimated at Tk. 4000. (i) What is the break ever point? (ii) Estimate profit of sales for Tk. 40000.

[Marks: (5+5) = 10] Q. No. 4. (a) Find the inverse of the matrix-A.

When A =

1

1

1

4

3

2

3

4

3

.

(b) From the following demand and cost function P= 20 – 4x and c = 4x find- i) Price and profit at the level of optimum. ii) new break even point when income taxes imposes at the rate of Tk. 0.50 per unit. iii) rate of tax and total taxes at optimum level. iv) total taxes if additional 10% sales taxes imposes.

[Marks: (4+6) = 10] Q. No. 5. (a) Find the equation of the straight line passing through the point (-3, 1) and perpendicular to the

line 5x – 2y + 7 = 0 (b) Find the derivative of (x4 – 4x3 + 9) tanxex

(c) Find the differential co-efficient of 7(cosx)(logx) +3cosecx + x

ex

x

+

tanw.r.t.x.

[Marks: (4+3+3) = 10]

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CMA DECEMBER, 2011 EXAMINATION FOUNDATION LEVEL SUBJECT: 003. QUANTITATIVE TECHNIQUE. Q. No. 6. A company manufactures and sells x transistor radios per week. The weekly cost function and

demand equation are: c(x) = 90000 + 30x, p = 300 - 30

x, 0 ≤ x ≤ 9000.

Find the (i) maximum weekly revenue, (ii) maximum weekly profit, (iii) production level at which the maximum profit in realized, and (iv) price the company should charge for the maximum profit.

[Marks: (2.5 x 4) = 10] Q. No. 7. (a) Work out the following:

(i) ∫ +− )43

(2

xxe

bxdx, (ii) ∫ +

3

2

32 1dxxx

(b) Find the area of the region bounded by the x – axis, the y - axis, the curve y = e-x and the line x = 3.

[Marks: (6+4) = 10]

PART-B: BUSINESS STATISTICS Q. No. 1.

(a) Discuss the role of business statistics in the management of a business enterprise. State the limitations of business statistics in brief.

(b) The following data shows the monthly sales (in ’000 Tk.) for 50 retail shops.

146 155 168 147 160 151 132 163 156 188

132 156 140 136 142 133 147 137 176 162

143 162 165 154 138 144 183 189 161 140

140 136 141 155 160 163 142 184 153 135

156 160 163 166 156 173 149 135 144 150

Taking a suitable class interval construct a frequency distribution for the above data. [Marks: (5+5) = 10]

Q. No. 2.

(a) What do you mean by central tendency? Define arithmetic mean, median and the mode with suitable examples.

(b) The daily salary (in Tk.) of some workers are given in the following table:

Salary (in Tk.) 100-150 150-200 200-250 250-300 300-350 350-400

# of workers 15 18 20 22 16 9

Calculate mean, median, mode and upper quartile. [Marks: (4+6) = 10]

Q. No. 3. (a) Define dispersion. What are the different absolute and relative measures of dispersion? Why we

need relative measures? (b) Considering the data given in Question # 2(b). Calculate range, mean and standard deviation.

[Marks: (4+6) = 10]

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CMA DECEMBER, 2011 EXAMINATION FOUNDATION LEVEL SUBJECT: 003. QUANTITATIVE TECHNIQUE. Q. No. 4. (a) Define moments, raw moments and central moments. Express 1st four central moments in terms

of raw moments. (b) For the data given below, calculate 1st four central moments and calculate the coefficient of

skewness and comment on the shape of the distribution.

Age of workers 25-30 30-35 35-40 40-45 45-50 50-55

# of workers 30 22 27 35 21 18

[Marks: (4+6) = 10] Q. No. 5. (a) Define regression co-efficient (b) X on Y. (b) Obtain the regression of y on x from the following table and estimate the blood pressure when

the age is 45 years.

Age in years Blood Pressure

(x) (y) 56 147 42 125 72 160 36 118 63 140 47 128 55 150 49 145 38 115 42 140 68 152 60 155

[Marks: (4+6) = 16] Q. No. 6.

(a) Define Multiplication law of probability for independent and dependent bases.

(b) A problem statistics is given to the three students A, B and C whose chances of solving it are ½, ¾ and ¼ respectively.

What is the probability that the problem will be solved if all of them try independently? [Marks: (4+6) = 10]

Q. No. 7.

Write short notes on the following:

(a) Type-I error type-II error.

(b) Skewness & Kurtosis.

(c) Conditional probability.

(d) Standard deviation. [Marks: (2.5 x 4) = 10]

= THE END =

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FOUNDATION LEVEL

SUBJECT: 004. BUSINESS ECONOMICS AND INTERNATIONAL BUSINESS.


� Answer FIVE questions, taking at least TWO from each Group “A” and “B”. � Show computations, where necessary. � Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

GROUP-A: BUSINESS ECONOMICS

Q. No. 1.

(a) How does knowledge of economics help in maximizing profit in Firms?

(b) Distinguish between:

(i) Economic profit and Accounting profit; and

(ii) Value Added and Profit.

(c) Give explanations for Super profit in firms.

(d) How Social Responsibility of Firms are consistent with the business objectives of Firms?

[Marks: (4+6+5+5) = 20] Q. No. 2.

(a) How equilibrium price is determined in the market?

(b) What are the possible causes of recent global financial crisis?

(c) Why Bangladesh has not been much affected by Global Financial Crisis of 2008-09?

(d) Calculate price elasticity, income elasticity and cross elasticity from the following figures of a firm selling X product:

Years Sales in quantity of X No.

Price per unit of X in Taka

Price per unit of Y in Taka

Per capita income in Taka

1990 15,000 30 12 20,000

2010 30,000 20 24 30,000

[Marks: (6+4+4+6) = 20] Q. No. 3.

(a) Distinguish between Perfect Competition and Monopoly.

(b) Show how price is determined under perfect competition.

(c) Give examples of two products in the market of:

(i) Oligopoly; and

(ii) Monopolistic Competition.

[Marks: (7+7+6) = 20]

Q. No. 4.

(a) Differentiate between demand-pull and cost push inflation.

(b) How to manage inflation without affecting economic growth?

(c) Whether inflation is always bad? Justify your answer.

[Marks: (7+7+6) = 20]

Q. No. 5.

(a) Distinguish between:

(i) Fixed cost and Variable cost,

(ii) Break even point and Shout down Point, and

(iii) Marginal cost and Average Cost.

(b) State the law of diminishing return. Indicate the exceptions to this law.

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CMA DECEMBER, 2011 EXAMINATION FOUNDATION LEVEL SUBJECT: 004. BUSINESS ECONOMICS AND INTERNATIONAL BUSINESS. Q. No. 5. (Contd..)

(c) Calculate average cost, marginal cost, marginal revenue, average revenue and profit from the

following information:

Units of Output Total Cost Variable Cost Fixed Cost Total Revenue

1 300 200 100 150

2 350 250 100 250 3 400 300 100 400

4 450 350 100 500 5 550 450 100 600

6 610 510 100 650

7 670 570 100 700 8 750 650 100 760

(d) Identify the Break Even Output Level and Profit maximizing Output level from ‘c’ as above.

[Marks: (6+5+5+4) = 20]

GROUP-B: INTERNATIONAL BUSINESS

Q. No. 6.

(a) What is the usual procedure of exports from Bangladesh?

(b) What are the potential products for export development in Bangladesh? Justify your answer.

(c) What are the comparative advantages of Bangladesh in international trade?

(d) What are the main barriers of export expansion in case of Bangladesh?

[Marks: (6+4+5+5) = 20]

Q. No. 7.

(a) What are the infant industry arguments? How far these arguments are valid for development of Bangladesh? Illustrate your answer.

(b) What are the positive and negative economic impacts of giving transit to India by Bangladesh? Illustrate your answer.

[Marks: (10+10) = 20]

Q. No. 8.

Write short notes on any five (5) of the following:

(a) Currency Depreciation.

(b) Theory of Comparative advantage.

(c) Ways of Poverty Alleviation in Bangladesh.

(d) Disguised Unemployment.

(e) Board of Investment (BOI).

(f) WTO.

(g) PSI (Pre-shipment Inspection).

(h) FDI (Foreign Direct Investment).

[Marks: (4 x 5) = 20]

= THE END =

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PROFESSIONAL LEVEL-I

SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING.



Q. No. 1. (a) Why is it necessary to convert accrual-based net income to a cash basis when preparing a

statement of cash flows? (b) From the following information, prepare a cash flow statement for Texaco Company:

Texaco Company Balance Sheet as at December 31, 2010

Particulars 31.12.2010 31.12.2009

Assets: (Taka) (Taka)

Cash 900,000 500,000

Account Receivable 450,000 550,000

Notes Receivable 150,000 150,000

Inventories 750,000 1,000,000

Building 1,000,000 1,000,000

Plant and Equipment 900,000 1,000,000

Accumulated Depreciation (350,000) (400,000)

Land 380,000 300,000

Total 4,180,000 4,100,000

Liabilities and stockholders’ equity:

Accounts Payable 800,000 700,000

Salaries Payable 100,000 50,000

Expense Payable 50,000 50,000

Bonds Payable 12% 1,080,000 1,100,000

Common stock 600,000 800,000

Additional paid in Capital 300,000 400,000

Retained earnings 1,250,000 1,000,000

Total 4,180,000 4,100,000

Texaco Company Income Statement for the year ended December 31, 2010

Particulars (Taka)

Revenues 2,500,000 Cost of goods sold (1,200,000)

Depreciation Expense (250,000)

Salaries Expense (400,000) Interest Expense (100,000)

Gain on sale of Equipment 100,000 Net Income 650,000

Additional Information: (i) A piece of machinery with an original cost of Tk.500,000 and accumulated depreciation of

Tk.300,000 was sold for Tk.300,000. (ii) Common stock originally issued for Tk.300,000 was acquired for Tk.350,000 and retired. The

difference of Tk.50,000 was deleted to retained earnings. (iii) The total dividends declared and paid during 2010 was Tk.350,000.

[Marks: (5+15) = 20]

Page 13 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 101. INTERMEDIATE FINANCIAL ACCOUNTING.

Q. No. 2. Harry Ltd. is a company which makes exclusive furniture to customers' precise specifications. An extract from Harry Ltd.'s general ledger at 31 December 2010 is as follows: Taka Taka Raw materials and consumables 1,570,000 - Salaries and wages 1,250,500 - Work in progress inventories at January 2010 45,600 - Finished goods inventories at 1 January 2010 13,400 - Freehold land and buildings at cost (cost of land Tk.2,000,000) 3,600,000 - Plant and machinery at cost 520,000 - Office furniture at cost 32,000 - Accumulated depreciation on buildings at 1 January 2010 - 640,000 Accumulated depreciation on plant and machinery at 1 January 2010 - 375,000 Accumulated depreciation on furniture at 1 January 2010 - 28,500 Intangible assets 15,000 - Operating expenses 10,000 - Trade and other receivables - 25,400 Trade and other payables - 1,968,600 Retained earnings at 1 January 2010 - 500,000 Ordinary share capital of Tk.10 each - 120,000 4% Redeemable preference share capital of Tk.10 each - 200,000 Share premium account 263,500 - Cash and cash equivalents - 3,500,000 Revenue 7,357,500 7,357,500

The following additional information is relevant: (i) Closing inventories at cost amounted to work in progress of Tk 50,200 and finished goods of Tk

15,000. The finished goods included a table with a cost of Tk 5,000. The customer who had ordered this table has been declared bankrupt. He had paid a Tk 1,000 deposit (which has been credited to revenue) and owed Tk 10,000 at the yearend in respect of other items. It is estimated that the table can be sold for Tk 4,000.

(ii) During the year the company used employees' idle time to produce new furniture for the company's offices. The old furniture was all scrapped. Raw materials costing Tk 54,000 were used. The employees' time amounted to a cost to the company of Tk 20,500. No adjustment has been made for this in the above.

(iii) Freehold land and buildings were revalued for the first time on 1 January 2010. The Surveyor performing the valuation estimated a valuation of Tk 5 million (including Tk 4 million for the land). Buildings are to continue to be depreciated on a straight line basis at a rate of 4% but Harry Ltd makes no transfer between the revaluation reserve and retained earnings in respect of this.

(iv) Plant is depreciated at a reducing balance basis at a rate of 20%. Office furniture is depreciated on a 15% straight line basis. Depreciation on the building and the plant should be charged to cost of sales.

(v) The intangible asset relates to a patent acquired on the purchase of a sole trader on 1 January 2010. This patent is considered to have a useful life of 20 years. The annual impairment review has indicated that the patent has a recoverable value at 31 December 2010 of Tk 14,000.

(vi) On 1 December 2010 the company made a 1 for 5 bonus issues of its ordinary shares against the share premium account. No entries have been made in respect of this.

(vii) The preference shares are redeemable in 2014. Dividends of Tk 1 per share on the ordinary shares and at the coupon rate on the preference shares were declared on 15 December 2010 and paid early in 2011. The income tax charge for the period has been estimated at Tk 250,000.

Requirement: Prepare an income statement for Harry Ltd for the year ended 31 December 2010 and a balance sheet as at that date in a form suitable for publication. You should classify expenses according to their nature.

[Marks: 20]

Page 14 of 54


Q. No. 3.

(a) Stock splits and stock dividends may be used by a company to change the number of shares of its stock outstanding. (i) What is stock dividend? Describe the accounting entry for a stock dividend, if any? (ii) What is stock split? Describe the accounting entry for a stock split, if any? (iii) How should a stock dividend that has been declared but not yet issued be classified in a

statement of financial position? Why?

(b) The following transactions occurred during 2010. Assume that depreciation of 10% per year is charged on all machineries and 5% per year on buildings, on a straight line basis, with no estimated salvage value. Depreciation charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

January 25 A building that cost Tk 1,320,000 in 1993 is torn down to make room for a new building. The wrecking contractor was paid Tk 51,000 and was permitted to keep all materials salvaged.

March 10 Machinery that was purchased in 2003 for Tk 160,000 is sold for Tk 29,000 cash, FOB purchaser’s plant freight of Tk 3,000 is paid on this machinery.

May 18 A special base installed for a machine in 2004 when the machine was purchased has to be replaced at a cost of Tk 55,000 because of defective workmanship on the original base. The cost of the machinery was Tk 142,000 in 2004. The cost of the base was Tk 35,000, and this amount was charged to the machinery account in 2004.

June 23 One of the buildings is repainted at a cost of Tk 69,000. It had not been painted since it was constructed in 2006.

Required: Prepare necessary general journal entries for the transactions. [Marks: {(3 x 3+11} = 20]

Q. No. 4.

(a) Write short note of ‘Perpetual Inventory System’ and ‘Periodic Inventory System’. (b) M/s. Monyem Ltd. has the following items as inventory as of June 30, 2011. What is the value

of inventory by applying Lower of Cost or Market?

Item AB BC CD DE EF FG

Units 500 300 400 700 900 600

Cost (Tk.) 65.00 80.00 90.00 38.00 20.00 55.00

Current Replacement Cost (Tk.) 68.00 72.00 105.00 42.00 21.00 45.00

Estimated Selling Price (Tk.) 80.00 102.00 112.00 40.00 30.00 67.00

Completion & Disposal Cost (Tk.) 3.00 8.00 10.00 4.00 2.00 2.00

For all inventory items, Normal Profit Margin is 30% of cost.

(c) Keya & Co. is a manufacturing company which prepares financial statements to 30 June each year. Before the draft financial statements for the year ended 30 June 2011 can be finalized and approved by the directors, the following points need to be addressed. Draft net assets at 30 June 2011 were Tk 2 million. (i) Keya & Co. has renewed the unlimited guarantee given in respect of the bank overdraft of

a company (Vass Ltd) in which it holds a significant investment. Vass Ltd.'s overdraft amounted to Tk 300,000 at 30 June 2011 and it has net assets of Tk 1 million.

(ii) A former director, who was dismissed from the company’s service on 1 June 2011 for acting outside his authority, has given notice of his intention to claim substantial damages for loss of office. On 1 November 2011 a claim was received for Tk 150,000. The company’s legal advisers have been negotiating with the former director and believe that the claim will probably be settled at Tk 100,000.

Page 15 of 54


Q. No. 4. (Contd..)

(iii) On 15 November 2011 the company sold its former head office building, for Tk 2.7 million. At the year end the building was unoccupied and Keya & Co. had not intended to sell the property for at least another year. The building's carrying amount (based on cost less accumulated depreciation) was Tk 3.1 million at the year end.

(iv) An overseas division of Keya & Co. was nationalized in July 2011. The overseas authorities have refused to pay any compensation. The net assets of the division have been valued at Tk 200,000 at the year end.

Required:

Prepare extracts from the statement of financial position of Keya & Co. as at 30 June 2011, including any relevant notes to the financial statements.

[Marks: (4+8+8) = 20] Q. No. 5. You are going to be a professional accountant. As a professional you have to know each and every related terms as well as techniques of ‘cost and management accounting’ and overall financial and business matters. Can you explain the following terms in brief?

(a) Net Asset Value (NAV) and Earning per Share (EPS).

(b) Price Earning Ratio (P/E ratio).

(c) Initial Public Offering (IPO) and Book building system.

(d) Right Offer and Bonus Shares.

(e) Interim Financial Report and Annual Report.

(f) Capital Market and Money Market.

(g) Price Sensitive Information and General Information.

(h) Securities and Exchange Commission (SEC). [Marks: (8 x 2½) = 20]

= THE END =

Page 16 of 54




SUBJECT: 102. COST ACCOUNTING.



Q. No. 1. (a) Distinguish between unavoidable spoilage and avoidable spoilage. How both should be reported

for management purpose. (b) As an internal auditor you have found the following information in attempting to verify the

costing of the December 31, 2011 inventory of Work-in-progress and finished goods recorded on Hasikhusi corporation’s books.

Finished goods 2,00,000 units Tk. 10,09,80 Work-in-progress 3,00,000 units (50% complete) as to labour and Factory overhead) Tk. 6,60,960

The company uses average costing. Materials are added to production at the beginning of the manufacturing process and factory overhead is applied at the rate of 60% of direct labour cost. Inventory cost records disclosed zero finished goods on January 1, 2011 and the following additional information for 2011 is as follows:

Units Material cost Labour cost W/I/P, January 1 (80% complete as to labour and factory O/H)

2,00,000 Tk. 2,00,000 Tk. 3,15,000

Units started in production 10,00,000 Materials Tk. 13,00,000 Labour Tk. 19,95,000

Units completed 9,00,000 Required: (i) Compute the equivalent cost of production. (ii) Compute the unit production costs of materials, labour and factory overhead. (iii) Compute cost of the ending finished goods and W/I/P inventories and compare to book

balances. (iv) Prepare the necessary Journal Entry to correctly state the finished goods and work in progress

ending inventories. [Marks: {5+(4+4+4+3) = 20]

Q. No. 2. Tipu Builders (TB) provides skilled labor to the building trade. They have recently been asked to bid for a kitchen fitting contract for a new development of 600 identical apartments. This company has not worked for this builder before. Cost information for the new contract is as follow: Labor for the contract is available. TB expects that the first kitchen will take 24 man-hours to fit but thereafter the time taken will be subject to a 95% learning rate. After 200 kitchens are fitted the learning rate will stop and the time taken for the 200th kitchen will be the time taken for all the remaining kitchens. Labor cost Tk. 15.00 per hour. Overheads are absorbed on a labor hour basis. TB has gathered the following overhead related information for the last four months:

Month Hours Cost (Tk.) 1 9,300 1,15,000 2 9,200 1,13,600 3 9,400 1,16,000 4 9,600 1,16,800

Page 17 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 102. COST ACCOUNTING.

Q. No. 2. (Contd..)

TB normally works around 1,20,000 labor hours in a year. The learning curve equation is Y = a x b, where b = – 0.074 . Required: (i) Describe five factors other than labor and overheads mentioned above that TB should consider

in calculating its bid. (ii) Calculate the total cost including all overheads for TB that it can use as a basis of the bid for the

new apartment contract. (iii) If the second kitchen alone is expected to take 21.6 man. hours to fit demonstrate how the

learning rate of 95% has been calculated. [Marks: (6+10+4) = 20]

Q. No. 3. (a) Is tuition fee of ICMAB a variable, step or fixed cost? Justify your answer. (b) Doraemon Sailmakers had the following account balances as of December 1, 2011:

Raw materials (Direct & Indirect) Inventory Tk.18,600 Work in progress Inventory Tk.27,500 Finished goods Inventory Tk.35,600

During December the company incurred the following factorys costs:

(a) Purchased Tk.178,000 of raw materials on account.

(b) Issued Tk.182,000 of raw materials of which Tk.134,000 were direct materials.

(c) Factory Payroll of Tk.88,000 was accrued; Tk.62,000 was for direct labour and the rest was for supervisors.

(d) Utility cost was accrued; Tk.6,500 of these costs were variable and Tk.1,500 were fixed.

(e) Property tax on the factory were accrued in the amount of Tk.2,200.

(f) Prepaid Insurance of Tk.1,800 on factory equipment expired in December.

(g) Straight line depreciation of factory equipment was Tk.40,000.

(h) Actual overhead was transferred to work in progress Inventory.

(i) Goods costing Tk.340,000 were transferred to finished goods.

(j) Sales on account totaled Tk.7,00,000.

(k) Cost of goods sold was Tk.3,50,000.

(l) Selling & administrative costs were Tk.2,80,000. (Credit “various accounts”)

Required:

(1) Journalize the above transaction for December 2011.

(2) Prepare a schedule of cost of goods manufactured.

(3) Prepare an Income Statement showing COGS in detail. [Marks: (4+6+6+4) = 20]

Q. No. 4.

(a) MRP models are based on several less than realistic assumptions. Briefly discuss those assumptions.

(b) Amberin Incorporation prepares DVDs with antivirus program to be sold in computer retail shops. The company President has been wondering how much blank DVDs to buy at a time, and when an order should be placed. He wants a safety stock of 140 DVDs and has estimated that his company uses 9000 DVDs annually. Ordering cost is Tk.6.40 per order and carrying cost per DVD in inventory is Tk.2.00. The company operates 300 days a year. It takes 7 days from placement of an order to arrival of the DVDs.

Page 18 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 102. COST ACCOUNTING.

Q. No. 4. (Contd..)

Required: (i) Determine the Economic Order Quantity. (ii) Compute the Order Point. (iii) Disregard the amount of Safety Stock and assume the following estimates:

Cost of a stock out Tk.32 per occurrence number of orders per year 38. There will be no change in carrying cost. Estimated stock out probabilities:

Units of safety stock Probability of stock out (%) 50 70

100 45 200 25 300 10 400 05

Find out the optimal safety stock for Amberin Incorporation. [Marks: (8+2+2+8) = 20]

Q. No. 5.

(a) What is Activity Based Costing? How can it improve the costing system of an organization?

(b) Merlin Company recently introduces a new product, which managers refer to as Special to complement their other product, Regular. Accountants accumulate all overhead in a single cost pool and allocate it based on machine-hours. With the recent addition of an expanded computer system, Merlin decided to begin implementing ABC. A study reveals much overhead cost relates to machine setups and engineering changes. They select the number of setups and the number of engineering changes as the activity drivers for the two new cost pools. They will continue to use machine-hours as the base for allocating all remaining overhead. Accountant provide the following information about Merlin Company’s most recently year of operations:

Regular Special Total

Units produced 49,800 200 50,000 Direct material cost per unit 20 120 Direct labor cost (Tk.) 22, 00,000 3, 00,000 25, 00,000 Machine hours 11,000 960 11,960 Machine set ups 20 40 60 Engineering charges 400 600 1,000 Overhead cost: Machine set ups related 2, 40,000 Engineering related 8, 36,400 Others 19, 13,600 Total Overhead 29, 90,000 Required:

(i) Using the current costing system, determine the total and unit cost for each product line.

(ii) Using the ABC costing system, determine the total and unit cost for each product line.

(iii) Reconcile the total and unit costs reported for Special by the two costing system.

(iv) What percentage of Merlin’s total overhead did the two costing system treat differently? By what percentage did the cost of Special changes as a result of the changes in the system? Calculate each answer to the nearest whole percentage.

[Marks: {5+(5+5+3+2) = 20]

= THE END =

Page 19 of 54




SUBJECT: 103. MANAGEMENT AND MARKETING MANAGEMENT.


� Answer any Three questions from each part. � Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

PART-A: MANAGEMENT (TOTAL-50)

Q. No. 1.

(a) Define the different aspects of Management.

(b) How do you determine management process in different cultures?

(c) Describe managerial ethics and its importance in society.

[Marks: (5+6+5) = 16] Q. No. 2.

(a) What are Operational Controls and Financial Controls?

(b) “Financial Control brings blood to the industry” – discuss.

(c) Success of a manager fully depends on control mechanism. Explain with examples.

[Marks: (5+6+5) = 16] Q. No. 3.

(a) Explain how managers differ from non-managerial employees.

(b) Discuss why an understanding of management is important even if you don’t plan to be a manager.

(c) Explain how today’s managers use scientific management.

[Marks: (5+6+5) = 16] Q. No. 4.

(a) “Decision making is the important organ of management” – analyze.

(b) Define the process of group decision making.

(c) Team decisions are always better than one-man’s decision- Discuss.

[Marks: (5+6+5) = 16] Q. No. 5.

(a) How would you define motivation?

(b) Describe Herzberg’s motivation-hygiene theory.

(c) Analyze the appropriate reward programs to motivate performance.

[Marks: (5+6+5) = 16]

Two marks are reserved for neatness and relevance

Page 20 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-I SUBJECT: 103. MANAGEMENT AND MARKETING MANAGEMENT.

PART-B: MARKETING MANAGEMENT (TOTAL-50)

Q. No. 6.

(a) What is meant by marketing management?

(b) “Needs, wants and demands are interrelated.” – Explain.

(c) Explain the concepts of value and satisfaction.

[Marks: (5+6+5) = 16] Q. No. 7.

(a) What are the differences between selling and marketing?

(b) What is Target Market? Do you think that only a target can satisfy a firm to sell its product or service? Explain.

(c) What do you mean by Customer’s Value and customer’s satisfaction?

[Marks: (5+6+5) = 16] Q. No. 8.

(a) What is market research?

(b) How would you evaluate and control marketing activities?

(c) What are the characteristics of a sound market research report?

[Marks: (5+6+5) = 16] Q. No. 9.

(a) What is marketing plan?

(b) How marketing plan differs from strategic plan?

(c) Describe the elements of a marketing plan.

[Marks: (5+6+5) = 16] Q. No. 10.

Write a short note on:

(a) Market Report;

(b) Marketing Concept;

(c) Marketing mix;

(d) Sales Promotion.

[Marks: (4 x 4) = 16]

Two marks are reserved for neatness and relevance

= THE END =

Page 21 of 54




SUBJECT: 104. INFORMATION TECHNOLOGY.

Time: 2 hours 30 minutes Full Marks: 80

� Start answering each question from a fresh sheet. � All questions are to be attempted. � Show computations, where necessary. � Answer must be brief, relevant, neat and clean.

Q. No. 1.

(a) Difference between: (i) Update and Upgrade; (ii) Search Engine and Browser; (iii) WiFi and Bluetooth; (iv) WAP and internet; (v) Upload and download.

(b) Outline some factors are depend on a successful ERP software implementation with Merits and Demerits of such software.

[Marks: {(5x2)+10)} = 20] Q. No. 2.

(a) What is Database and Database Management Systems? (b) Briefly discuss elements of DBMS. (c) Discuss about System Development Life cycle. (d) Mention some commonly used Database management software.

[Marks: (4 x 5) = 20] Q. No. 3.

(a) What is system and system development? (b) What are role of Cost Accountant in building a new sound information system? (c) What are the cost and benefits of information systems? (d) How can a Management Accountant helps in developing a sound information system?

[Marks: (4+5+5+6) = 20] Q. No. 4.

Write short notes on the followings:

(a) Digital Market. (b) Virtual Drive. (c) Web based Solution. (d) Volatile Memory. (e) Digital Signature.

[Marks: (5 x 4) = 20]

= THE END =

Page 22 of 54



PROFESSIONAL LEVEL-II

SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I.



Q. No. 1. (a) What are the two general criteria that must be satisfied before a company can recognize revenue? (b) Describe a consignment sale. When does a consignor recognize revenue for a consignment sale? (c) Salam, Kalam and Kamal undertake to erect a five-storied mansion for Dhaka City Corporation.

The contract price is agreed at Tk.25,00,000, to be paid in cash Tk.22,00,000 by four equal installments and the balance amount in 8% notes payable of the corporation. They agree to share equally the profit or loss. They open a joint banking account with cash contributed as stated below:

Salam – Tk.3,00,000, Kalam – Tk.3,75,000 and Kamal – Tk.2,00,000. Salam arranges the preparation of building plans, etc. and pays Tk.32,000 as architect’s fees.

Kalam brings a concrete mixture and other implements valued Tk.80,000 and Kamal brings a motor lorry valued Tk.75,000.

They pay in cash for the followings: Taka Materials 12,26,800 Wages 7,33,200 Sundry expenses 20,000 Plant 60,000

On completion of the venture concrete mixture is sold for Tk.50,000 and plant and other implements are sold as scrap for Tk.10,000. Kamal takes back motor lorry at Tk.40,000.

Subsequently Salam takes over the notes payables issued by the corporation at a valuation of Tk.2,00,000.

Required: Necessary ledger accounts for the joint venture. [Marks: (2+3+15) = 20]

Q. No. 2. (a) Briefly explain the “Substance over the form” rule. (b) What disclosures are to be made by Lessee and Lessor for ‘finance lease’ and ‘operating lease’

as per IAS-17? (c) In a sales type lease what entries are to be passed at the inception of the lease and at the close of

the lease (showing the difference with imaginary figures, in case of guaranteed residual value and unguaranteed residual value).

(d) On January 01, 2010 Auto Ltd. sells a Truck to Easy Finance Co. Ltd. for Tk. 13,60,000 and immediately leases the Truck back. The relevant information is as follows: (i) The Truck was carried on Auto Ltd’s books at a value of Tk. 12,00,000. (ii) The term of the now cancelable lease is 10 years title will transfer to Auto Ltd. (iii) The lease agreement requires equal annual rental payments of Tk. 2,21,332.62 at the end

of each year. (iv) The incremental borrowing rate of Auto Ltd. is 12%, Auto Ltd. is aware that Easy

Finance Co. Ltd. set the annual rental to ensure a rate of return of 10%. (v) The Truck has a fair value of Tk. 60,000 on June 2010. (vi) Auto Ltd. pays the executory costs of Tk. 18,000 per year.

Instruction: Prepare the journal entries for both the leasee and the lessor for 2020 to reflect the sale and lease back agreement. No uncertainties exist and collectively is reasonably certain.

[Marks: (2+4+4+10) = 20]

Page 23 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I.

Q. No. 3. Pikay and Co. commenced a business on 1 January 2010 with a Home Office and one Branch. All goods are purchased by Home Office and are normally packed immediately. But on 31 December 2010 goods costing Taka 25,000 remained unpacked. The cost of packing materials amounted to 1% of selling price and there was no loss or wastage. Only packed goods are sent to the Branch and are charged at selling price less 1%. The following Trial Balance was extracted before adjusting the above:

Home Office Branch Capital 200,000 Drawings 50,000 Purchases 2000,000 Goods sent from Home Office 540,000 Packing materials 30,000 Sales 1,600,000 500,000 Packed goods sent to Branch 567,000 Selling and Admin. Expenses 180,000 19,000 Accounts Receivable 140,000 21,000 Accounts Payable 133,000 25,000 Current Accounts 60,000 Branch 95,000 Bank 5,000 ________ 5,000 ________ 2,500,000 2,500,000 585,000 585,000 Other information: (a) Sales by Home Office were at a uniform gross profit, after charging packing materials, of 20%

on a fixed selling price. (b) All Branch sales were at fixed selling price. (c) Goods invoiced and dispatched by Home Office to Branch in December 2010 for Taka 27,000

were not received until January 2011. (d) A remittance of Taka 8,000 from Branch in December 2010 to Home Office was not received in

2010. (e) Branch stock taking disclosed a shortage of goods of a selling value of Taka 2,500. (f) All stocks are to be valued at cost. (g) Branch stock of a selling value of Taka 10,000 had been damaged, necessitating their value for

stock purposes, being reduced by Taka 5,450 below invoiced price to the Branch. The Home Office agreed to allow the Branch a credit of Taka 1,600 against these goods.

Required: Prepare Income Statement and Balance Sheet for the whole business, in columnar form. [Marks: 20]

Q. No. 4. (a) What are the draw backs of single entry system? (b) Mr. X, a retail merchant, keeps only a memorandum record of his transactions. By going

through his notes and records you are able to ascertain the following: (1) Summary of Bank Account (01.01.2009 to 31.12.2009):

Dr. Cr. Tk. Tk. Balance b/d 2,500 Accounts payable 2,20,000 Cash deposit 2,30,000 Rent expenses 12,000 Balance c/d 13,100 Office charges 3,600 _______ Drawings 10,000 22,,4455,,660000 22,,4455,,660000

Page 24 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 201. ADVANCED FINANCIAL ACCOUNTING-I. Q. No. 4. (Contd..)

(2) Other cash transactions: Cash purchases Tk. 20,000 Other expenses paid 20,500 Cash balance on 01.01.2009 500 Cash balance on 31.12.2009 1,000

(3) Other information: (i) Stock-in-trade:

as on 01.01.2009 Tk. 50,000 as on 31.12.2009 75,000

(ii) A deposit of Tk. 3,000 paid as rent expense to the landlord remains as permanent advance.

(iii) Furniture with a written-down-value of Tk.30,000 on 01.01.2009 is subject to depreciation @10%.

(iv) Electricity bill to be paid on 31.12.2008 and 31.12.2009 were Tk.400 and Tk.600 respectively. (v) Amounts due to the accounts payable on 31.12.2008 and 31.12.2009 were Tk.10,600 and

Tk.21,000 respectively. (vi) An amount of Tk.2,000 being irrecoverable from a customer is to be written off as bad debts. (vii) Accounts receivable on 31.12.2008 and 31.12.2009 were Tk.20,000 and Tk.17,000

respectively (excluding Tk.2,000 as bad debt). Required: (1) Income statement for the year ended on 31.12.2009; and (2) Balance sheet as on 31.12.2009.

[Marks: (5+15) = 20] Q. No. 5. (a) State the basic features of three broad types of Joint Venture as per IAS-31. (b) Mary, Nancy and Oli own adjourning properties of 15, 10 and 5 acres of land respectively. It is

agreed to pool these properties and to develop, sub-divide and sell the land as a joint venture. It is agreed that a valuation of Tk. 3,00,000 shall be allowed for each acre contributed to the venture, profits are to be divided a follows: (i) A commission of 10% on selling price is to be allowed to each member making plot sales. (ii) Upon conclusion of the venture, a salary of Tk. 20,000 is to be allowed to Oli, who is to

act as managing partner; Oli is to take care of the venture receipts and expenditures. (iii) The net profit after allowance of commission and salaries is to be dividend equally. (iv) Oli pays Tk. 5,00,000 for improvements that are completed in April. The property is sub-

divided into 155 plots that are offered for sale as follows: Number Selling price per plot Plots, Grade A 40 Tk. 1,50,000 Plots, Grade B 115 Tk. 100,000

All of the plots are sold for cash in May and June. Sales by members of the venture are as follows:

Number of plots sold Grade A Grade B Sales by Mary 10 30 Sales by Nancy 15 40 Sales by Oli 05 10

Remaining plots are sold by sales man. Advertising Salaries and miscellaneous expenses were Tk. 20,000. The profit from the venture is calculated and Oli distributes cash to members in final settlement. Instructions: (i) Assuming that a separate set of books of the venture is not kept, prepare journal entries to

record the fore going transactions in the books of Managing Partner Oli. (ii) Show also the Co-venturers personal account in the book of Managing Partner Oli.

[Marks: (3+12+5) = 20] = THE END =

Page 25 of 54




SUBJECT: 202. MANAGEMENT ACCOUNTING.



Q. No. 1. (a) Explain how CVP analysis can be used for managerial planning? (b) Bengal Travel Agency specializes in flights between Dhaka and London. It books passengers on

United Airlines at Tk. 90,000 per round-trip ticket. Until last month, United paid Bengal a commission of 10% of the ticket price paid by each passenger. This commission was Bengal’s only source of revenues. Bengal’s fixed cost are Tk. 14,00,000 per month (for salaries, rent etc) and its variable costs are Tk. 2,000 per ticket purchased for a passenger. This Tk. 2,000 includes a Tk. 1,500 per ticket delivery fee paid to DHL. Assume each round trip ticket purchased is delivered in a separate package. Thus, the Tk. 1,500 delivery fee applies to each ticket. United Airlines has just announced a revised payment schedule for travel agents. It will now pay travel agents a 10% commission per ticket up to a maximum of Tk. 5,000. Any ticket costing more than Tk. 500,000 generates only a Tk. 5,000 commission, regardless of the ticket price.

Required: (i) Under the old 10% commission structure, how many round-trip tickets must Bengal sell each

month (a) to break even and (b) to earn an operating income of Tk. 700,000? (ii) How does United’s revised payment schedule affect your answer to (a) and (b) in requirement?

[Marks: {5+(10+5)} = 20] Q. No. 2. (a) Sunk cost is irrelevant cost. Elaborate this statement with a hypothetical example. (b) Smart Company on January 1, 2008 decides to contract with another company to preassemble a

large percentage of the component of its telescopes. The revised manufacturing cost structure during the 2008 to 2010 period is:

Variable manufacturing cost per unit produced: Direct material cost Tk. 30.50 Direct manufacturing labour cost 2.00 Indirect manufacturing cost 1.00

Total variable manufacturing cost per unit produced Tk. 33.50 Total fixed manufacturing cost (all indirect) Tk. 1,200

Under the revised cost structure, a large percentage of SMART’s manufacturing costs are variable with respect to units produced. The denominator level of production used to calculate budgeted fixed manufacturing cost per unit in 2008, 2009 and 2010 is 800 units. Summary information pertaining to absorption costing operating income and variable costing operating income with this revised cost structure is given below: Particulars 2008 2009 2010 Absorption-costing operating income Tk. 16,800 Tk. 18,650 Tk. 24,000 Variable-costing operating income 16,500 18,875 23,625 Difference 300 (225) 375 Beginning Inventory - 200 units 50 units Ending Inventory 200 units 50 units 300 units

Page 26 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 202. MANAGEMENT ACCOUNTING. Q. No. 2. (Contd..)

Required: (i) Compute the budgeted fixed manufacturing overhead cost per unit in 2008, 2009 and 2010. (ii) Explain the difference between absorption-costing operating income and variable-costing

operating income in 2008, 2009 and 2010, focusing on fixed manufacturing costs in beginning and ending inventory.

[Marks: {5+(5+10)} = 20] Q. No. 3. HAQ Fabrications manufactures boxes for workstations. The firm’s standard cost sheet and the operating result of October 2010 are given below:

Particulars Standard cost per unit

Operating result (October 2010)

Units 9500 Sales Tk. 50.00 Tk. 551,000 Variable costs: Direct materials 5 pounds @ Tk. 2.40 Tk. 12.00 48,000 pounds @ Tk. 3 = Tk. 144,000 Direct labour: 0.5 hour @ Tk. 14 per hour Tk. 7.0 48,000 hour @ Tk. 16 = Tk. 76,800 Variable manufacturing overhead Tk. 2.00 Tk. 19,000 Variable selling and administrative expenses Tk. 5.00 Tk. 55,100 Total variable cost Tk. 26.00 Tk. 294,900 Contribution margin Tk. 24.00 Tk. 256,100 Fixed cost: Manufacturing cost Tk. 50,000 Tk. 55,000 Selling and administrative expenses 20,000 24,000 Total fixed costs Tk. 70,000 79,000 Operating Income Tk. 177,100

In preparing the master budget for October 2010 the firm had several expected changes from the standard cost sheet. The sales price would increase by 8%. Its suppliers notified the form that material prices would increase by 5% starting October 1. The labour contract that started on October 1 increased wages and benefits by 10%. Fixed manufacturing costs would increase Tk. 5,000 for insurance, property taxes and salaries. For fixed selling and administrative expenses there would be a Tk. 2,000 increase in manager’s salaries. Furthermore, the firm plans to spend an additional Tk. 2,000 for advertising during October 2010. The unit sales for October 2010 were expected to be 10,000 units. Haq Fabrications uses JIT systems in all of its operations including materials acquisitions and product manufacturing. Required: (i) Prepare the master budget and flexible budget at 9,500 units and at 11,000 units for October

2010. (ii) Compute the sales volume operating income variances, flexible budget operating variance, sales

price variance and flexible budget variable cost variance for October 2010. (iii) Determine the direct material price variance, direct material usage variance, direct labour rate

variance and direct labour efficiency variance. [Marks: (8+6+6) = 20]

Q. No. 4. (a) Mr. Din Mohammad is a traveling inspector for the Environmental protection Agency. He uses

his own car and the agency reimburses him at Tk.18.00 per kilometer. Mr. Din Mohammad claims that he needs Tk.22.00 per kilometer just to break-even. A scrutiny of his expenses by agency reveals the following:

Oil charge for every 4,800 km Tk.1,200 Maintenance (other than oil) every 9,600 km Tk.18,000 Yearly insurance (comprehensive with accident benefits) Tk.40,000 Cost of car with an average residual value of Tk.6,00,000 and with a useful life of 3 years.

Tk.10,80,000

Page 27 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 202. MANAGEMENT ACCOUNTING.

Q. No. 4. (Contd..)

Petrol cost is Tk.50 a liter and Din Mohammad gets 8 km per liter in his car. When Din Mohammad is on the road, he averages 192 km a day. He works 5 days a week, his 10 days vacation in a year, besides 6 holidays, and spends 15 working days a month in the office. Required: (1) An equitable rate of reimbursement on the basis of the schedule he presently follows. (2) The number of kilometers a year he would have to travel, to break-even at the current rate

of reimbursement. (b) A practicing Cost Accountant now spends Tk.9 per km on taxi fares for his clients work. He is

considering two other alternatives, the purchase of a new small car or an old bigger car.

New small car (Tk.) Old big car (Tk.) Purchase Price 3,50,000 2,00,000 Sale price after five years 1,90,000 1,20,000 Repairs & Servicing per annum 10,000 12,000 Taxes & Insurance per annum 17,000 7,000 Diesel consumption per liter to run 10 kms 07 kms Diesel Price, per liter Tk.35 Tk.35

He estimates that he can run 1,00,000 kms annually.

Required:

(1) Which of the three alternatives will be cheapest? (2) If his practice expands and he has to do 1,90,000 kms per annum, what should be his

decision? (3) At how many kms per annum will the cost of two cars break-even and why? Ignore

interest and income tax. [Marks: (5+5+4+3+3) = 20]

Q. No. 5. (a) “Financial planning models guide managers through the budget process so that managers do not

really need to understand budgeting” Do you agree? Explain. (b) “If a product line is generating a loss, then that’s pretty good evidence that the product line

should be discontinued.” Do you agree? Explain. (c) The New Age Industries produces three products. The budgeted operations of coming year are

given as follows:

Products

A (Tk.) B (Tk.) C (Tk.)

Sales 9,00,000 6,40,000 3,60,000

Variable costs 4,00,000 3,60,000 2,40,000

Profit contribution 5,00,000 2,80,000 1,20,000 Avoidable fixed costs 2,00,000 1,00,000 90,000

Profit contribution after avoidable fixed cost 3,00,000 1,80,000 30,000

Investments in receivables and inventories 7,00,000 6,00,000 5,00,000

Unallocated joint costs total Tk.2,50,000. The firm is considering a proposal to drop product line C. If the firm does so, it can recover the investment in receivables and inventories related to the line and pay off debts of Tk.5,00,000 that bears 15% interest.

Required: Determine whether the firm should drop the product line or not. [Marks: (5+5+10) = 20]

= THE END =

Page 28 of 54




SUBJECT: 203. COMMERCIAL & INDUSTRIAL LAWS.


� Answer FIVE questions taking at lest TWO from each group “A” and “B”. � Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

GROUP-A: COMMERCIAL LAW

Q. No. 1. (a) “An acceptance is to offer what a lighted match is to a train of gun powder”- Discuss with

example. (b) Is communication of an offer necessary? (c) Mr. X offers a reward to whosesoever shall bring to him lost dog. Mr. Y brings to Mr. X his lost

dog. Can Mr. Y claim the reward? Answer giving reasons. (d) Distinguish between unenforceable and illegal contract.

[Marks: (8+4+3+5) = 20] Q. No. 2. (a) Distinguish among (i) Existing goods, (ii) Future goods, and (iii) Contingent goods. (b) Distinction between condition and warranty alongwith consequences of Breach of Condition

and Breach of Warranty. (c) Explain the Doctrine of Caveat Emptor with its exceptions if any.

[Marks: (6+8+6) = 20] Q. No. 3. (a) Define the term delivery. Discuss the rule relating to delivery in the Sale of Goods Act. (b) A contracts to sell B Java sugar according to sample produced by him. The sugar when

delivered agrees with the sample but is not Java sugar. Has B got any remedy? (c) Define principal and agent as per the provision of the Law of Contract. What happens when the

agent exceeds his authority? [Marks: (7+6+7) = 20]

Q. No. 4. (a) State with reason whether Bill of Exchange, Bill of Lading and Hundis are negotiable

instrument. (b) Under what circumstances the judicial authority may refer the parties to arbitration? (c) What are the differences between Charter Party and Bill of Lading?

[Marks: (7+6+7) = 20] Q. No. 5. Write short notes on the followings (any five): (a) Negotiable Instruments. (b) Arbitrations and Umpire. (c) Bill of Exchange and Promissory Note. (d) Condition and warranty. (e) Forged instrument. (f) Unpaid Seller. (g) Offer and Acceptance.

[Marks: (5 x 4) = 20]

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CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 203. COMMERCIAL & INDUSTRIAL LAWS.

GROUP-A: INDUSTRIAL LAW

Q. No. 6. (a) Define Trade Union and describe its objectives. (b) Describe the requisites for registration of a ‘Trade Union’ of workers. (c) What constitutes ‘unfair labour practices’ by an employee?

[Marks: (6+7+7) = 20] Q. No. 7. Distinguish the following in the light of Bangladesh labour Act, 2006. (a) Temporary workers and Probationary workers. (b) Retrenchment and discharge. (c) Ventilation and temperature. (d) Casual leave and sick leave.

[Marks: (5 x 4) = 20] Q. No. 8. Discuss the composition, function and jurisdiction of Labour Courts of Bangladesh.

[Marks: 20] Q. No. 9. (a) What are the procedures of retrenchment? Is an employer under any obligation has to re-employ

a retrenched worker? (b) Briefly discuss the provisions in the Bangladesh Labour Act, 2006 for the protection of the

interest of the children. (c) Describe the grievance handing procedures as laid in the Labour Act, 2006.

[Marks: (7+6+7) = 20] Q. No. 10. Write short notes on the followings: (a) Unfair Labour Policy. (b) Minimum Wage-Board. (c) Labour Appellate Tribunal. (d) Power and function of Chief Inspector. (e) Dock Workers Management Board.

[Marks: (5 x 4) = 20]

= THE END =

Page 30 of 54




SUBJECT: 204. TAXATION.



Q. No. 1. (a) Write short notes on the following:

(i) Capital assets; (ii) Double taxation relief; and (iii) Truncated value addition.

(b) Government mainly focuses on revenue maximization through the annual Finance Acts. Do you agree? Explain with reference to the Finance Act, 2011.

(c) Discuss the provisions of exemption of newly established physical infrastructure facility set up between the period of July 2011 and June 2013 under section 46C of the Income Tax Ordinance (ITO) 1984.

(d) What is the special tax treatment in respect of investment in the purchase of Bangladesh Government Treasury Bond under section 19D of the ITO 1984?

(e) Differentiate between tax deducted at sources and tax collected at sources. How is the concept of advance tax related to these source taxes?

[Marks: (3+4+5+3+5) = 20] Q. No. 2. Asha, Pasha and Rasha are three equal partners of a firm, Asha, Pasha & Rasha Associates. For the income year ended June 30, 2011, the firm produces the following information for the purpose of computing total income and tax liability of the firm as well as its partners. (a) The firm owns a commercial building partly (one half) occupied by the firm to operate its own

business and partly (another half) let out at a monthly rent of Tk.35,000. Municipal taxes are paid on the municipal value of Tk.800,000 (deemed annual rental value). During the year, the firm has also earned Tk.40,000 as advance and Tk.10,000 as first year’s rent from a joint stock company by letting its top floor to set up its hoarding of commercial advertisement.

(b) The firm is engaged with trading of garments supplies which resulted following gross margin amount for the year:

Particulars Amount (Tk.) Amount (Tk.) Sales 5,000,000 Less: Cost of Goods Sold: Beginning Inventory 800,000 Add: Purchase 4,200,000 Cost of Goods Available for Sale 5,000,000 Less: Ending Inventory 1,000,000 Cost of Goods Sold 4,000,000 Gross Margin 1,000,000

(c) Other relevant information is given below: Inventories are always valued at 2% above cost. Analysis also reveals that purchase figure was

overstated by Tk.200,000 for the year. Total operating expenses charged during the period amounted to Tk.450,000 which included following items among other things: (i) Maintenance to Building:

Amount (Tk.) Amount (Tk.) Portion let out 8,000 Portion used for business 20,000 28,000

Page 31 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-II SUBJECT: 204. TAXATION.

Q. No. 2. (Cont’d ……….)

(ii) Municipal taxes to the extent borne by the company: Total amount of municipal taxes paid for the year was Tk.40,000 out of which the tenant bore Tk.10,000.

(iii) Annual contribution to Cotton Dealers Association, a trade association, amounted to Tk.10,000.

(iv) All of the partners were active and took part in running business. Salaries paid to the partners were Tk.40,000 to Asha, Tk.50,000 to Pasha and Tk.30,000 to Rasha.

(v) Legal charges amounted to a total of Tk.50,000 including a fine of Tk.10,000 charged due to its involvement with illegal form of business.

(vi) The firm charged Tk.15,000 as provision for bad debt against receivable.

(vii) The firm deducted a loss of Tk.50,000 incurred from speculative business.

(viii) Accounting depreciation charged was Tk.38,000 which was Tk.3,000 higher than tax depreciation.

(d) Contribution by the firm to Aga Khan Development Network was Tk.50,000.

(e) Asha had no other income during the year; however, Pasha and Rasha were also partners of another firm. The respective incomes of Pasha and Rasha from the firm for the year ended 30th June 2011 were as under:

Partners Salary Interest Profit/(Loss) Pasha Tk.40,000 Tk.10,000 Tk.(50,000) Rasha Tk.60,000 Tk.20,000 Tk.20,000

(f) Asha had income from a house property at London amounting to Tk.425,000 (after deduction of 15% tax at source and remitted to Bangladesh through proper banking channel).

(g) Rasha had income from interest on Pratiraksha Sanchay Patra of Tk.30,000. Bank charged Tk.300 as collection fee and Tk.3,000 as interest on borrowing taken from the bank for investment in the securities.

Required: (1) Compute tax liability of ‘Asha, Pasha & Rasha Associates’ for the year as per the Finance Act

2011 and total income in the hands of individual partners from all sources. (2) State the principles governing the basis of taxability of total income of Asha, Pasha and Rasha

as individuals having share of income from partnership firm. [Marks: (15+5) = 20]

Q. No. 3.

(a) Mr. Khoda Box reports the following incomes for the income year ended on June 30, 2011.

Income form Business or Profession Tk. 400,000 Income from House Property 90,000 Capital Gains 70,000 Income from Speculation Business 100,000 Share of Profit from Firm 40,000

However, he has claimed some losses carried forward from earlier years with the following details:

Particulars Amount of Losses c/f to Income Year 2010-11

Income Year of Origination

Income from Business or Profession Tk. (70,000) 2007-2008 (except unabsorbed depreciation)

Capital Gains (80,000) 2002-2003

Income from Speculation Business (50,000) 2004-2005

Unabsorbed depreciation on business assets (30,000) 2001-2002

Page 32 of 54


Q. No. 3. (Cont’d ……….)

Required:

Compute the amount of total income relating to income year 2010-11 after adjusting the past losses.

(b) Saint Zavier Ltd. sold on 15 July, 2010 a piece of old equipment used in the business for Tk.20 million. In relation to the sale, it incurred advertisement cost of Tk. 80,000 and paid Tk.300,000 brokerage commission. It bought the equipment 6 years back at a cost of Tk.3,490,000. On 30 November, 2010 it has bought another new equipment at a cost of Tk.25 million inclusive of incidental costs. The Company has duly informed the DCT about its intention to roll over the capital gain to new equipment purchased.

Required:

Compute the amount of capital gain and comment on the implication of income tax thereon.

[Marks: (10+10) = 20]

Q. No. 4.

Mr. Jashim Ahmed has reported the following incomes for the income year ended on 30th June, 2011:

Income from Salary:

Mr. Jashim Ahmed received basic salary of Tk.18,500 in the month of June, 2011 as per the scale of 17,000–1,500x2–20,000. He has joined the company on 1st April, 2010. Besides basic salary, he received the following: Dearness allowance @ 15% of basic salary; Entertainment allowance and Medical allowance @ 20% and @ 10% of basic salary respectively; Annual bonus and fees Tk.36,000; House rent allowance Tk. 11,000 per month; Conveyance allowance Tk.1,250 per month. He contributes 10% of basic salary to a recognized provident fund (RPF) and his employer also contributes the same in the fund. During the year he received Tk.15,000 as interest on provident fund and the rate of interest was 15%. He contributes to an approved superannuation fund @ 5% of basic salary.

Income form Interest on Securities:

He enchased in June 2011 Defense Savings Certificate, which was purchased earlier at Tk.300,000, and obtained Tk.332,400 in cash after deduction of tax of Tk.3,600 @10% at source under section 52D. He obtained Tk.50,000 from interest on debenture issued by a listed company and no tax was deducted at source under section 51. He financed Tk.1,00,000 by taking a 8% loan to purchase those securities and interest was paid for the whole year. Bank charged Tk.2,415 as collection fee for these interest incomes.

Income from Business or Profession:

Due to the economic problem and huge competition, his business resulted a loss of Tk.80,000 during the last year (2010-11).

Capital Gains:

He has sold a machine at a price of Tk.150,000 at fair market value before the expiry of 5 years from the date of acquisition, when it was purchased at a price of Tk.80,000 for the purpose of his business. Another Tk.30,000 was spent to improve the machine. At the time of sale, the machine had accumulated depreciation amounting to Tk.53,680. He has no intention to purchase such machine in future and not purchased such machine over last two years.

Mr. Ahmed made and incurred the following investments and expenses during the said year: (i) Life insurance premium Tk.6,000; value of the policy worth Tk.70,000. (ii) Purchase of books Tk.6,000 and purchase of scientific instruments Tk.10,000. (iii) Purchase of primary shares of a Public Limited Company Tk. 48,000.

Page 33 of 54


Q. No. 4. (Cont’d ……….)

(iv) Donation to an unapproved religious institution Tk.8,000; donation to Government Zakat Fund Tk.7,500; donation to a local private club Tk.9,000; donation to a blind school (approved under paragraph 11B of Part B, Sixth Schedule) Tk.15,000.

(v) Purchase of a piece of land worth Tk.70,000 out of his post-tax income in the name of his wife and a sum of Tk.5,000 was spent for its registration.

(vi) Spent a sum of Tk.15,000 as educational expenses of his children.

(vii) Purchase of ICB Unit Fund certificate Tk.20,000.

(viii) Purchase of gold Tk.20,000.

(ix) Contribution to a group insurance scheme Tk.2,000.

(x) Actual medical expenses were Tk.20,350.

Required:

Ascertain his total income and tax to be paid in the assessment year of 2011–2012. [Marks: 20]

Q. No. 5.

(a) What is the use of Baggage Rules? Who will fall under the Baggage Rules? Mention some penalties for failing to abide by the Baggage Rules.

(b) Who is responsible to pay Foreign Travel Tax and to whom? Discuss the mode of levy of such tax on travel by Air, Land and Sea.

(c) What are the provisions to get input tax credit under section 9 of the Value Added Tax Act 1991?

(d) Briefly discuss the provisions of Certificate of Deductions at Source as per the Value Added Tax Rules, 1991.

[Marks: (5+5+6+4) = 20]

= THE END =

Page 34 of 54



PROFESSIONAL LEVEL-III

SUBJECT: 301. ADVANCED FINANCIAL ACCOUNTING-II.



Q. No. 1. (a) Explain how an acquirer is determined in a business combination. (b) A Ltd. acquired the assets (except cash) and assured the liabilities of B Ltd. on January 01,

2010. ‘B’ Ltd’s. December 31, 2009, Balance Sheet, reflecting both book values and fair values, showed : Book Value (Tk.) Fair Value (Tk.) Accounts Receivable 70,000 65,000 Inventory 90,000 1,00,000 Land 1,10,000 1,60,000 Building 3,70,000 4,50,000 Equipment 2,35,000 2,99,000 Total 8,75,000 10,74,000

Accounts Payable 85,000 85,000 Notes Payable 1,80,000 1,80,000 Ordinary Share Capital 1,53,000 Tk. 2 face value Share Premium 2,29,000 Retained Earnings 2,28,000 Total 8,75,000

Instructions: (i) Record the journal entries on the books of ‘A’ Ltd. to record the acquisition on January 01,

2010. Assume that the purchase consideration is Tk. 8,50,000. Follow IFRS-3. (ii) Now assume that the purchase consideration is Tk. 7,20,000. Give journal entries on ‘A’s books

to record the acquisition on January 01, 2010. Make necessary assumptions in line with IFRS-3. (iii) Refer to requirement (i) above. Now assume that ‘A’ Ltd. agreed to pay the former shareholders

of ‘B’ Ltd. Tk. 1,35,000 cash if the post combination earnings of the combined company(A) reached certain levels during 2010 and 2011. How would you journal entries to give effect to this contingent consideration in line with the requirements of IFRS-3?

[Marks: 5+ (5+5+5) = 20] Q. No. 2. The summarised balance sheets of A Ltd. and B Ltd. as at 31 December 2010 were as follows:

A Ltd. B Ltd. Tk. Tk. Tk. Tk.

ASSETS Non-current assets:

Property, plant and equipment 80,000 58,200 Investments 84,000 0 164,000 58,200

Current assets: Inventories 18,000 12,000 Trade and other receivable 62,700 21,100 Investments 0 2,500 Cash and cash equivalents 10,000 3,000

Page 35 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 301. ADVANCED FINANCIAL ACCOUNTING-II.

Q. No. 2. (Contd..)

Current account – A Ltd. 0 3,200 90,700 41,800 254,700 100,000

EQUITY AND LIABILITIES Capital and reserves:

Ordinary share capital (Tk. 1 shares 120,000 60,000 Share premium account 18,000 0 Revaluation reserve 23,000 16,000 Retained earnings 56,000 13,000 Equity 217,000 89,000

Current liabilities: Trade and other payables 35,000 11,000 Current account – B Ltd. 2,700 0 37,700 11,000 Total equity and liabilities 254,700 100,000

The following information are relevant: (1) On 1 January 2008 A Ltd. acquired 48,000 shares in B Ltd. for Tk. 84,000 cash when the

retained earnings of B Ltd. were Tk. 8,000 and the balance on the revaluation reserve was Tk. 16,000.

(2) The inventories of A Ltd. include Tk. 4,000 of goods from B Ltd. invoiced to A Ltd at cost plus 25%.

(3) A cheque for Tk. 500 from A Ltd to B Ltd., sent before 31 December 2009, was not received by the latter company until January 2011.

(4) A n impairment review at 31 December 2010 revealed that goodwill in respect of B Ltd had fallen in value over the year by Tk. 500. By 1 January 2010 this goodwill had already suffered impairments totaling Tk. 1,700.

Required: (i) Prepare the consolidated balance sheet of A Ltd. and its subsidiary B Ltd. as at 31 December

2010. (ii) Explain the adjustments necessary in respect of intra-group sales when preparing the

consolidated balance sheet of the A Ltd. group. [Marks: (16+4) = 20]

Q. No. 3. The Chairman of DEXIMCO Group has flown the statement prepared to present in a board meeting to be held tomorrow to discuss the group financial position. Following his review of the profit and loss account and balance sheet, he has called into your consultancy office with a draft copy of the group cash flow statement, as shown below. He has left the remaining cash flow statement notes on the aero plane and cannot obtain a replacement set at short notice. He has raised certain questions with you.

DEXIMCO Group Cash Flow Statement For the year ended 31st December. 2010.

Taka Taka CASH FLOWS FROM OPERATING ACTIVITIES: Net profit before tax and extra ordinary items 88,000 Adjustments for: Depreciation 12,000 Loss on sale of tangible fixed asset 10,000 Increase in creditors 16,000

Page 36 of 54


Q. No. 3. (Contd..)

Increase in stock (10,000) Increase in debtors (5,000) Taxes paid (35,000) Net cash flow from operating activities 76,000

CASH FLOWS FROM INVESTING ACTIVITIES: Dividends received from associated undertaking 12,000 Purchase of fixed assets (62,000) Purchase of subsidiary undertaking (30,000) Sale of trade investment 11,000 Sale of plant and machinery 25,000 Net cash used in investing activities (44,000)

CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of share capital 10,000 Dividends paid (15,000) Purchase of bonds (25,000) Net cash used in financing activities (30,000) Increase in cash and cash equivalents 2,000

The Chairman has raised following matters with you: (i) According to the balance sheet, the bank balance has increased by 1,000. This disagrees with

the cash flow statement which gives an increase of Tk.2,000. (ii) The statement shows the purchase of the subsidiary as only 30,000, where as DEXIMCO Ltd.

paid Tk. 33,000 for the shares of the subsidiary. (iii) DEXIMCO Ltd’s dividends, as shown in the profit and loss account amounted to 12,000, yet

the cash flow statement shows Tk. 15,000. (iv) In the statement there is a figure of Tk.62,000 for the purchase of fixed assets but in the balance

sheet our fixed assets additions are Tk. 70,000. (v) The statement does not show the loan DEXIMCO Ltd. received from one of its 100% owned

subsidiaries. You are required to: Prepare a report for the Chairman of the DEXIMCO Group giving a brief possible explanation of each of the matters raised above.

[Marks: (5x4) = 20] Q. No. 4. Extracts from group financial statements of AB, a public limited company, year ended April 30, 20X1.

Particulars Amount in Tk. Profit from continuing operations 35,000 Loss on discontinued operation (tax relief Tk.500 million) (1,500) Income tax (7,500) Minority interest (loss on discontinued activities Tk.500 million) (1,500) Preference share appropriation – dividend (2 years) (30) Other (5) Share capital at April 30, 20X1 Ordinary shares of Tk.1 each 1,000 5% convertible preference shares 30

Page 37 of 54


Q. No. 4. (Contd..)

Other information: (a) On January 1, 20X1, 48 million ordinary shares were issued on the acquisition of CD plc at a

valuation of Tk.190 million. If CD earns cumulative profits in excess of Tk.8,000 million up to April 30, 20X2, an additional 10 million shares are issuable to the vendors. If the profits do not reach that amount, then only 2 million shares are issuable on April 30, 20X2.

(b) The profits for the three months to April 30, 20X1, are Tk.1,200 million. (c) On May 11, 20X1, there was a bonus issue of one for four ordinary shares. The financial

statements are made up to April 30, 20X1, and had not yet been published. (d) The company has a share option scheme. The directors exercised options relating to 18 million

shares on February 28, 20X1, at price of Tk.3 per share. In addition, options were granted during the year on March 1, 20X1, to subscribe for 10 million shares at Tk.2 each. The fair value of the shares on March 1, 20X1, was Tk.4, and the average fair value for the year was Tk.5.

(e) The preference shares are convertible into ordinary shares on May 1, 20X2, on the basis of one ordinary share for every two preference shares or on May 1, 20X3, on the basis of one ordinary share for every four preference shares.

(f) There is a profit share scheme in operation whereby employees receive a bonus of 5% of profits from continuing operations after tax and preference dividends.

(g) XY plc, a 100% owned subsidiary of AB, has in issue 9% convertible bonds of Tk.200 million that can be converted into one ordinary share of AB for every Tk.10 worth of bonds. Income tax is levied at 33%.

Required: Calculate basic and diluted earnings per share. [Marks: 20]

Q. No. 5. (a) Discuss the information and conditions those are provided by an enterprise about products and

services and about geographical areas. (b) What is hedge accounting? What are the differences in accounting for a forward contract used

as (a) cash flow hedge and (b) a fair value hedge of a foreign currency denominated asset or liability?

(c) Discuss the codes of ethics that should be followed by a Cost and Management Account. Reference should be given to the codes of ethics adopted by ICMA Bangladesh.

(d) How are the preacquisition revenue and expense items of a subsidiary acquired during a fiscal period treated under the pooling of interest method?

[Marks: (5 x 4) = 20]

= THE END =

Page 38 of 54




SUBJECT: 302. ADVANCED COST ACCOUNTING.



Q. No. 1. (a) Prime Oceanic Water (POW) desalinates and bottles sea water. The desalinated water is in high

demand from a large group of environmentally conscious people on the west coast of the Country. During March, POW processes 1,000 gallons of sea water and obtains 800 gallons of drinking water and 50 pounds of sea salt (the rest of the sea water evaporates in the desalinization process). Processing the 1,000 gallons of water costs POW Tk.1,500. POW sells 600 gallons of the desalinated water in 2 gallon containers for Tk.8 per container. In addition POW sells 40 pounds of sea salt for Tk.1.20 per pound. Due to the relatively small proportion of sea salt, POW has decided to treat it as a byproduct. Required 1. Assuming POW accounts for the byproduct using the production method, what is the

inventoriable cost for each product and POW’s gross margin? 2. Assuming POW accounts for the byproduct using the sales method, what is the

inventoriable cost for each product and POW’s gross margin? 3. Discuss the difference between the two methods of accounting for byproducts.

(b) Padma Sawmill Inc. (PSI), purchases logs from independent timber contractors and processes the logs into three types of lumber products:

♦ Studs for residential buildings (walls, ceilings)

♦ Decorative pieces (fireplace mantels, beams for cathedral ceilings)

♦ Posts used as support braces (mine support braces, braces for exterior fences on ranch properties)

These products are the result of a joint sawmill process that involves removal of bark from the logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cutting the individual products from the logs. The joint process results in the following costs of products for a typical month:

Direct materials (rough timber togs) Tk. 500,000

Debarking (labor and overhead) 50,000

Sizing (labor and overhead) 200,000

Product cutting (labor and overhead) 250,000 Total joint costs Tk.1,000,000

Product yields and average sales values on a per-unit basis from the joint process are as follows:

Monthly Output of Materials at

Product Split off Point Fully processed Selling Price

Studs 75,000 units Tk. 8

Decorative pieces 5,000 units 100 Posts 20,000 units 20

The studs are sold as rough-cut lumber after emerging from the sawmill operation without further processing by PSI. Also, the posts require no further processing beyond the split off point. The decorative pieces must be planed and further sized after emerging from the sawmill. This additional processing costs Tk.100,000 per month and normally results in a loss of 10% of the units entering the process. Without this planning and sizing process, there is still an active intermediate market for the unfinished decorative pieces in which the selling price averages Tk.60 per unit.

Page 39 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 302. ADVANCED COST ACCOUNTING.

Q. No. 1. (Contd..)

Required (1) Based on the information given for Padma Sawmill, allocate the joint processing costs of

Tk.1,000,000 to the three products using: (a) Sales value at split off method (b) Physical-measure method (volume in units) (c) NRV method

(2) Prepare an analysis for Padma Sawmill that compares processing the decorative pieces further as they currently do, with selling them as a rough-cut product immediately at split off.

(3) Assume Padma Sawmill announced that in six months it will sell the unfinished decorative pieces at split off due to increasing competitive pressure. Identify at least three types of likely behavior that will be demonstrated by the skilled labor in the planning and sizing process as a result of this announcement. Include in your discussing how this behavior could be influenced by management.

[Marks: (3+3+2+4+4+4) = 20] Q. No. 2. (a) “A customer-profitability profile highlights those customers who should be dropped to improve

profitability.” Do you agree? Explain. (b) Alex Foods manufactures apple products such as apple jelly and applesauce. It makes

applesauce by blending Tolma, Golden and Ribson apples. Budgeted costs to produce 100,000 kg of applesauce in November are as follows:

45,000 kg of Tolman apples @Tk.30 per kg Tk.13,50,000 180,000 kg of Golden apples @Tk.26 per kg Tk.46,80,000 75,000 kg of Ribson apples @Tk.22 per kg Tk.16,50,000

Actual costs in November are:

62,000 kg of Tolman apples @Tk.28 per kg Tk.17,36,000 155,000 kg of Golden apples @Tk.26 per kg Tk.40,30,000 75,000 kg of Ribson apples @Tk.20 per kg Tk.18,60,000

Required: (i) Calculate the total direct materials price and efficiency for November. (ii) Calculate the total direct materials mix and yield variances for November. (ii) Comment on your results in requirement 1 and 2.

[Marks: (5+5+5+5) = 20] Q. No. 3. (a) “Transferred-in costs are those costs incurred in the preceding accounting period. “Do you

agree? Explain. (b) Del Co. Ltd. began the current period with 1000 units, which were 60% complete. During the

period, works on additional 50000 units were started. Materials are added at the start of the process while labor is added when units are 40% complete. Overhead costs are incurred uniformly. Units are inspected for rework when they are 50% complete. Rejected units are returned to 20% complete point for rework. Normal rework is 3% of the units inspected. Units are again inspected when they are 70% complete. Rejected units are thrown away as spoiled. Normal spoilage is 1% of the units inspected. There were 52000 units inspected for rework and 800 units were rejected as spoilage. Ending work in process consists of 6000 units, 80% complete. Costs attached to opening inventory were Tk. 45,000 for material, Tk. 21,000 for labor and Tk. 50,000 for overheads; Current costs were material Tk. 225,000, labor Tk. 106,100 and Tk. 421,680 for overhead. Using weighted average method.

Required: (i) Find out the cost of (a) goods completed (b) ending work in process (c) abnormal rework and

(d) abnormal spoilage. (ii) Prepare a process account. [Marks: (5+8+7) = 20]

Page 40 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-III SUBJECT: 302. ADVANCED COST ACCOUNTING.

Q. No. 4. (a) What is the difference between Market Share variance and Market size variance? (b) XYZ, a business house, sells five different types of products, namely, A, B, C, D and E. The

budgeted and actual operating data of five products for the month of August 2011 were as follows: Product Selling Price/kg (Tk.) Variable Cost/kg (Tk.) Sales volume in kg

A 90.00 50.00 45,000 B 100.00 54.00 25,000 C 110.00 58.00 10,000 D 120.00 60.00 5,000 E 130.00 68.00 15,000

100,000 Actual for August 2011

Product Selling Price/kg Tk.) Variable Cost/kg (Tk.) Sales volume in kg A 90.00 52.00 57,600 B 104.00 58.00 18,000 C 110.00 56.00 9,600 D 120.00 68.00 13,200 E 140.00 80.00 21,600 120,000

XYZ focuses on contribution margin in its variance analysis. As you are working as Management Accountant for this business house, the management asks you to furnish some key variances on budgeted and actual sales for August 2011. Required: (i) Compute total sales –volume variance for August 2011. (ii) Compute total sales-quantity variance for August 2011. (iii) Compute total sales-mix variance for August 2011. (iv) Comment on your results in requirements 1, 2 & 3. [Marks: {4 + (4 x 4)} = 20] Q. No. 5. (a) “Managers should consider only additional revenues and separable costs when making

decisions about selling at split off or processing further.” Do you agree? Explain. (b) Why might mangers seeking a monthly bonus based on attaining a target operating income

prefer the sales method of accounting for byproducts rather than the production method? (c) The following details are available in respect of a 8-ton truck maintained by a transport company:

Cost of the truck Tk. 120,000 Estimated life 10 years Petrol, oil, grease, etc. Tk. 28 per trip Driver’s wages 300 p.m. Assistant’s wages 175 p.m. Repairs and maintenance 250 p.m. Insurance 3,600 per annum Tax 1,200 per annum General supervision charges 2,400 per annum

The truck carries goods to and from a town covering a distance of 50 miles. On the return journey, freight is available only up to 25% of capacity. Assuming that the truck runs, on an average, 25 days a month.

Required: (i) Operating cost per ton-mile; and (ii) Rate per ton per trip that the company should charge if it wants to make a profit of 20% on

freightage. [Marks: (4+4+8+4) = 20]

= THE END =

Page 41 of 54




SUBJECT: 303. CORPORATE LAWS, GOVERNANCE & SECRETARIAL PRACTICES.


� Answer FIVE questions taking any THREE from Part-A and TWO from Part-B including question no. 5 which is compulsory.

� Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

PART-A: CORPORATE LAWS Q. No. 1. (a) The object clause of a Public Ltd. Co. is to manufacture cement. The company started to

produce paint in addition to cement. Whether it is permission under law. Discuss. (b) What are the subjects normally in corporated in the memorandum & Articles of Association of a

Public Ltd. Company? [Marks: (10+10) = 20]

Q. No. 2. (a) What do you mean by Holding Company? Discuss with reference to any case law. (b) What are the functions of an issue manager of an intending Public Ltd. Co.?

[Marks: (10+10) = 20] Q. No. 3. (a) A Company willing to collect capital by issuing shares to the public. Discuss the steps to be

taken. (b) What are the advantages and disadvantages of collecting capital by issuing shares to the public?

[Marks: (10+10) = 20] Q. No. 4. (a) Who are the Sponsors Directors? Whether they can form and run a Company? Give comments. (b) What is the difference between MD & MA? (c) Who are the Independent Directors? Why they are appointed?

[Marks: (8+8+4) = 20] Q. No. 5. Write Short Note on any FOUR of the followings: (i) In Sider Trading. (ii) Right Share, Bonus Share and Stock Dividend. (iii) Book Building Method of valuation of share. (iv) Short selling of share. (v) Authorized Capital. (vi) Corporate Governance

[Marks: (5 x 4) = 20] PART-B: CORPORATE GOVERNANCE & SECRETARIAL PRACTICES

Q. No. 6. (a) What is a Right offer? What are procedures to offer right shares of a Limited company? (b) Is there any difference between a Statutory Meeting and an Extra Ordinary General Meeting? If

so discuss. [Marks: (10+10) = 20]

Q. No. 7. (a) How much SEC and the Government is responsible for the down fall of share market. (b) Briefly discuss the constitution of SEC.

[Marks: (10+10) = 20] Q. No. 8. (a) What are the Salient features of Secretarial practices of a Public Ltd. Co.?

(b) How a company is dissolved? What are the preferential claims at the time of dissolution of a company? [Marks: (10+10) = 20]

= THE END =

Page 42 of 54




SUBJECT: 303. CORPORATE LAWS, GOVERNANCE & SECRETARIAL PRACTICES.


� Answer FIVE questions taking any THREE from Part-A and TWO from Part-B including question no. 5 which is compulsory.

� Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

PART-A: CORPORATE LAWS

Q. No. 1. (a) The object clause of a Public Ltd. Co. is to manufacture cement. The company started to

produce paint in addition to cement. Whether it is permission under law. Discuss. (b) What are the subjects normally in corporated in the memorandum & Articles of Association of a

Public Ltd. Company? [Marks: (10+10) = 20]

Q. No. 2. (a) What do you mean by Holding Company? Discuss with reference to any case law. (b) What are the functions of an issue manager of an intending Public Ltd. Co.?

[Marks: (10+10) = 20] Q. No. 3. (a) A Company willing to collect capital by issuing shares to the public. Discuss the steps to be

taken. (b) What are the advantages and disadvantages of collecting capital by issuing shares to the public?

[Marks: (10+10) = 20] Q. No. 4. (a) Who are the Sponsors Directors? Whether they can form and run a Company? Give comments. (b) What is the difference between MD & MA? (c) Who are the Independent Directors? Why they are appointed?

[Marks: (8+8+4) = 20] Q. No. 5. Write Short Note on any FOUR of the followings: (i) In Sider Trading. (ii) Right Share, Bonus Share and Stock Dividend. (iii) Book Building Method of valuation of share. (iv) Short selling of share. (v) Authorized Capital. (vi) Corporate Governance

[Marks: (5 x 4) = 20]

PART-B: CORPORATE GOVERNANCE & SECRETARIAL PRACTICES Q. No. 6. (a) What is a Right offer? What are procedures to offer right shares of a Limited company? (b) Is there any difference between a Statutory Meeting and an Extra Ordinary General Meeting? If

so discuss. [Marks: (10+10) = 20]

Q. No. 7. (a) How much SEC and the Government is responsible for the down fall of share market. (b) Briefly discuss the constitution of SEC.

[Marks: (10+10) = 20] Q. No. 8. (a) What are the Salient features of Secretarial practices of a Public Ltd. Co.?

Page 43 of 54

(b) How a company is dissolved? What are the preferential claims at the time of dissolution of a company?

[Marks: (10+10) = 20] = THE END =

Page 44 of 54



PROFESSIONAL LEVEL-IV

SUBJECT: 401. FINANCIAL MANAGEMENT.



Q. No. 1. You are the finance director of Xylo Phone Ltd. a Bangladeshi Company that imports mainly from Europe and export to the US. Xylo Phone is partly financed by a Taka loan and usually hedges its foreign currency exposure by using the forward or money markets. Most customers are allowed 3 month’s credit. The company has recently sold equipment to a customer in the US for $ 2 million. The following information are available:

$/Tk. ∈/Tk. Exchange rates Spot rate 1.9600 1.4600 1 month forward rate 1.9580 1.4579

Bangladesh USA Europe Central bank base rate per annum 5.5% 4.25% 3.75%

A recent economic fore-cast suggested that annual inflation over the next 12 month in Europe is expected to be 1% while in the USA it is expected to be 2.7%. Required: Comment on the interest rate parity and the purchasing power parity methods for estimating future exchange rates and answer each of the following questions including appropriate calculations, where relevant to aid your discussion.

(i) As interest rates are higher in Bangladesh than Europe, should the euro be depreciating against the Taka, hence trading at a discount?

(ii) What 3 months dollar forward rate of exchange is implied by the information given, and therefore what Taka receipts can the Company expect in 3 months’ time from the US customer?

(iii) If the Company buys euros on the spot market as and when needed to pay for their imports rather than taking out forward contracts would it save them money?

(iv) Would a sensible policy be to buy euros on the spot market now and place them on deposit until Xylo Phone needs them?

(v) Would it be in Xylo Phone’s interests to borrow euros and pay off their Taka loan? Would this save money on interest payments?

[Marks: (4 x 5) = 20] Q. No. 2. ABC Corporation plans to expand assets by 50%: to finance the expansion, it is choosing between a straight 12 per cent debt issue and ordinary shares. Its balance sheet and income statement are shown below:

ABC Corporation Balance Sheet as on 31 December 2010

Liabilities Tk. Assets Tk.

11% Debentures 40,00,000 Total Assets 2,00,00,000

Ordinary Share Capital (10,00,000 shares of Tk. 10 each)

1,00,00,000

Retained 60,00,000

2,00,00,000 2,00,00,0000

Page 45 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 401. FINANCIAL MANAGEMENT.

Q. No. 2. (Contd..)

ABC Corporation Income Statement for the year ended 31 December 2010

Details Tk. Sales 6,00,00,000

Total costs(excluding interest) 5,40,00,000

Net Income before taxes(EBIT) 60,00,000

Interest on debentures @ 11% 4,40,000

Income before taxes 55,60,000

Taxes @ 50% 27,80,000

Profits after tax 27,80,000

EPS (Tk. 27,80,000/10,00,000) Tk. 2.78

Price/Earning ratio 7.5 times

Market price (7.5 x 2.78) Tk. 20.85

If ABC Corporation finances Tk. 1 crore expansion with debt, the rate of the incremental debt will be 12 per cent and the price/earning ratio of the ordinary shares will be 5 times. If the expansion is financed by equity, the new shares can be sold at Tk. 12 per share and the price/earnings ratio will remain at 7.5 times. Required: (a) Assuming that net income before interest and taxes (EBIT) is 10% of sales, calculate earnings

per share at sales levels of Tk 4 crores, when financing is with (i) ordinary shares, and (ii) debt. (b) At what level of earnings before interest and taxes(EBIT), after the new capital is acquired,

would earnings per share (EPS) be the same whether new funds are raised by issuing ordinary shares or raising debt?

(c) Using the p/e ratio, calculate the market value per share for each sales level for both the debt and equity financing.

[Marks: 20] Q. No. 3. The following statement and operating results of AB Ltd. revealed the following position as on 31 December, 2009:

1 Equity Share Capital (Tk. 100 per share fully paid) Tk. 200,000 2 Working Capital 1,56,000

3 Bank Overdraft 24,000

4 Current Ratio 2.5

5 Quick Ratio 1.5

6 Proprietary Ratio (Fixed Assets to Equity) 0.6 7 Gross Profit Ratio 20%

8 Stock Velocity 5 times

9 Debtors Velocity 1 month

10 Net Profit to Sales 10%

Expenses included depreciation Tk. 26,000. Closing stock was 25% higher than the opening stock. There were also free reserves brought forward from earlier years. Current assets included Stock, Debtors and Cash at Bank only. Current liabilities consisted of Bank Overdraft and Creditors. There were no Fictitious Assets. The following information was gathered from the books and records for the year ended 31 December, 2010:

Page 46 of 54


Q. No. 3. (Contd..)

(1) From 1st January 2010 the sales price was enhanced by 5%. Further, sales for the year were 10% higher in volume as compared to the previous year.

(2) Stock level was raised to Tk. 1,80,000 from January and maintained at that level through out the year.

(3) Percentage of gross profit on turnover has gone up from 20% to 25%.

(4) Depreciation on fixed assets to be provided at 10% on written down value method. Full year’s depreciation is to be provided on additions.

(5) Expenses outstanding on 31.12.2010 Tk. 5000.

(6) Ratio of net profit to sales 12 %

(7) Debtors velocity was same and creditors were Tk. 1,00,000.

(8) Bank Overdraft was fully discharged.

(9) Fixed assets acquired Tk. 40,000.

From the above information prepare: Income Statement for the year ended 31.12.2010 and Balance Sheet on that date.

[Marks: 20] Q. No. 4.

Assume today is 1 October 2011.

CIP is a manufacturing company and its board is evaluating a potential project which involves the launch of a new product that has a limited life of six years and which will require an initial investment in specialized machinery.

Project cash flows:

The specialized machinery will cost Tk. 6.5 million and will be installed and paid for on 1 January 2012. The Finance Manager has forecast that the net after tax cash flows associated with the new product will be as follows:

Year to 31 December 2012 2013 2014 2015 - 7

Net after tax cash flows(000) 750 950 1,400 2,100

The project will have no residual value as the specialized machinery cannot be used elsewhere or sold at the end of the project. The net after tax cash flows can be assumed to arise at the end of the year to which they relate.

Financing the project

The proposed investment is in a development region of the country and the local government is offering subsidized borrowing for 40% of the initial capital investment at an annual interest rate of 1% to encourage investment.

A further 20% of the capital required will be raised by bank borrowing, at an annual interest rate of 6%, which is the same as CIP’s pre-tax cost of debt.

The duration of the borrowings will match the duration of the investment with the full amount of the borrowings repayable at the end of the six year term. The corporate income tax rate is 30% and tax is payable or recoverable at the end of the year to which it relates. There are sufficient taxable profits within CIP to benefit in full from the tax relief available on interest payments. CIP has sufficient cash to fund the remaining 40% of the capital expenditure.

Page 47 of 54


Q. No. 4. (Contd..)

Other information:

• CIPs current market debt: equity ratio is 1:3.

• CIP’s current WACC (weighted average cost of capital), which is typically uses for investment appraisal, is 10%. The proposed project is in a market which is expected to be riskier than its normal operations and therefore some of the board of CIP is unsure whether 10% is an appropriate rate at which to appraise the investment. The Finance Manager has suggested that either a risk adjusted WACC should be used as a discount rate (based upon a cost of equity reflecting the business risk of the project and CIP’s existing gearing) in an NPV (net present value) evaluation or, alternatively, an APV (adjusted present value) approach should be adopted. He has identified PPP as a company that operates exclusively in the market of the proposed project. PPP’s equity beta is 1.95 and it has a current market debt: equity ratio of 1:4. The post-tax risk free rate of return and market rate of return are expected to be 4% and 9% respectively for the foreseeable future.

• Administrative costs of arranging the two borrowings are expected to be 1% of the amounts raised.

• Required: Calculate, as at 1 January 2012:

(i) The NPV of the project at CIP’s existing WACC of 10%. (ii) The NPV of the project at a risk adjusted WACC using PPP as a proxy company in respect

of business risk. (iii) The APV of the project.

[Marks: (3 +7+10) = 20] Q. No. 5.

(a) Consider the following data:

Sales Tk.10,000,000; Closing Inventory Tk.2,000,000;

Receivables Tk.657,534; Payables Tk.660,000;

Cost of goods sold Tk.6,800,000; beginning inventory nil.

Determine the days in cash conversion cycle.

(b) Super Sets Inc. sells goods only on credit, terms being 2/10n 30. Assume that 70% of customers take discounts and pay on day 10, while the other 30% pays on day 30. Find out the company’s average collection period. Also find out the receivables if the annual sales are 200,000 units at a price of Tk.198 per unit.

(c) From the following information determine the cash flow from operation; Net income Tk.500,000; depreciation Tk.60,000; loss on sale of land and building Tk.130,000; increases in accounts receivable Tk.45,000; decrease in accounts payable Tk.20,000.

(d) From the following calculate the market to book ratio and explain its importance and significance. Long-term assets Tk.2,000,000; Working capital Tk.80,000; long-term debit Tk.800,000; shares outstanding 1,000,000; market share price, July Tk.12 and November Tk.18.

[Marks: (4+6+5+5) = 20]

= THE END =

Page 48 of 54




SUBJECT: 402. STRATEGIC MANAGEMENT ACCOUNTING.



Q. No. 1.

Sonangol Limited currently subsidizes cafeteria services at its corporate head office at Banani for its 200 employees. Sonangol is in the process of reviewing the cafeteria services as cost cutting measures are needed throughout the organization to keep the prices of its products competitive. Two alternatives are being evaluated: (i) downsizing the cafeteria staff and offer a reduced menu or (ii) contract with an outside vendor.

The current cafeteria operation has four employees with a combined base annual salary of BDT 110,000 plus additional employees benefits at 25% of salary. The cafeteria operates 250 days each year, and the cost for utilities and equipment maintenance average BDT 30,000 annually. The daily sales include 100 entrées at BDT 4.00 each, 80 sandwiches or salads at an average price of BDT 3.00 each, plus an additional BDT 200 for beverages and desserts. The cost of all cafeteria supplies is 60% of revenue.

The plan for downsizing the current operations envisions retaining two of the current employees whose combined base annual salaries total BDT 65,000. An entrée would no longer be offered, and price of the remaining items would be increased slightly. Under this arrangement, Sonangol expects daily sales of 150 sandwiches or salads at a higher average price of BDT 3.60 each. The additional revenue of beverage and desserts is expected to increase to BDT 230 each day. Because of the elimination of the entrée, the cost of all cafeteria supplies is expected to decline to 50% of revenues. All other conditions of operation would remain the same. Sonangol is willing to continue to subsidize this reduced operation but will not spend more than 20% of the current subsidy.

A proposal has been received from Bongos Foods, an outside vendor who is willing to supply cafeteria services. Bongos has proposed to pay Sonangol BDT 1,000 per month for the use of the cafeteria and utilities. Sonangol would be expected to cover equipment repair costs. In addition, Bongos would pay Sonangol 4% of all revenue received above the breakeven point. This payment would be made at the end of the year. All other costs incurred by Bongos to supply the cafeteria services are variable and equal 75% of revenues. Bongos plans to charge BDT 5.00 for an entrée and the average price of sandwiches or salads would be BDT 4.00. All other daily sales are expected to average BDT 300. Bongos expects daily sales of 66 entrées and 94 sandwiches or salads.

Required:

(i) Determine whether the plan for downsizing the current cafeteria operation would be acceptable to Sonangol Limited. Please show your calculation.

(ii) Is the Bongos Foods proposal more advantages to Sonangol Limited than the downsizing plan? Please show your calculation.

[Marks: (12+13) = 25] Q. No. 2. Taliesin Ltd manufactures a range of ice-cream based confectionery products, which it sells to national supermarket chains which market the products under their own brand labels. The board of directors is committed to a policy of achieving growth. However because the company is a relatively small player within the industry the board of directors is focused solely upon internal development as opposed to growth by acquisition and has further agreed that it wishes to confine operations to the home market.

Page 49 of 54

CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 402. STRATEGIC MANAGEMENT ACCOUNTING.

Q. No. 2. (Cont’d ……)

Summary financial statements for the year ended 31 May 2011 together with prior year comparative figures are as follows:

Profit and Loss Account 2011 2010 Tk.’000 Tk.’000 Sales (note 1) 48,000 40,000 Cost of sales (note 2) 28,800 24,000 Gross Profit 19,200 16,000 Operating expenses 10,200 8,000 Interest 1,000 0 Depreciation 4,000 4,000 Net Profit 4,000 4,000

Balance Sheet 2011 2010 Tk.’000 Tk.’000

Fixed Assets (net book value) 42,000 40,000 Net Current Assets 24,000 12,000 Total Assets less Current Liabilities 66,000 52,000 Loan Finance 10,000 -------- Net Assets 56,000 52,000

Capital Employed: Ordinary Share Capital (Tk.1 per share) 30,000 30,000 Retained Earnings 26,000 22,000 Capital Employed 56,000 52,000

Other information relating to Taliesin Ltd is as follows:

(1) Sales information in respect of the years ended 31 May 2011 and 2010 is as follows:

2011 2010 Sales revenue Tk.’000 Tk.’000 1 June–30 November 33,300 26,000 1 December–31 May 14,700 14,000

(2) Cost of sales information: 2011 2010

Tk.’000 Tk.’000 Materials 9,360 7,800 Labour 4,620 4,200 Manufacturing overheads 14,820 12,000 Cost of sales 28,800 24,000

(3) Other information: 2011 2010

Number of employees: Permanent 204 200 Temporary* 288 240

Number of customers 5 6 Number of new products introduced** 6 5

Page 50 of 54


Q. No. 2. (Cont’d ……)

* Temporary employees are hired on a full-time basis between 1 June and 30 November in each

year. They were paid at the same rate as permanent employees. ** Six new product lines were launched during the year ended 31 May 2011. The manufacture of

each new product line required an investment in capital equipment of Tk.1 million.

Required:

(a) Using the above information, appraise the performance of Taliesin Ltd during the year ended 31 May 2011 and evaluate the extent to which the objective of growth has been achieved.

(b) Explain the major benefits of pursuing a policy of internal development. (c) Explain how the use of activity-based techniques may benefit Taliesin Ltd.

[Marks: (10+8+7) = 25] Q. No. 3.

Latent Company operates a number of call centers. The company is structured into three divisions, based on the type of service provided. All of the services are highly specialized and require staff to be highly trained. Once trained, staff can work in any of the divisions. The board of directors is considering the operational plan for the year to 30 September 2011, based on the following projected information:

Division A B C Tk Tk Tk

Revenue per call 15 22 19

Total revenue 6,220,800 5,702,400 9,357,120

Staff costs Note 1 2,846,560 1,773,600 3,383,040

Other costs Note 2 4,423,143 3,037,881 5,538,977

Profit/ (Loss) (1,048,903) 890,919 435,103

Note 1: Staff costs include call handling staff and supervisory staff. Each call handling employee deals with six calls per hour. Projected staff costs are based on the assumption that call handling staff are operational for 32 hours per week and for 45 weeks per year. Supervisory staffs are directly employed by each division and the related costs are fixed costs.

Note 2: These are fixed costs. The total for each division includes both directly attributable costs and an apportionment of central costs. Total central costs are Tk3·5 million, and are apportioned to divisions in proportion to revenue generated (the proportion being in percentage up to two decimals).

In advance of the next meeting, the Managing Director has circulated the memo shown below:

It has been suggested that as division A is loss making, it should be closed. This may be a

simplistic analysis. There may be arguments for retaining all of the divisions.

The human resource director has advised me that if we close the division, we will have to pay Tk100,000 to staff in severance costs.

We also need to ensure that we have contingency plans in place. Our projections are based on the assumption that we can obtain sufficient staff. However, it is possible that the supply of call handling staff will be in short supply in the short term, and could be 10% less than included in our projections. We can easily transfer call handling staff between divisions, so we should ensure that these employees are deployed to maximize profit. Another possibility is to use an agency to provide additional staff in the short term. I am advised that we can obtain additional staff for up to 14,400 hours at a cost of Tk40 per hour. If we decide to take up this option, we will be required to sign a contract for a specified number of hours in advance.

Page 51 of 54


Q. No. 3. (Cont’d ……)

Required:

Based on the information provided:

(a) Provide a financial assessment of the proposal to close division A. (b) Assuming that all divisions continue in operation and that the number of calls handled in each

division cannot be increased, recommend: (i) How existing staff should be deployed to maximize short-term profit if the 10%

restriction to call handling staff occurs; (ii) How many agency staff hours should be contracted in each division, and the financial

benefit that would be gained? [Marks: (10+(5+5) = 20]

Q. No. 4.

(a) Discuss why improving productivity is important for a firm that competes on a cost leadership strategy.

(b) Carlson Automotive Company, a US company, manufactures fuel-injection systems. It manufactured and sold 60,000 units in 2009 and 64,000 units in 2010 at $ 25 per unit. In 2009, the firm used 75,000 pounds of alloy TPX-45 at $7.20 per pound and spent 10,000 direct labor-hours at an hourly wage rate of $30. In 2010, the firm used 89,000 pounds of alloy TPx-45 at $6.80 per pound and spent 10,847 direct labor-hours at an hourly wage rate of $32. The total amount of all expenses remains the same at $450,000 each year. Jerry Olson, CEO, was disappointed that although the total sales increased in 2010, the $195,616 operating income earned in 2010 is only 93 percent of the amount earned in 2009, which was $210,000.

Required: Analyze the following:

(i) Partial operational productivity of the direct material and direct labor for both 2009 and 2010.

(ii) Partial financial productivity of the direct material and direct labor for both 2009 and 2010.

(iii) Detailed composition of partial financial productivity.

(iv) Total productivity for 2009 and 2010 as measured in both units and dollars. [Marks: {3+ (4x3)} = 15]

Q. No. 5. (a) State the reasons why the net present value investment appraisal method is preferred to other

investment appraisal methods such as payback return on capital employed and internal rate of return.

(b) What are the methods most commonly used in international taxation to determine a transfer price acceptable to tax authorities? Explain each method briefly.

(c) What is meant by arm’s length standard, and for what is it used? (d) Why is continuous quality improvement essential to achieve TQM and critical to an

organization’s success and competitive position? [Marks: (3+5+3+4) = 15]

= THE END =

Page 52 of 54

THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH CMA DECEMBER, 2011 EXAMINATION

PROFESSIONAL LEVEL-IV SUBJECT: 403. STRATEGIC MANAGEMENT AND ORGANIZATIONAL BEHAVIOUR.


� Answer any THREE questions from group “A” and TWO questions from group “B”. � All questions carry equal marks. � Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

GROUP-A: STRATEGIC MANAGEMENT (TOTAL MARKS-60) Q. No. 1.

(a) What do you mean by ‘strategic’ management?

(b) What are the purposes of SWOT analysis?

(c) How SWOT analysis can be made effective? [Marks: (6+7+7) = 20]

Q. No. 2.

(a) Name the five tasks of strategic management.

(b) Who performs these tasks?

(c) Explain the characteristics of the five task process. [Marks: (6+7+7) = 20]

Q. No. 3.

(a) How would you identify the threats of a company’s future profitability? (b) Describe the real value of SWOT analysis.

(c) Does benchmarking of company’s activities against rivals provide evidence of company’s cost competitiveness? [Marks: (6+7+7) = 20]

Q. No. 4.

(a) What do mean by competitive strategy?

(b) How is it decided upon for a company?

(c) Discuss the five generic competitive strategy of Professor Michel Porter. [Marks: (6+7+7) = 20]

Q. No. 5.

Write short notes on the followings:

(a) Strategic thinking.

(b) Strategic alliances.

(c) Emergent strategies.

(d) Generic strategies. [Marks: (4 x 5) = 20]

GROUP -B: ORGANIZATIONAL BEHAVIOUR (TOTAL MARKS-40) Q. No. 6.

(a) What is organizational behavior?

(b) What are the requirements of managers in terms of functions, roles and skills?

(c) Narrate the challenges and opportunities for managers in using organizational behavior concept. [Marks: (6+7+7) = 20]

Q. No. 7.

(a) What is meant by organizational culture? Clarify with examples.

(b) What is spiritual Organizational culture?

(c) Discuss how to create customer responsive culture. [Marks: (6+7+7) = 20]

Q. No. 8. (a) Explain how organizational behavior affects managerial performance? (b) Discuss the role of leadership on O. B. (Organizational Behaviour). (c) What techniques a manager can apply to avoid undesirable worker’s movement for wage increase?

[Marks: (6+7+7) = 20] Q. No. 9.

(a) What are the factors that determine personality? (b) How it is typically measured?

(c) Narrate the big five personality traits that predict work behavior. [Marks: (6+7+7) = 20]

= THE END =

Page 53 of 54




SUBJECT: 404. COST AND MANAGEMENT AUDITING.


� All questions are to be attempted. � Answer must be brief, relevant, neat and clean. � Start answering each question from a fresh sheet.

PART-A: COST AUDITING (MARKS-50)

Q. No. 1. (a) What is meant by the knowledge of the business and why it is important to the auditors? (b) How an auditor can obtain knowledge of the industry and the entity?

[Marks: (4+4) = 8] Q. No. 2. (a) For what purposes the Cost Auditor refers to financial records while conducting cost audit of an

entity? (b) Write a short note on the following:

(i) True and fair cost of production; (ii) Reconciliation of cost and financial accounts.

[Marks: (4+6) = 10] Q. No. 3. (a) As per requirements of Cost Audit Report Rules 1997, how following items to be reported in

the Annexure to the Cost Audit Report: (i) Raw materials, (ii) Wages and Salaries, (iii) Overhead expenses.

(b) As a Cost Auditor of a Jute Mill how would you ascertain following during the course of your audit: (i) Evaluate the operating and management efficiencies of the organization. (ii) Evaluate the operating and management efficiencies of the operation.

[Marks: {6+ (5 x 2)} = 16] Q. No. 4 Identify specific audit procedures that might have led to the detection of the following accounting irregularities carried out by an employee of a manufacturing company: (a) The falsification of inventory count sheets; (b) The bogus debit memos for accounts payable; (c) The recording of transshipping transactions as retail sales; (d) The inclusion of consigned merchandise in year-end inventory.

[Marks: (4 x 4) = 16]

PART-B: MANAGEMNT AUDITING (MARKS-50) Q. No. 5. (a) “Social audit is primarily based on recognition of social responsibility of corporate

management” – Explain. (b) How social audit can protect interest of (i) employees, (ii) society and (iii) customer?

[Marks: (4+6) = 10]

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CMA DECEMBER, 2011 EXAMINATION PROFESSIONAL LEVEL-IV SUBJECT: 404. COST AND MANAGEMENT AUDITING. Q. No. 6.

(a) What is Corporate Development Audit?

(b) A publicly listed company seems ‘going towards sickness’ due to mismanagement. The Board of Director appointed you as Management Auditor. How would you evaluate an in-depth study of the factors responsible for sickness?

[Marks: (4+12) = 16]

Q. No. 7.

(a) How many audits are performed for Software Configuration Management Audit (SCM)? Discuss.

(b) In process SCM audits are typically focused on either SCM processes or SCM baselines. Illustrate an example of a checklist for a baseline-focused in-process SCM audit and list possible objective evidence gathering techniques for each item.

[Marks: (4 + 8) = 12]

Q. No. 8.

You have been appointed as a Management Consultant of a large manufacturing company. You are asked to establish internal control system of the organization. Prepare a checklist along with a description how you would implement the internal control system for the following:

(i) Petty cash transactions;

(ii) Party bills payment through cheque;

(iii) Delivery of the products from the factory; and

(iv) Raw material issue for production. [Marks: (4 x 3) = 12]

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ICMA Questions Dec 2011