CMA JANUARY 2022 EXAMINATION

Foundation Level
FR111.Fundamentals of Financial Accounting
Model Solution
Solution of the Q. No. 1
Question No Answer Question No Answer Question No Answer
(i) (c) (vi) (a) (xi) (d)
(ii) (b) (vii) (c) (xii) (b)
(iii) (b) (viii) (b) (xiii) (c)
(iv) (d) (ix) (a) (xiv) (e)
(v) (d) (x) (e) (xv) (d)

Solution of the Q. No. 2

(a) False. Sales discount is a contra revenue account.
(b) False. A balance sheet reports the assets, liabilities, and owner’s equity at a specific date.
(c) False. The worksheet is essentially a working tool of the accountant.
(d) True
(e) True

Solution of the Q. No. 3

1(e) 2(h) 3(l) 4(k) 5(b)

Solution of the Q. No. 4

(a) Closing value of Inventories at the year-end
Item Cost(Tk.) NRV(Tk.) Lower of cost and NRV
1 36 40 36
2 28 24 24
3 46 48 46
Total Value of three items 106
(b)
i. Unequal totals. The total debits would be Tk. 27 more than the total credits.
ii. Equal balance. However, both Accounts Receivable (an asset account) and Accounts Payable
(a liability account) would be overstated by Tk. 150.
iii. Equal balance. However, both accounts would be incorrect. Cash would be overstated by Tk.
378, and Office Supplies would be understated by Tk. 378.
iv. Equal balance. However, an error has been made by debiting the wrong asset. Therefore,
Supplies would be overstated by Tk. 450, and Equipment would be understated by Tk. 450.

(c)
(i)
Dec. 31 Commission Revenue ................................. 92,000
Income Summary ................................. 92,000
Dec. 31 Income Summary .......................................... 7,800
Interest Expense................................... 7,800
(ii)
Jan. 1 Commission Revenue ................................. 4,500
Accounts Receivable.......................... 4,500
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Jan. 1 Interest Payable............................................. 1,500
Interest Expense................................... 1,500
(iii)
Jan. 10 Cash................................................................4,500
Commission Revenue................................ 4,500
Jan. 15 Interest Expense.............................................2,500
Cash................................................................. 2,500

Solution of the Q. No. 5

(i) Adjusting Entries

(i) Supplies Expenses Dr. 1250
Supplies Cr. 1250
(ii) Utilities Expenses Dr. 150
Accounts Payable Cr. 150
(iii) Insurance Expenses Dr. 250
Prepaid Insurance Cr. 250
(iv) Unearned Service Revenue Dr. 2,800
Service Revenue Cr. 2,800
(v) Salaries Expenses Dr. 1900
Salaries and wages payable Cr. 1900
(vi) Depreciation Expenses Dr. 250
Accumulated Depreciation: Equipment Cr. 250
(vii) Accounts Receivable Dr. 1200
Service Revenue Cr. 1200

ii. Adjusted Trial Balance at June 30, 2020

Accounts Debit (tk.) Credit (tk.)
Cash 8000
Accounts Receivable [6000+1200] 7200
Supplies [2000-1250] 750
Prepaid Insurance [3000-250] 2750
Equipment 15000
Accounts Payable [4500+150] 4650
Unearned Service Revenue [4000-2800] 1200
Owner’s Capital 22600
Service Revenue [7900+2800+1200] 11900
Salaries and Wages Expense [4000+1900] 5900
Rent Expense 1000
Supplies Expenses 1250
Utility Expenses 150
Insurance Expenses 250
Salary and Wages Payable 1900
Depreciation Expenses 250
Accumulated Depreciation: Equipment 250
Total 42500 42500
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iii. Classified Balance sheet as at June 30, 2020
Particulars Tk. Tk.
Assets :
Current Assets:
Cash 8000
Accounts Receivable 7200
Supplies 750
Prepaid Insurance 2750
Total Current Assets 18700
Non-Current Assets:
Equipment 15000
[-] Acc. Depreciation (250) 14,750
Total Non-current Assets 14750
Total Assets 33450
Liabilities:
Current Liabilities:
Accounts Payable [4500+150] 4650
Unearned Service Revenue [4000-2800] 1200
Salaries and Wages payable 1900
Total Current Liabilities 7,750
Non-Current Liabilities: 00
Total Liabilities 7,750
Owner’s Capital 22,600
[+] Profit during year [Note] 3100 25700
Total Stockholders’ Equity 25700
Total Liabilities and Stockholder equity 33,450

Note: Profit during year

Service Revenue 11,900
Rent expenses 1000
Salaries and wages expenses 5900
Utilities Expenses 150
Insurance Expenses 250
Depreciation Expenses 250
Supplies Expenses 1250 (8,800)
Profit During the year 3,100

Solution of the Q. No. 6

(a) Bahar Lotus is correct. A single ratio by itself may not be very meaningful and is best interpreted
by comparison with: (1) past ratios of the same company, (2) ratios of other companies, or (3)
industry norms or predetermined standards. In addition, other ratios of the enterprise are
necessary to determine overall financial well-being.

(b) (i)
MULDUR CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2020
Cash flows from operating activities
Net income ............................................................. Tk. 18,300)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense................................ Tk. 5,200* )
Loss on sale of equipment ...................... 5,500**
Increase in accounts payable................. 3,500)
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Increase in accounts receivable ............ (2,900) 11,300)
Net cash provided by operating activities....... 29,600)

Cash flows from investing activities

Sale of equipment................................................ 3,300)
Purchase of investments .................................. (4,000)
Net cash used by investing activities............... (700)

Cash flows from financing activities

Issuance of common stock .............................. Tk. 5,000
Payment of dividends......................................... (16,400)
Retirement of bonds ........................................... (20,000)
Net cash used by financing activities............... (31,400)

Net increase in cash ............................................... (2,500))

Cash at beginning of period................................. 17,700
Cash at end of period ............................................. Tk. 15,200
========
*[Tk.14,000 – (Tk.10,000 – Tk.1,200)]
**[Tk.3,300 – (Tk.10,000 – Tk.1,200)]

(ii) Tk. 29,600 – Tk. 0 – Tk.16,400 = Tk.13,200

Solution of the Q. No. 7

(a) (i)
FAMILY VIDEO COMPANY
Bank Reconciliation
July 31
Cash balance per bank statement............................................ Tk. 7,263
Add: Deposits in transit............................................................. 1,500
8,763
Less: Outstanding checks ......................................................... 591
Adjusted cash balance per bank............................................... Tk. 8,172

Cash balance per books .............................................................. Tk. 7,284

Add: Collection of note receivable
(Tk.900 plus accrued interest Tk.36,
less collection fee Tk.20) ................................................... 916
8,200
Less: Bank service charge ........................................................ 28
Adjusted cash balance per books............................................ Tk. 8,172

(ii)
July 31 Cash...........................................................................916
Miscellaneous Expense ........................................... 20
Notes Receivable............................................... 900
Interest Revenue................................................ 36
31 Miscellaneous Expense ........................................... 28
Cash....................................................................... 28

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(b)

Date BMX (Seller) SNK (Buyer)

May Accounts Receivable-SNK . 1,500 Merchandise Inventory . . . . .1,500
4 Sales . . . . . . . . . . . . . . . . . . . . . . 1,500 Accounts Payable-BMX . . . . . . 1,500
Cost of Goods Sold . . . . . . . . 900
Merchandise Inventory . . . . . . . . 900
6 No entry. Merchandise Inventory . . . . . 30
Cash . . . . . . . . . . . . . . . . . . . . . . 30
8 Accounts Receivable-SNK . 1,000 Merchandise Inventory . . . . .1,000
Sales . . . . . . . . . . . . . . . . . . . . . . 1,000 Accounts Payable-BMX . . . . . . 1,000
Cost of Goods Sold . . . . . . . .700
Merchandise Inventory . . . . . . . . 700
10 Delivery Expense . . . . . . . . . .50 No entry.
Cash . . . . . . . . . . . . . . . . . . . . . . 50

16 Sales Returns & Allowances .200 Accounts Payable-BMX 200

Accounts Receivable—SNK . . . . 200 Merchandise Inventory . . . . . . . . . 200
Merchandise Inventory . . . . . 140
Cost of Goods Sold . . . . . . . . . . 140

18 Cash . . . . . . . . . . . . . . . . . . . . 800 Accounts Payable—BMX . . .800

Accounts Receivable—SNK . . . . . 800 Cash . . . . . . . . . . . . . . . . . . . . . . . 800

21 Accounts Receivable—SNK . . . . . . . Merchandise Inventory . . . . . . . . . . . 2,500

2,400 Accounts Payable—BMX . . . . . . 2,500
Sales . . . . . . . . . . . . . . . . . . . . . . 2,400
Accounts Receivable—SNK . . . . . . . 100
Cash . . . . . . . . . . . . . . . . . . . . . . 100
Cost of Goods Sold . . . . . . . . . . . . . .
1,440
Merchandise Inventory . . . . . . . . 1,440
31 Cash . . . . . . . . . . . . . . . . . . 2,452 Accounts Payable—BMX . .2,500
Sales Discounts . . . . . . . . . . . . 48 Merchandise Inventory . . . . . . . 48
Accounts Receivable—SNK . . . . . 2,500 Cash . . . . . . . . . . . . . . . . . . . . . . 2,452

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