MGT401 Latest Midterm 2011 Subjective

Rana Abubakar Khan
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MGT401 LATEST MIDTERM 2011 SUBJECTIVE QUESTIONS SOLVED
1) differentiate between impairment and depreciation
Depreciation is the result of systematic allocation of the depreciable amount of an asset over its estimated useful life.
Depreciation for the accounting period is charged to net profit or loss for the period either directly or indirectly. However the
impairment in the value of any asset is a fall in the value of an asset due to many reasons beyond the control of the company,
so that its recoverable amount is now less than its carrying value in the balance sheet.
2) authorized and paid up capital difference
A maximum limit of the amount of capital that a company can issue is mentioned in the Memorandum and Articles of
Association of the company. Company cannot issue capital exceeding this amount unless it amends the memorandum and
articles of association. • Paid Up Capital: Paid up capital is amount that the company issues out of the authorized capital.
1
3) numerical of COST and NRV calculation and the treatment in balance sheet
two question of 5 5 marks
NRV calculationg: Net Realizable Value is a method of evaluating the value of the assets held by a company in the context
of inventory.
1. Add the total market value of all inventory held by the company. This is the amount the company could sell its assets for.
2. Add the costs associated with selling each asset the company possesses.
3. Subtract the costs from the total market value to get the NRV. Finishing the example, NRV = $35,000 - $12,500 = $22,500.
4) entries of assets and liability were given and we have to calculate the amount of capital
5) expected selling price of asset = 2500
expected cost of completion = 400
expected cost of selling = 100
required:
what value will be shown in balance sheet if carrying amount of asset is 1500?
what value will be shown in balance sheet if carrying amount of asset is 2500?
2) Q01: Differentiate between Benchmark Treatment and Allowed Alternative Treatment for the Borrowing cost
(3 marks)
Benchmark Treatment: The benchmark treatment of borrowing costs is the most straightforward and prudent. The
accounting policy adopted for borrowing costs should be disclosed Under the benchmark treatment of IAS 23 borrowing cost
should be treated as expense in the period they are incurred regardless of the of how the loan is used.
3) Allowed alternative Treatment: Borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset should be capitalized as cost of the asset”.
Q02: Write down the types of stocks for Trading and Manufacturing concerns (3marks)
Different types of business have different types of Inventories e.g. • Trading concerns Stock in Trade (Finished inventory
only) • Manufacturing Concerns Raw Material Work in Process Finished Goods
Q03: Trade Debts considered as good_ unsecured 11000 Rs
Trade Debts considered doubtful _unsecured 41000 Rs
Provision for doubtful debts 41000 Rs
Then:
You are required to show the above information in Note to the account of Trade (3 marks)
2
Q04: Define Current Liabilities. What heads should be included in Current Liabilities? (5 marks)
Current Liabilities: Current Liabilities are all those liabilities that are expected to be paid or will become due for payment
within 12 months from the balance sheet date. • Current Liabilities may include any or all of the following heads: Trade
and other payables, Interest, profit, return or mark-up accrued on loans and other payables Short term
borrowings Current portion of long term borrowings Current portion of long term murabaha Provision for taxation
--
short qsns = 5
1. Define Associate & Influence W.r.t IAS-28 =3 marks
Associate: • An enterprise in which an investor has significant influence and which is neither a subsidiary nor a joint venture
of the investor.
Associated Companies – IAS 28 • IAS 28 defines An Associate through identification of influence,
2. if = 3 marks
Balance (jan 01, 2008) 100units @ Rs 800 per unit
jan 1 received 100 units @ 9
jan 3 issued 100
calculate value of Inventory on jan 3 2008 using weighted average method
3. Write down the components of financial statements w.r.t IASB's frame work. = 3 marks
The framework deals with:
a) The objective of financial statements.
The objective of the financial statements is to provide information about the financial position, performance and changes in
financial position of an entity that is useful to a wide range of users in making economic decisions.
3
4. Define long term liabilities & which heads are included under it. = 5 marks
Long Term Liabilities: Long Term Liabilities are all those liabilities that will become due for payment after a period of 12
months from the balance sheet date. • Long Term Liabilities may include any or all of the following heads: Long term
financing Debentures Liabilities against assets subject to finance lease; Long term modaraba; Long term
deposits; and Deferred liabilities.
5. Assets costing Rs 40,000
useful life = 7 yrs
residual value = 5000
calculated depriciation using straight line method
2nd yr
residual value = 10000
remaining useful life = 5 yrs
Compute WDV at end of 2nd yr.
Example how to solve
SL = (Cost - Salvage Value) / Life

Example: A table is purchased for $567.65. The expected life is 5 years. There is a $50.00 salvage value.
Calculate the annual depreciation as follows:
(567.65 - 50.00) / 5 = 103.53

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Rana Abubakar Khan

If you want to learn computer programming then contact with me

JOIN FB GROUP FOR VU HELP

Virtual University of Pakistan

Leading Student's Social Network Worldwide!

1) differentiate between impairment and depreciation

2) authorized and paid up capital difference

1. Define Associate & Influence W.r.t IAS-28 =3 marks

Associated Companies – IAS 28 • IAS 28 defines An Associate through identification of influence,

Balance (jan 01, 2008) 100units @ Rs 800 per unit

jan 1 received 100 units @ 9

jan 3 issued 100

calculate value of Inventory on jan 3 2008 using weighted average method

The framework deals with:

a) The objective of financial statements.

5. Assets costing Rs 40,000

useful life = 7 yrs

residual value = 5000

calculated depriciation using straight line method

residual value = 10000

remaining useful life = 5 yrs

Compute WDV at end of 2nd yr.

Example how to solve

SL = (Cost - Salvage Value) / Life

Calculate the annual depreciation as follows:

(567.65 - 50.00) / 5 = 103.53

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