BBA-2009

1. (a) What are the four basic assumptions that underline the financial accounting structure? (b) What are the primary objectives of financial report? 2. (a) What are the general methods used for calculating deprecation? What is the basic difference between straight line method & activity method? (b) Mention the factors to be considered in calculating the depletion base? 3. (a) Provide two examples of assets that do not qualify for interest capitalization. (b) What interest rate should be used in determining the amount of interest to be capitalized? How should the amount of interest to be capitalized be determined? 4. (a) Explain the difference between the installments sales method & cost recovery method of revenue recognitions. (b) What are the three alternative accounting methods available to a seller that is exposed to continued risk of ownership through return of the product? 5. What are the methods of recording bed debts & which one is the best? Why? 6. (a) What are the two main characteristics of intangible assets? (b) Explain how, losses on impaired intangible assets should be reported in income? 7. (a) What are the differences between operating lease & capital lease from the viewpoint of the lessee? (b) if an operating lease requires the payment of uneven rental amount over its life, how should the lessee recogni9ze rental expense?

8. (a) ABC Corp. factors TK. 300000 of accounts receivable with XYZ Finance Corporation on a without recourse basis o n July 1,2007. The receivables records are transferred to XYZ Finance, which will receive the collections. XYZ Finance assesses a finance charge of 1% of the amount of accounts receivable & retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, & allowances. The transaction is to be recorded as a sale. Required: 1. Prepare the Journal Entry on July 1, 2007, for ABC Corporation to record the sale of receivables without recourse.

2. Prepare the Journal Entry on July 1, 2007, for XYZ Finance Corporation to rescore the purchase of receivables without recourse. (b) Spike Corporation operates in an industry that has a high rate of bad debit. Before any year end adjustments, the balance I n Spikes Accounts Receivable Account was TK. 555000 & the Allowance for Doubtful accounts had a credit balance of Tk. 35000. the year end balance reported in the balance sheet for the Allowance for Doubtful Account will be based on the aging schedule shown below:Days Account Outstanding Less than 16 days Between 16 and 30 day Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days Amount 300000 100000 80000 40000 20000 15000 Probability of Collection 0.98 0.90 0.85 0.75 0.40 0.00

Required;1) What is the appropriate balance for the Allowance for Doubtful Accounts at year-end? 2) Show how accounts receivable would be presented one the balance sheet. 3) What is the dollar effect of the year-end bed debt adjustment on the before tax income? 9. (a) What is an amortization intangible asset? What are the factors to be considered in estimating the useful life of an intangible asset? (b) Jackson Company has provided information on an intangible asset as follows;A patent was purchased from Brookline Inc. for tk 2000000 on January 1, 2003. Jackson estimated the remaining useful life of the patent to be 10 years. The patent was carried in Brooklines accounting records at a net book value of tk 2000000 when Brooklines sold it to Jackson. During 2004 a franchise was purchased from Reagan Company for tk. 480000. I n addition, 5% of revenue from the franchise must paid to Reagan. Revenue from the franchise for 2004 was 2500000. Jackson estimates the useful life of the franchise to be 10 years and takes a full years amortization in the year of purchase. Jackson incurred research and development costs in 2004 as follow: Materials and equipment Personnel Indirect cost Taka 2, 42,000 1, 89,000 1, 02,000

Jackson estimates that these costs will be recouped by December 31, 2007. The materials and equipment purchased have no alternative uses. On January 1, 2004 because of recent events in the field, Jackson estimates that the remaining life of the patent purchased on January 1, 2003 is only 5 years from January 1, 2004. Instruction : 1) Prepare a schedule showing the intangibles section of Jacksons balance sheet at December 31, 2004. Show supporting computation in good form. 2) Prepare a schedule showing the income statement effect for the year ended December 31,2004, as a result of the facts above. Show supporting computations in good form 3) 10. (a) Identify and briefly describe the two methods generally employed to account for the cash received in situations where the collection of the sales price is not a reasonably assured. (b) In 2004 Justin Construction Company agreed to construct an apartment building at a price of Tk. 10,00,000. the information relating to the costs and billings for this contract is shown below :-

Cost incurred to date Estimated cost yet to be incurred Customer billings to date Collections of billings to date

2, 80,000 5, 20,000 1, 50,000 1, 20,000

6, 00,000 2, 00,000 4, 00,000 3, 20,000

7, 85,000

10, 00,000 9, 40,000

Instructions: 1) Assuming that the percentage-of-completion method is used (a) compute the amount the gross profit to recognized in 2004 and 2005 and (b) prepare journal entries for 2005. 2) for 2005, show hoe the details related to this construction contract would be disclosed on the balance sheet and on the income statement.

11.

(a) Maxwell Company purchased equipment for Tk. 212,000 on October 1, 2007. it is estimated that the equipment will have a useful life of 8 years & salvage value of Tk. 12,000. Estimated production is 40,000 unites &estimated working hours 20,000. During 2007, Maxwell used the equipment for 525 hours and the equipment produces 1,000 unite.

Required: Compute depreciation expense under each of the following methods. Maxwell is on a calendar year basis ending December 31. 1) 2) 3) 4) Straight-line method for 2007. Activity method (working hours) for 2007. Double declining balance method for 2008. Sum of the years digits method for 2009.

(b) Aleide Mining Company purchased land on February 1, 2004, at a cost of tk 1, 19,000. it estimated that a total of 60,000 tons of mineral was available for mining. After it has removed all the natural resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the cost of this restoration at tk 90,000. It believes it will be able to sell the property afterwards for tk 100,000. it incurred development cost of tk 200,000 before it was able to do any mining. In 2004 resources removed totaled 30,000 tons. The company sold 22,000 tons, Required: compute the following information for 2004. 1) Per unit materials cost. 2) Total materials cost of December 31, 2004, inventory. 3) Total materials cost in cost of goods sold at December 31, 2004.

12. Phonix Leasing Company (Lessor) signs an agreement on January 01, 2005, to lease equipment to IIatil Furniture Company (Leessee). The following information relates to this agreement :1) The term of the non-cancelable lease is 5 years with on renewal option: the asset is revert to the lessor at the end of the term. 2) The fair value of the asset at January 01, 2005 is tk 100,000 with on residual value. The equipment has an estimated economic life of 5 years. 3) Lessee Company pays all executors cost directly to third parties expect for the property taxes of tk 2,000 per year which are included in the annual payments to the lessor.

4) The agreement requires equal annual rental payments of tk. 25, 981.62 to the lessor , beginning on January 01, 2005. 5) The lessees incremental borrowing rate is 11%. The lessors implicit rate is 10% and the lessee knows this fact. 6) Lessee Company uses the straight-line depreciation method for all equipment. Required: 1) Prepare an amortization schedule that would be suitable for the lessee for the lease term. 2) Prepare journal entries for the lessee for 2005 and 2006 to record the lease agreement, the lease payments and all expenses related to this lease. Assume the lessees annual accounting period ends on December 31.