CMA JANUARY 2023 EXAMINATION

INTERMEDIATE LEVEL I
INTERMEDIATE FINANCIAL ACCOUNTING

Course Code : FR222 Total Marks : 100

Reading Time : 15 minutes Writing Time : 180 minutes

Instructions to Candidates
 You MUST NOT write anything during the reading time.
 Youshould attempt ALLquestions.
 Answers should be properly structured and relevant.
 Carefully read ALL the requirements and sub-questions before attempting a specific
question.
 ALL answers must be written in the answer book.
 AVOID WRITING/MARKING on the question paper at any time which may cause disciplinary
action.
 Start answering each question from a fresh sheet.
 Answers should be clearly numbered with the sub-question number.

Allowable Materials
 Writing Stationaries
 Non-programmable Calculator

Assessment Structure
Sub- Expected Time
Marks
question Required
Question 1 Multiple-choice questions 10 10 20 minutes
Section
Question 2 Modified True/False 5 5 10 minutes
A
Question 3 Matching 5 5 10 minutes
Question 4 Essay/Computational/Case 2 20 32.50 minutes
Section Question 5 Essay/Computational/Case 3 20 32.50 minutes
B Question 6 Essay/Computational/Case 3 20 32.50 minutes
Question 7 Essay/Computational/Case - 20 32.50 minutes
Revision 10 minutes
Total 100 180 minutes

RESTRICTED USE
This paper MUST NOT BE REMOVED from the examination venue

Do not turn the page until instructed

 SECTION A [20 MARKS]
THERE ARE 3 (THREE) QUESTIONS IN THIS SECTION. ANSWER ALL THE QUESTIONS IN
THE ANSWER SCRIPT FOLLOWING THE EXAMPLE PROVIDED FOR THE SPECIFIC
QUESTION.
QUESTION 1 [10 × 1 = 10 MARKS]
There are ten (10) multiple-choice questions with five options. Pick the option that best explains
the given question. Write your answer on the answer script [DO NOT PUT ANY MARK ON THE
QUESTION PAPER]. Follow the example given below in proving your answer.

Example:
(i) ICMAB stands for the –
(a) Institute of Cost Management Accounting of Bangladesh
(b) Institute of Cost and Management Accountants of Bangladesh
(c) Institute for Cost Managers and Accounting of Bangladesh
(d) Institute of Cost Management Accountants of Bangladesh
(e) Industrial Cost Management Accountants of Bangladesh
Answer: (i) (b)

(i) According to the IASB’s Conceptional Framework, which of the following are enhancing
qualitative characteristics?
(a) Comparability, understandability, timeliness, verifiability.
(b) Consistency, prudence, measurability, verifiability.
(c) Consistency, reliability, measurability, timeliness.
(d) Materiality, understandability, measurability, reliability.
(e) Relevant, Consistency, Prudence, Neutrality.

(ii) What should be disclosed a note to the financial statements in respect of material non-
adjusting event?
(a) The nature of the event and the estimated financial effort.
(b) A letter from solicitor.
(c) Nothing.
(d) Where the event took place.
(e) Everything

(iii) Prime Plc is a VAT registered retailer. All transactions attract VAT at the rate of 20%. For the
year to 30 June 20X7, Prime made purchases of Tk.69,600 including VAT and made sales of
Tk.89,400 excluding VAT. There was no change in the figures of opening and closing
inventory in the statement of financial position as at 30 June 20X6 and 20X7.
Required:
What was Prime plc’s gross profit for the year ended 30 June 20X7?
(a) Tk.19,800
(b) Tk.14,900
(c) Tk.31,400
(d) Tk.16,500
(e) Tk.15,500

CMA January 2023 Examination, FR222 [Page 2 of 11]

(iv) Meghna company purchases a machine for Tk.15,000 on 1 January 20X1. After incurring
transportation costs of Tk.1,300 and spending Tk.2,500 on installing the machine it breaks
down and costs Tk.600 to repair. Depreciation is charged at 10% per annum.
Required:
At what carrying amount will the machine be presented in Meghna company’s statement of
financial position at 31 December 20X1?
(a) Tk.13,500
(b) Tk.14,670
(c) Tk.16,920
(d) Tk.18,800
(e) Tk.19,200

(v) On 1 September 20X8, Fareast had inventory of Tk.3,80,000. During the month, sales
totaled Tk.6,50,000. On 30 September 20X8 a fire destroyed some of the inventory. The
undamaged goods were valued at Tk.2,20,000. The business makes all sales with a
standard gross profit margin of 30%.
Based upon this information, what is the cost of the inventory destroyed in the fire?
(a) Tk.1,85,000
(b) Tk.1,40,000
(c) Tk.4,05,000
(d) Tk.3,60,000
(e) Tk.380,000

(vi) It is the application of a new accounting policy to transactions, other events and conditions as
if that policy had always been applied.
(a) Prospective application
(b) Retrospective application
(c) Retrospective restatement
(d) Prospective restatement
(e) None of the above

(vii) Which of the following would not be included in the cost of an item of property, plant and
equipment?
(a) Delivery charges
(b) Testing costs
(c) Refundable value added tax
(d) Site preparation cost
(e) installation charges

(viii) A company is currently accounting for a construction contract. The works certified at the
year ended is Tk. 24,000 and cost of sales has been calculated as Tk. 18,000. Cost incurred
to date amount to Tk. 20,000 and Tk. 25,000 been invoiced to the customer. What is the
amount due to/from customers that should be recorded Statement of Financial Position in
relation to this construction contract?
(a) 1,000
(b) 6,000
(c) 5,000
(d) 2,000
(e) 7,000

CMA January 2023 Examination, FR222 [Page 3 of 11]

(ix) Goodwill acquired in a business combination should subsequently be measured:
(a) At cost
(b) At cost less accumulated amortization
(c) At cost less accumulated impairment losses
(d) At cost less accumulated amortisation and less accumulated impairment losses
(e) None of the above.

(ix) When disclosing a related party transaction, which of the following terms must be disclosed?
(A) A description of the relationship with the related party.
(B) A description of the transaction.
(C) Details of the amount involved
(D) Details of the balance outstanding at the year end
(a) A,B, and D
(b) A,B,C and D
(c) A,,C and D
(d) A, and D
(e) B,C and D

QUESTION 2 [5 × 1 = 5 MARKS]
There are five (5) statements given under the question. Identify the statements as True or False. If
the statement is false, rewrite the statement on the answer script to make it ‘True’. Reasoning is
NOT required. Follow the example given below in proving your answer.

Example:
(a) ICMAB stands for the Industrial Cost Management and Accounting of Bangladesh.

Answer:
(a) False. ICMAB stands for the Institute of Cost and Management Accountants of
Bangladesh.

Note:
 You will not get any mark if you simply rewrite as ICMAB does not stand for the
Industrial Cost Management Accountants of Bangladesh.
 If the statement is true, you need NOT to rewrite the statement rather only mention that
the statement is True.

(a) The non- current asset register is a schedule of panned maintenance of not-current assets
for use by the plant engineer.
(b) If an entity uses the periodic weighted average cost method to value closing inventory, unit
average cost is calculated once at the end of an accounting period.
(c) When comparing a statement of cash flows, one prepared using the direct method and the
other prepared using the indirect method, the only differences between the two statements
relate to the presentation of items within ‘cash flows from operating activities.
(d) An increase in return on Capital could be caused by an increase in long-term loans taken out
by the business during the year.
(e) Whether a debit or a credit to an account increases the account's balance or decreases the
account's balance depends on the type of account.

CMA January 2023 Examination, FR222 [Page 4 of 11]

QUESTION 3 [5 × 1 = 5 MARKS]
Match the items of column A with the most suitable items of column B. Match only one item of
column A with one item of column B. Write your answer on the answer script. Follow the example
given below in proving your answer.

Example:

Column A Column B
1. ICMAB (a) Professional accountancy body
(b) University

Answer: 1 (a)

Column A Column B
1) Define which transaction should or should (a) Faithful representation
not be reported in books of the business. (b) Historical cost
2) Usual basis of recording assets. (c) Timeliness
3) It supports verifiable evidence for the (d) Accounting entity
occurrence of any business transactions. (e) Prudence
4) Use of a common unit of measurement for (f) Verifiability
reporting financial activity
(g) Money Measurement
5) Profit should not be overstated and losses
(h) Constraint
should not be understated
(i) Prudence
(j) Confirmatory value
(k) Objectivity

END OF SECTION A

CMA January 2023 Examination, FR222 [Page 5 of 11]

 SECTION B [80 MARKS]
THERE ARE 4 (FOUR) QUESTIONS IN THIS SECTION. ANSWER ALL THE QUESTIONS IN
THE ANSWER SCRIPT. SHOW ALL RELEVANT COMPUTATION.

QUESTION 4 [(2+2)+7+9 = 20 MARKS]

(a) A conceptual framework of accounting is a coherent system of interrelated objectives and
fundamental principles, which prescribes the nature, function and limits of financial
accounting and financial statements.
Required:
(i) Outline five (5) objectives the IASB’s conceptual framework of accounting seeks to
achieve.
(ii) State the main contents of the IASB’s conceptual framework for financial reporting.
(b) The following information was taken from the financial records of the W Company.
1. The board of directors declared cash dividends totaling Tk.240,000 during the current
year. The comparative balance sheet indicates dividends payable of Tk.50,000 at the
beginning of the year and Tk.60,000 at the endof the year.
2. Office equipment, which had cost Tk.245,000 and on which accumulated depreciation
totaled Tk.95,000 on the date of sale, was sold for Tk.130,000 during the year.
3. Delivery equipment, which had cost Tk.39,000 and on which accumulated depreciation
totaled Tk.23,000 on the date of sale, was sold for Tk.20,000 during the year.
4. The company issued 5,000 shares of Tk.10 par Common Stock for Tk.50 pershare.
5. The company purchased land with a mortgage note payable.
6. Depreciation expense reported on the income statement was Tk.55,000.
7. Bonds Payable of Tk.60,000 were retired.
Required:
For each of the situations indicate the items to be reported on the statement of cash flows,
the section of the statement in which the item would appear and the amount to be reported.

(c) The following trial balance has been extracted from the books of Fareast Ltd. as at 31 March
20X8
Taka Taka
Administration expenses 2,10,000
Ordinary Share Capital 6,00,000
Trade receivables 4,70,000
Bank overdraft 80,000
Provision for warranty costs 2,05,000
Distribution costs 4,20,000
Non-current asset investments 5,60,000
Investment income 75,000
Finance cost 10,000
Freehold land and buildings at cost 2,00,000
Plant and equipment:
At cost 5,50,000
Accumulated depreciation (at 31 March 20X8) 2,20,000
Retained earnings (at 1 April 20X7) 1,80,000
Purchases 9,60,000
Inventories (at 1 April 20X7) 1,50,000
Trade payables 2,60,000
Revenue 20,10,000
20X7 final dividend paid 35,000
20X8 interim dividend paid 65,000
36,30,000 36,30,000

CMA January 2023 Examination, FR222 [Page 6 of 11]

Additional Information:
(a) Inventories at 31 March 20X8 were valued at Tk.1,60,000.
(b) The following items ae already include in the balances listed in this trial balance.
Distribution costs Administration expenses
Tk. Tk.
Depreciation charge for the year 27,000 5,000
Employee benefits 1,50,000 80,000
(i) The income tax charge for year is estimated at Tk. 74,000.
(ii) The warranty provision is to be increased by Tk.16,000, charged to administrative expenses.
(iii) Staff bonuses totaling Tk.40,000 are to be provided for, charged equally to distribution costs
and administrative expenses.
(iv) In May 20X8 a final dividend for 20X8 of 10p per share was proposed on each of the
company’s 6,00,000 ordinary shares.
Required:
Prepare Fareast Ltd.’s statement of profit or loss and statement of changes in equity for the year to
31 March 20X8, a statement of financial position at that date and notes in accordance with the
requirements of IAS 1 (revised) presentation of Financial Statements to the extent the information
is available.

QUESTION 5 [(3+3)+7+7 = 20 MARKS]

(a) Erickson Company had a Tk.300 credit balance in Allowance for Doubtful Accounts at
December31, 20XX, before the current year's provision for uncollectible accounts. An aging of
the accountsreceivable revealed the following:
Estimated Percentage
Uncollectible
Current Accounts Tk.170,000 1%
1–30 days past due 15,000 3%
31–60 days past due 12,000 6%
61–90 days past due 5,000 15%
Over 90 days past due 9,000 30%
Total Accounts Receivable Tk.211,000
Required:
(i) Prepare the adjusting entry on December 31, 20XX, to recognize bad debts expense.
(ii) Assume the same facts as above except that the Allowance for Doubtful Accounts account
had a Tk.300 debit balance before the current year's provision for uncollectible accounts.
Preparethe adjusting entry for the current year's provision for uncollectible accounts.
(b) BAQ is a listed entity with a financial year end of 31 March. At 31 March 20X7, it had
8,000,000 ordinary shares in issue.
The directors of BAQ wish to expand the business’s operations by acquiring competitor
entities. They intend to make no more than one acquisition in any financial year. The
directors are about to meet to discuss two possible acquisitions. Their principal cri- terion for
the decision is the likely effect of the acquisition on group earnings per share.
Details of the possible acquisitions are as follows:
Acquisition of CBR
100% of the share capital of CBR could be acquired on 1 October 20X7 for a new issue of
shares in BAQ;
CBR has 400,000 ordinary shares in issue;
Four CBR shares would be exchanged for three new shares in BAQ;
CBR’s profit after tax for the year ended 31 March 20X7 was Tk.625,000 and the entity’s
directors are projecting a 10% increase in this figure for the year ending 31 March 20X8.

CMA January 2023 Examination, FR222 [Page 7 of 11]

 Acquisition of DCS
80% of the share capital of DCS could be acquired on 1 October 20X7 for a cash
payment of Tk.10.00 per share;
DCS has 1,00,000 ordinary shares in issue;
The cash would be raised by a rights issue to BAQ’s existing shareholders. For the purposes
of evaluation, it can be assumed that the rights issue would take place on 1 October
20X7, that it would be fully taken up, that the market value of one share in BAQ on that
date would be Tk.5.36, and that the terms of the rights issue would be one new share for
every five BAQ shares held at a rights price of Tk.5.00;
DCS’s projected profit after tax for the year ending 31 March 20X8 is Tk.860,000.
BAQ’s profit after tax for the year ended 31 March 20X8 is projected to be Tk.4.2 million. No
changes in BAQ’s share capital are likely to take place, except in respect of the possible
acquisitions described above.
Required:
Calculate the group earnings per share that could be expected for the year ending 31
March 20X8 in respect of each of the acquisition scenarios outlined above.

(c) The assets and liabilities of a manufacturing plant of Prime Ltd. form a disposal group. The
criteria for classification are met on 28 February 20x8.
As of 1 January 20x8, the carrying amounts of the assets and liabilities of the plant consist
of:
Taka (Million)
Goodwill allocated to plant 200
Land and building, at revalued amount 100
Plant, machinery and equipment, at depreciated cost 500
Investment property at fair value 120
Receivables and financial assets 80
Inventories 120
Loans and borrowings (300)
Net carrying amount 820
Prior to the classification as non-current assets held for sale, the land and building is
revalued at Tk. 150m. Depreciation of plant, machinery and equipment is about 10% per
annum. The fair value of the investment property at 28 February 20x8 is determined at
Tk.130m. After deducting allowances for doubtful debts, the receivables and financial assets
are valued at Tk. 75m. Testing the inventories for lower of cost and net realisable value
results in a write-down of Tk. 10m. Loans and borrowings are carried at the amortised cost
basis and the amount in the accounts approximates their fair value.
Negotiation to dispose of the manufacturing plant to VW Ltd. is in the advanced stage and
the buyer is willing to pay a price of Tk. 603.4m to buy the manufacturing plant as a
whole . Costs of disposal are estimated at Tk. 1.7m. (m= Million)
Required:
Remeasure the assets and liabilities of the manufacturing plant immediately before
classification as non current assets held for sale and determine the net carrying amount of
the disposal group upon the classification.

CMA January 2023 Examination, FR222 [Page 8 of 11]

QUESTION 6 [4 + 6 + 10 = 20 MARKS]
(a) Presented below is information related to Kushiara Company for the year 2021:
Tk.
Net sales Tk.
12,00,000
Write-off of inventory due to obsolescence 80,000
Cost of goods sold 7,80,000
Depreciation expense omitted by accident in 2014 40,000
Selling expenses 65,000
Casualty lost (extraordinary item) before taxes 50,000
Administrative expenses 48,000
Cash dividends declared 45,000
Dividend revenue 20,000
Retained earnings at December 31,2014 9,80,000
Interest revenue 7,000
Effective tax rate of 34% on all items
Instructions:
(i) Prepare a statement of income for 2021. Assume that 60,000 shares of common stock are
outstanding.
(ii) Prepare a retained earnings statement for 2021.

(b) Surma Corporation held Trading securities for the first year of 2021 its portfolio. At the date
of acquisition, the trading securities are recorded at cost, including brokerage, commission
and taxes, in the entitled trading securities.
The first valuation of this recently purchased portfolio:
Investment Cost (Tk.) Fair value (Tk.)
IDLC 10% Bonds 44840 50,200
ADJL 11% Bonds 1,90,200 1,83,000
PRIME 8% Bonds 87,300 92,400
Instructions:
(i) Determine unrealized gain or loss with necessary computations.
(ii) Prepare adjusting entry is made to a valuation allowance, referred to as securities fair
value adjustments.
(c) Sky Touch Ltd. presented below of its investment situation for the year —2021:
Situation-(a)
The company acquired 18% of the 3,00,000 shares of common stock of Nippon Co. at a cost
of Tk. 15 per share on April- 1, 2021. On June-30, Nippon Co. declared and paid Tk.
1,20,000 cash dividend. On December-31, Nippon Co. reported net income of Tk. 1,60,000
for the year. At December, 31, the market price of Nippon was Tk. 18 per share. The
securities are classified as available for sale.

Situation-(b)
Sky Touch Ltd. obtained significant influence over Star Corporation by buying 35% of Star’s
50,000 outstanding shares of common stock at a cost of Tk. 10 per share on January-1,
2021. One June -25, Star Co. announced and a cash dividend of Tk. 52,000, On December
31, Star Co. reported a net income of Tk. 1, 00,000 for the year.
Instruction:
Prepare all necessary journal entries for both situations.

CMA January 2023 Examination, FR222 [Page 9 of 11]

QUESTION 7 [(3+3)+(2+3)+(3+3+3) = 20 MARKS]
(a) Part (A)
Define ‘performance obligation’. List any six examples of promised goods and services as
per IFRS 15 ‘Revenue from Contracts with Customers’.
Part (B)
On 1 October 2017, Galaxy Telecommunications (GT) entered into a contract with a bank for
supplying 20 smart phones to the bank staff with unlimited use of mobile network for one
year. The contract price per smart phone is Tk. 34,650 and the price is payable in full within
10 days from the date of contract. At the end of the contract, the phones will not be returned
to GT.
The entire amount received as per contract was credited by GT to advance from customers
account. The smart phones were delivered on 1 November 2017.
If sold separately, GT charges Tk. 18,000 for a smart phone and a monthly fee of Tk. 1,800
for unlimited use of mobile network.
Required:
Prepare adjusting entry for the year ended 31 December 2017 in accordance with IFRS 15
‘Revenue fromContracts with Customers’.
(b) Part: (A)
An entity shall recognise revenue when (or as) the entity satisfies a performance obligation
by transferring a promised good or service to a customer. An asset is transferred when (or
as) the customer obtains control of that asset.
Required:
List the different indicators of transfer of control.

Part (B):
Pluto Limited (PL) sells industrial chemicals at following standalone prices:
Products Taka (per carton)
C-1 1,00,000
C-2 90,000
C-3 1,10,000
PL regularly sells a carton each of C-2 and C-3 together for Tk. 1,70,000.
Required:
Calculate the selling price to be allocated to each product, in case PL offers to sell one
carton of each product for a total price of Tk. 260,000.
(c) Prime Ltd. commenced operations on 1 July 2006. The following financial
information is available for the years ended 30 June 2007 and 2008:
2007 2008
Taxable income 1,20,000 1,50,000
Assets and liabilities as disclosed in the balance sheet
ASSETS
Cash 30,000 45,000
Inventory 35,000 65,000
Accounts receivable 1,20,000 1,35,000
less allow. for doubt. debts (10,000) 6,000
1,10,000 1,29,000
Prepaid insurance 14,000 13,000
Plant –cost 1,50,000 1,50,000
less accumulated depreciation (30,000) 60,000
120,000 90,000
Total assets 3,09,000 3,42,000
LIABILITIES
Accounts payable 45,000 66,000
Unearned revenue 5,000 3,000
Provision for annual leave 4,000 6,000
Total liabilities 54,000 75,000
Net assets 2,55,000 2,67,000

CMA January 2023 Examination, FR222 [Page 10 of 11]

Other information:

(1) The plant is depreciated over 5 years for accounting purposes, but over 3 years for taxation
purposes.
(2) Revenue received in advance by the company is assessable for tax purposes in the year in
which it is received.
(3) The tax rate is 30 per cent.
Required:
(i) Determine the deferred taxes, and prepare the journal entries to account for the income tax
for the year ended 30 June 2007. Use a tax worksheet.
(ii) Determine the deferred taxes, and prepared the journal entries to account for the income tax
for the year ended 30 June 2008. Use a tax worksheet.
(iii) Show the ledger accounts for the deferred tax asset and the deferred tax liability after the
above entries.

END OF SECTION B

CMA January 2023 Examination, FR222 [Page 11 of 11]