CMA MAY 2023 EXAMINATION

FOUNDATION LEVEL
FUNDAMENTALS OF FINANCIAL ACCOUNTING

Model Solution

Solution to the Question No. 1

(i) (b) Tk.30,000
(ii) (c) Amounts earned from providing goods and services to a customer.
(iii) (a) Tk.3,685
(iv) (c) Asset Turnover Ratio
(v) (b) Tk.1,10,000
(vi) (c) Tk.360
(vii) (b) IASB
(viii) (a) Increase in assets & decrease in assets
(ix) (d) Supplies should be credited by BDT 4,000
(x) (e) Reversal entry
(xi) (c) Aging schedule
(xii) (b) FIFO
(xiii) (b) Declining book value
(xiv) (b) 12.73 times
(xv) (e) Credit sale

Solution to the Question No. 2

(a) True.
(b) False. Positive difference between selling price and cost of an asset is treated as
Capital Gain.
(c) False. A statement of cash flows summarizes information about the cash inflows and
outflows for a specific period of time.
(d) False: In straight line depreciation method periodic depreciation is the same for each
year of the asset’s useful life.
(e) True.

Solution to the Question No. 3

(1) (c)

(2) (d)

(3) (e)

(4) (j)

(5) (h)
Solution to the Question No. 4
(b)

i)

Cash received from revenue : BDT 108,000

Cash paid for expenses : (BDT 72,000)

Cash basis net income : BDT 36,000

ii) Revenue: [BDT (108,000-25,000) +36,000] = BDT 119,000

Expenses: [BDT (72,000-30,000)+42,000] = (BDT 84,000)

Accrual basis net income = BDT 35,000

(c)

Item Type of adjustment Accounts before adjustment

1 Accrued Revenues Assets understated & Revenues understated
2 Prepaid Expenses Assets overstated &Expenses understated
3 Accrued Expenses Expenses understated &Liability understated
4 Unearned Revenues Liability overstated & Revenue understated
5 Accrued Expenses Expenses understated &Liability understated

Solution to the Question No. 5

(c)

Cost or
Cost to Cost or
Cost or NRV NRV
Product Cost Sales complete NRV NRV
Individual Major
and sell Total
Group

Electronic Items
Television 90,000 120,000 20,000 100,000 90,000
Air Conditioner 200,000 250,000 25,000 225,000 200,000
Fridge 40,000 50,000 5,000 45,000 40,000
Total electronic 330,000 420,000 50,000 370,000 330,000 330,000
Plastic Items
Plastic Table 50,000 60,000 5,000 55,000 50,000
Plastic Chair 40,000 50,000 3,000 47,000 40,000
Total Plastic 90,000 110,000 8,000 102,000 90,000 90,000
Grand Total 420,000 530,000 58,000 472,000 420,000 420,000

CMA May 2023 Examination, FR111 [Page 2 of 5]

Solution to the Question No. 6

ABC Limited
Income Statement
For the year ended June 30, 2022

Particular Taka Taka

Sales Revenue 1,010,000.00
(-) Cost of Goods Sold:
Beginning inventory 90,000.00
(+) Purchases 510,000.00
(-) Ending Inventory (80,000.00) (520,000.00)
Gross Profit 490,000.00
(-) Operating Expenses:
Advertising Expense 40,000.00
Salaries & Wages Expense (90,000+25,000) 115,000.00
Utilities Expense 15,000.00
Insurance Expense 20,000.00
Supplies Expense 10,000.00
Depreciation Expense – Buildings 81,000.00
Depreciation Expense – Equipment 61,000.00
Bad Debt Expense 11,000.00 (353,000.00)
Profit from 137,000.00
Operations
(+) Other Revenues: Investment Income 40,000.00
(-) Other Expenses: Interest Expense (31,000.00) 9,000.00
(310,000×10%)
Net Profit 146,000.00

ABC Limited
Classified Balance Sheet
As at June 30, 2022

Particulars Tk. Tk. Tk.

ASSETS:
Current Assets:
Cash 160,000.00
Accounts Receivable 110,000.00
(-) Allowance for Doubtful Debt (11,000.00) 99,000.00
Inventory 80,000.00
Supplies (40,000-10,000) 30,000.00
Prepaid Insurance (55,000-20,000) 35,000.00 404,000.00
Non-Current Assets:
Land 510,000.00
Buildings 810,000.00
Acc. Dep. – Buildings (450,000+81,00(531,000.00) 279,000.00
Equipment 610,000.00
Acc. Dep. – Equipment (401,000.00) 209,000.00 998,000.00

CMA May 2023 Examination, FR111 [Page 3 of 5]

 (340,000+61,000)
Total Assets 1,402,000.00
LIABILITIES & OWNER’S EQUITY:
Current Liabilities:
Accounts Payable 80,000.00
Notes Payable 90,000.00
Salaries & Wages Payable 25,000.00
Interest payable 31,000.00 226,000.00
Non-Current Liabilities:
10% Bank Loan 310,000.00
Owner’s Equity:
Owner’s Capital 810,000.00
(+)Net Profit 146,000.00
(-)Owner’s Drawings (90,000.00) 866,000.00
Total Liabilities & Owner’s Equity 1,402,000.00

Solution to the Question No. 7

(b)
Computations:
Old Machine used (Jan 11 to Jan 20) = 9 years
Depreciation for 9 years = (360,000/12*9) = 270,000
Gain on exchange of Machine:
Old machine cost: 360,000
Less: Depreciation charged 270,000
Book Value 90,000
Sale price of old machine 100,000
Gain on exchange of Machine 10,000

Journal Entry:
New Machine Dr. 400,000
Accumulated Depreciation Dr. 270,000
Old Machine Cr. 360,000
Cash Cr. 300,000
Gain on exchange of Machine Cr. 10,000

(c)

(i) Adjustment in Cash Book

Adjustments in cash book
Debit Credit
(i.e. add to (i.e. deduct
cash balance) form cash
balance)
Item Tk. Tk.
(3) Cash book incorrectly credited with interest on 30 100
June, should have been debited with the receipt
(4) Bank charges 50
(5) Under cast on payment (credit) side of cash book 20
(6) The dividend received should be debited in the 300
cash book

CMA May 2023 Examination, FR111 [Page 4 of 5]

 (7) Cheque drawn on the deposit account, not current 150
account Add cash back to the current account
(8) Cheque back to Tesla is out of date. So canceled. 75
Cash book should now be debited since the
previous credit entry is no longer valid
625 70
Tk. Tk.
Cash book: Balance on the current account as at June
30, 2022. (500)
Adjustments and Corrections:
Debit entries (adding to cash) 625
Credit entries (reducing cash balances) (70)
Net adjustments 555
Corrected balance in the cash book 55

BANK RECONCILIATION STATEMENT AT 30 JUNE 2022

Particular Taka Taka

Balance per bank statement 165
Add: Outstanding Lodgements 600
(i.e. cheques paid in but not yet credited)
Deposit interest not yet credited 100 700
865
Less: Unpresented cheques 735
Less cheque to Dorin canceled 75 810
Balance per corrected cash book 55

END OF SECTION B

CMA May 2023 Examination, FR111 [Page 5 of 5]