MGT101 Questions with Answers

MGT101 Long Questions

Write down the five advantages of Limited Company.

Answer

It is a legal entity created by law and hence has its own recognition, good will and brand equity etc. It is a wide form of business and hence a formal approach for various partners/investors to come and work for the same objectives in an organized form. Liability limited to company assets only. Investors/partners do not personally liable for any loss or in state of bankrupty. Being a legal entity, easy to get loans or gather funds from public (for public limited companies only) or financial institutes. Being a legal entity, it can enjoy more opportunities for mega projects and trade/operations opportunities in international markets on its on behalf.

Required:

What will be the amount of discount received by the company?

Solution:

(A) Discount Received= (150,000-20,000) x (2/100) = 2600

(B) Particulars Dr. Cr. Entry for Purchase Goods 150,000 A/P 150,000

Entry for Return A/P 20,000 Goods 20,000

While making Payment ( 2% discount = 2600) A/P 130,000 Discount income 2,600 Cash 127,400

State clearly how you will deal with Bad Debts Account, Provision for Bad Debts Account, Profit & Loss account and Balance Sheet in the following case: The items appearing in the trial balance are bad debts Rs. 300, provision for bad debts Rs. 350 and sundry debtors Rs. 12,000. It is required to increase the provision for bad debts to 5% on sundry debtors.

The unadjusted and adjusted trial balances for Tinker Corporation on December 31, 2007, are shown below: Tinker Corporation Trial Balances December 31, 2007

Unadjusted · Adjusted · Debit

Rs.

Credit

Rs.

Debit

Rs. Credit Rs. Cash 35,200 35,200 29,120 29,120 1,200 Prepaid rent 5,400 5,400 Office supplies

Equipment 60,000 60,000 49,000 50,000

5,000 5,000 Interest payable 2,100 Income taxes payable 1,570 1,570 6,800 3,800 25,000 25,000 30,000 30,000 Fees earned 91,530 94,530 1,500 1,500 6,600 7,200 19,800 19,800 Office supplies expense 1,200 1,500 Repairs expense 4,800 4,800 11,000 12,000 Salaries expense 26,300 28,400

7,000 7,000

210,000 · 210,000 · 213,100 · 213,100

Journalize the five adjusting entries that the company made on December 31, 2007.

Solution:

Date Particular Dr. Cr. Dec 31 Insurance expense 600 to Unexpired insurance 600 Dec 31 Office Supplies Expense 300 to Office Supplies 300 Dec 31 Depreciation Expense-Equip. 1000 to Accumulated depreciation-Equip. 1000 Dec 31 Salaries Expense 2100 to Salaries Payable 2100 Dec 31 Unearned revenue 3000 to Fee Earned 3000

If the capitals of the partners are fixed, Pass Journal Entries for the following:

Drawings made by partner Excess drawn amount is returned by partner Profit distribution among partner

Partner’s Current A/c Dr. Cash/Bank A/c Cr.

Cash/Bank Dr. Partner’s Current A/c Cr.

Profit & Loss A/c Dr. Partner’s Current A/c Cr.

Required:

What will be the amount of discount received by the company?

Purchases A/c 150,000 Creditor A/c 150,000 Goods are being purchased

Creditor A/c 20,000 Purchases A/c 20,000 Goods returned to supplier Creditor A/c 130,000 Discount Received A/c 2600 Cash/Bank A/c 127400 Payment is being made to creditor and 2% discount is received.

On 01-01-2007, the provision for doubtful debts a/c stood at Rs. 12,000 (credit balance). In 2007, the bad debts are amounted to Rs. 10,000. The debtors on 31-12-2007 are amounted to Rs. 3, 20,000 and a provision for doubtful debt to

Required:

Show Journal entries and also show how the items will appear in Profit and Loss account and Balance sheet. (Show complete working where it is necessary)

The accounting staff of ABC, Inc., has assembled the following information for the year ended December 31, 2007: Cash and cash equivalents, Jan. 1 Rs.35,800 Cash and cash equivalents, Dec. 31 74,800 Cash paid to acquire plant assets 21,000 Proceeds from short-term borrowings 10,000 Loan made to borrowers 5,000 Collection on loans (excluding interest) 4,000 Interest and dividends received 27,000 Cash received from customers 795,000 Proceeds from sale of plant assets 9,000 Dividends paid 55,000 Cash paid to suppliers and employees 635,000 Interest paid 19,000 Income taxes paid 71,000 Using this information, prepare a statement of cash flows. Include a proper heading for the financial statement, and classify the given information into the categories of operating, investing and financing activities.

Mr. Hassan is a partner in a partnership firm. His capital on July 1, 2001 was Rs. 400,000. He invested further capital of Rs. 150,000 on March 01, 2002. Markup rate is 6%p.a. The financial year of such a business is from 1 st July to 30 th June. Required: You are required to calculate his markup on Capital at the end of 30 th June 2002.

a) Capital invested on july 1 2001 = 400,000 Markup rate on 400,000 = 6% of 40,000 = 24,000

b) Further capital introduced / invested = 150000 on March 1, 2002 Markup rate = 6% of 150000 = 9000 x 4/12 = 3000

Total mark up rate = a + b = 24000 + 3000 = 27000

X and Y were partners in a business sharing profits in the ratio of 3:1. Their capital were Rs.30,000 and Rs.10,000 respectively. They earned a net profit of Rs. 160,000. Mr. Y was entitled to a salary of Rs.200 p.m. Prepare Profit Distribution Account of X & Y Partnership.

X AND Y ARE SHARED WITH the ratio 3:1 X capital = 30000 Y capital = 10000

Mr. Y salary is = 200 p.m entitled Total investment = X + Y capital = 30000 +10000 = 40000 Calculate cost of goods sold with he help of given data.

Rs. Purchases 418,000 7,900

debtors 16,000 Sales man commission 2,000 Office expenses 2,000 Carriage outwards 1,700 Salaries 13,000 Direct labor 3,825 FOH 2,100 Plant & Machinery 53,000 Buildings 35,000 Tools 8,650

Helping data:

Plant & Machinery depreciate 10% and charged to FOH Buildings depreciate 5% and 40% charged to Administrative expenses and balance to FOH 40% of salaries will be charge to office and balance to Selling expenses

The following is the trial balance of Sikander’s Photo Studio, Inc., dated December 31, 2007. The net income for the period is Rs.36,000. You are required to prepare Balance Sheet as on December 31, 2007. Sikander’s Photo Studio, Inc. Trial balance December 31, 2007

Cash Rs.171,100 9,400 Prepaid studio rent 3,000 7,200 Supplies Equipment 18,000 Rs.7,200 10,000 3,200 4,000 Income tax payable 6,000 8,800 100,000 34,000 Revenue earned 165,000 Salary expense 85,000 Supply expense 3,900 12,000 1,900

1,800

23,000

338,200

338,200

What is the difference between public and private company?

Private Limited Company

Number of members in a private limited company varies from 2 to 50.

the companies’ ordinance 1984. They can also apply to security exchange commission for company’s registration. The shareholders of the private limited company elect two members of the company as Directors. These directors form a board of directors to run the affairs of the company. The head of board of directors is called chief executive. Private limited company can not offer its shares to general public. In case a investor decides to sell his/her/her shares, his/her shares are first offered to existing shareholders. If all existing shareholders decide not to buy these shares, then an outsider investor can buy. Words and digression “(Private) Limited” are added at the end of the name of a private limited company.

Public Limited Company

Least number of members in a public limited company is 7 with no upper limit in number of members.

the companies’ ordinance 1984. They can also apply to security exchange commission for company’s registration. The shareholders of the public limited company elect seven members of the company as Directors and these directors form a board of directors to run the daily affairs. The head of board of directors is called Chief Executive. Public limited company can offer its shares to general public at large. Word “Limited” is added at the end of the name of a public limited company.

On top of that there are two types of public limited company: Listed Company Non Listed Company

LISTED COMPANY

Listed company is the one whose shares are quoted and traded on stock exchange. It is also called quoted company.

NON LISTED COMPANY

Non listed company is the one whose shares are not quoted or traded.