There are two parts need a solution

There are two parts need a solution

Part 1
Assignment Questions:
(Marks 15)
Question 1 – Explain the following methods to allocate Support Department Cost to
Operating Department with Suitable Numerical Example.
(5 Marks)
a) Step Down Method
b) Reciprocal Method
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Question 2 – ‘Grow Well Juice’ company produces three products differently. These
products are jointly produced up to certain stage and afterwards they are identified
separately as Product A, B and C. The joint cost of processing these products are SAR
120,000. You are required to allocate this Joint Cost among the three different product
by using the following methods.
(5 Marks)
A) Sales Value at Split Off Method
B) Net Realizable Value (NRV) Method
The quantitative information of these products are as follows:
Products
A
B
C
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KG Produced Selling Price
Per KG at
Split Off
20,000
SAR 1.2
40,000
SAR 1.4
80,000
SAR 0.8
Final Sale
Value
Separable
Cost
70,000
94,000
80,000
6,000
9,000
10,000
Question 3 – Robert Inc. is preparing a budget for 2024. The budgeted selling price per
unit is $ 12, and total fixed costs for 2024 are estimated to be $ 8,000. Variable Cost
are budgeted at $ 3/unit. Prepare a flexible budget for the volume level of 2000, 2500
and 3000.
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(5 Marks)
Part 2
Q.1 The Abdullah and Ahad partnership has the following plan for the distribution of
partnership net income (loss):
Particulars
Salaries
Bonus on Net Income
Interest on average Capital Balance
Remainder (if Positive Balance)
Remainder (if Negative Balance)
Abdullah
80000
6%
7%
60%
50%
Ahad
100000
12%
7%
40%
50%
Required:
Calculate the distribution of partnership net income (loss) for each independent situation
below (for each situation, assume the average capital balance of Abdullah is $140,000
and of Ahad is $240,000).
1. Partnership net income is $360,000. (2 Marks)
2. Partnership net income is $240,000. (2 Marks)
3. Partnership net loss is $40,000.
(2 Marks)
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2. On Jan, 1 2014, Peter Corp. (a U.S. based company) formed a new subsidiary in
Saudi Arabia, Saeed Inc., with an initial investment of 30,000 SAR.
Assume Saeed Inc.
Purchases inventory evenly throughout 2014. The ending inventory is purchased
Nov. 30, 2014.
Uses straight-line depreciation on fixed assets.
Declares and pays dividends on Nov. 30, 2014.
Purchased the fixed assets on April 1, 2014.
Uses SAR as the functional currency.
Exchange Rates are given:
Jan 1, 2014
0.260
April 1, 2014
0.255
Nov. 30, 2014
0.240
Dec. 31, 2014
0.238
Saeed’s financial statements on Dec. 31, 2014
Accounts
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SAR
Cash
5000
Account Receivable
12000
Inventory
32000
Note Receivables
5000
Plant & Equipment
70000
Cost of Goods sold
32000
Depreciation
2000
Other Expenses
18000
Dividends
16000
Total Debits
192000
ACC. OC – Translation Adjustment (Debit)
Adjusted Total Credit
Accumulated Depreciation
2000
Account Payable
12000
Bonds Payable
36000
Mortgage Payable
46000
Common Stock
30000
Sales
66000
Total Credits
192000
REQUIRED
Prepare a schedule to translate Saeed’s financial statements on Dec. 31, 2014 to
U.S. dollars.
Restricted – ‫مقيد‬
(6 Marks)
Restricted – ‫مقيد‬
College of Administration and Finance Sciences
Q.3 Anwar and Bravo wish to form the A&B partnership. Anwar contributes land with
a book value of $ 175,000 (current value of $200,000) and a building with a book value
of $200,000 (current value of $300,000). Bravo will contribute cash. If the partners plan
to share profits and losses equally after the formation of the partnership and assuming
they have agreed to equal capital contributions, how much cash will Bravo have to
contribute to form the partnership? Pass Journal entry to be recorded in A&B Firm.
(3 Mark)
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