Allama Iqbal Open University, Islamabad s8

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Commerce)

ADVANCED FINANCIAL ACCOUNTING (8553)

CHECKLIST

SEMESTER: AUTUMN, 2017

This packet comprises the following material:

1. Textbook (one) 2. Assignment No. 1, 2 3. Assignment Forms ( 2 sets )

In this packet, if you find anything missing out of the above mentioned material, please contact at the address given below:

The Mailing Officer Allama Iqbal Open University Sector H-8, Islamabad Ph: 051-9057611-12

Muhammad Munir Ahmad (Course Coordinator) ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Commerce)

[ WARNING 1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE. 2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM POLICY”. Course: Advanced Financial Accounting (8553) Semester: Autumn, 2017 Level: M. Com Total Marks: 100 Pass Marks: 50

ASSIGNMENT No. 1

Q. 1 (a) Briefly describe the operating procedure for Statements of Financial Accounting Standards. (10) (b) What are the three principal financial statements of a corporation? Describe layout and the purpose of each statement. (10)

Q. 2 What are some typical outputs of an AIS? Why do system analysts concentrate on managerial reports when they start to design an effective AIS? Why not start with the inputs to the system instead? (10)

Q. 3 Orser Furniture purchases and sells dining room furniture. Its management uses the perpetual method of inventory accounting. Journalize the following transactions that occurred during October 2017: (20)

Oct. 2 Purchased on account Rs. 27,000 of inventory with payment terms 2/10, n/30, and paid Rs. 650 in cash to have it shipped from the vendor’s warehouse to the Orser showroom. 5 Sold inventory costing Rs. 4,900 for Rs. 8,250 on account. 10 Paid Rs. 13,950 of accounts payable (from October 2 purchase) and received the cash discount. 14 Returned two damaged tables purchased on October 2 (costing Rs. 550 each) to the vendor. 19 Received payment of Rs. 4,560 from customers. 20 Paid the balance of the account from October 2 purchase. 22 Sold inventory costing Rs. 3,800 for Rs. 5,200 on account. 24 A customer returned a dining room set that she decided didn’t match her home. She paid Rs. 3,250 for it, and its cost to Orser was Rs. 1,800.

2 Assuming the balance in the inventory account is Rs. 12,000 on October 1, and no other transactions relating to inventory occurred during the month, what is the inventory balance at the end of October?

Q. 4 The income statements for Unique Co. and Creative Co. for the year ended 31st December 2016 are shown below. Unique Co. acquired 60% of the ordinary share capital of Creative Co several years ago. (15) Unique Creative Rs '000' Rs '000' Sales 3,000 1,500 cost of sales and expenses (1,800) (900) Gross profit 1,200 600 Distribution Cost (60) (35) Admin cost (25) (20) Investment income: Dividend received from Creative 5 profit before tax 1,120 545 Tax (115) (15) Profit after tax 1,005 530

Goods were sold by Unique to Creative Rs 10,000 at a margin of 30% (All goods were unsold by Creative at the yearend) You are required to prepare Consolidated Income Statement for the year 2016.

Q. 5 (a) XYZ Corporation reported earnings per share of Rs. 2.00 in 2016. In 2017, XYZ Corporation reported earnings per share of Rs. 1.50. On July 1, 2017, and December 31, 2017, 2-for-1 stock splits were declared. You are required to present the earnings per share for a two-year comparative income statement that includes 2017 and 2016. (10)

(b) Blue Company has the following pattern of financial data for Years 1 and 2: Year 1 Year 2 Net income Rs. 40,000 Rs. 42,000 Preferred stock (5%) Rs. 450,000 Rs. 550,000 Weighted average number of common shares outstanding 38,000 38,000 Required: Calculate earnings per share and comment on the trend. (5)

3 Q. 6 The present value to a lessor of a lease, on which the lessee is obligated to make a Rs. 40,000 payments at the end of each of the next three years and on which there is an unguaranteed residual value of Rs. 8,000 at the end of the lease term, is Rs. 98,266 using the lessor’s implicit interest rate of 14 percent. The lease qualifies as a direct financing lease. (20) Required i) Prepare an amortization schedule for the lessor covering the three-year lease term. ii) Compute the present value of a similar lease; assume that the lessor’s implicit rate is 12 percent. Prepare an amortization schedule similar to the one required in (i) above

iii) Assume, instead, that each of the three Rs. 40,000 annual payments are paid at the beginning of each year, and that 8,000 residual value is expected at the end of the lease term of three years. What is the present value of the lease payments at 14 percent? Prepare the lessor’s amortization schedule for this lease.

GUIDELINES FOR ASSIGNMENT # 1 The student should look upon the assignments as a test of knowledge, management skills, and communication skills. When you write an assignment answer, you are indicating your knowledge to the teacher: . Your level of understanding of the subject; . How clearly you think; . How well you can reflect on your knowledge & experience; . How well you can use your knowledge in solving problems, explaining situations, and describing organizations and management; . How professional you are, and how much care and attention you give to what you do.

To answer a question effectively, address the question directly, bring important related issues into the discussion, refer to sources, and indicate how principles from the course materials apply. The student must also be able to identify important problems and implications arising from the answer.

For citing references, writing bibliographies, and formatting the assignment, APA format should be followed.

4 ASSIGNMENT No. 2 Total Marks: 100 Pass Marks: 50

This assignment is a research-oriented activity. You are required to obtain information from a business/commercial organization and prepare a report of about 1000 words on the issue allotted to you to be submitted to your teacher for evaluation. You are required to select one of the following issues according to the last digit of your roll number. For example, if your roll number is P-3427182 then you will select issue # 2 (the last digit): -

ISSUES : 0- The need for a common set of accounting and financial reporting standards 1- Constraints and trade-offs between different qualitative characteristics of Financial Statements 2- A comprehensive study on International Accounting Standard 17 (IAS 17) 3- Presentation of Financial Statements (IAS 1) 4- Accounting for Merchandizing Business 5- A comprehensive study on International Accounting Standard 2 (IAS 2) 6- Presentation of Annual Accounts of Banking Companies according to accounting standards. 7- Accounts of Insurance Companies 8- A comprehensive study on International Accounting Standard 27 (IAS 27) 9- An Accounting Information System of an entity

The report should follow the following format: i. Title page ii. Acknowledgements iii. An abstract (one page summary of the paper) iv. Table of contents v. Introduction to the issue (brief history & significance of topic assigned) vi. Practical study of the organization (with respect to the topic) vii. Data collection methods viii. Conclusion (one page brief covering important aspects of your report) ix. Recommendations (specific recommendations relevant to issue assigned) x. References (as per APA format) xi. Annexes (if any)

5 GUIDELINES FOR ASSIGNMENT # 2: . 1.5 line spacing . Use headers and subheads throughout all sections . Organization of ideas . Writing skills (spelling, grammar, punctuation) . Professionalism (readability and general appearance) . Do more than repeat the text . Express a point of view and defend it.

WORKSHOPS The workshop presentations provide students opportunity to express their communication skills, knowledge & understanding of concepts learned during practical study assigned in assignment # 2. You should use transparencies and any other material for effective presentation. The transparencies are not the presentation, but only a tool; the presentation is the combination of the transparencies and your speech. Workshop presentation transparencies should only be in typed format.

The transparencies should follow the following format: 1) Title page 2) An abstract (one page summary of the paper) 3) Introduction to the issue (brief history & significance of topic assigned) 4) Practical study of the organization (with respect to the issue) 5) Data collection methods 6) Conclusion (one page brief covering important aspects of your report) 7) Recommendations (specific recommendations relevant to topic assigned)

GUIDELINES FOR WORKSHOP PRESENTATION: . Make eye contact and react to the audience. Don't read from the transparencies or from report, and don't look too much at the transparencies (occasional glances are acceptable to help in recalling the topic to cover). . A 15-minute presentation can be practiced several times in advance, so do that until you are confident enough. Some people also use a mirror when rehearsing as a substitute for an audience.

6 WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT # 2 & WORKSHOP PRESENTATIONS Assignment # 2 & workshop presentations are evaluated on the basis of theory & its applicability. The weightage of each aspect would be: Theory: 60% Applicability (practical study of the organization): 40%

Note: Assignments and presentation carry 300 Marks: Assignment 01 100 Marks Assignment 02 (Submission) 100 Marks Assignment 02 (Presentation) 100 Marks