Accountancy & Auditing, Paper I

Shakeel formed a business entity to provide bus service for a fee to public and private schools in the Walnut Creek area. The business is organized as a sole proprietorship, called Walnut Creek Transportation Services. The transactions during July, while the new business was being organized, are listed below. July 1, Shakeel opened a bank account in the name of the business with a deposit of Rs.225,000 cash. July 3 The new company purchased land and a building at a cost of Rs.120,000, of which Rs.72,000 was regarded as applicable to the land and Rs.48,000 to the building. The transaction involved a cash payment of Rs.30,000 and the issuance of a note payable for the balance of the purchase price. July 5 Purchased 9 new buses at Rs.27,000 each from Fleet Sales Company. Paid Rs.76,500 cash, and agreed to pay Rs.80,000 by July 31 and the remaining balance by August 15. The liability is viewed as an accounts payable. July 7 Sold one of the buses at cost to Young Camping Services. The buyer paid Rs.15,000 in cash and agreed to pay the balance within 30 days. July 8 Upon inspection, one of the buses was found to be defective and was returned to Fleet Sales Company. The amount payable to this creditor was thereby reduced by Rs.27,000. July 20 Purchased office equipment at a cost of $2,400 cash. July 31 Issued a check for Rs.80,000 in partial payment of the liability to Fleet Sales Company. Required

On April 1, 1997, Hamid Hassan, an attorney, opened her own legal practice, to be known as the Law Office of Hamid Hassan. The business adjusts its accounts at the end of each month. The following trial balance was prepared at April 30, 2025, after one month of operations: LAW OFFICE OF HAMID HASSAN Trial Balance April 30, 2025 Particulars Rs. Particulars Rs. Legal Fee Receivable 10060 Unexpired Insurance 26400 Prepaid office rent 16000 Office supplies Accumulated Dep-Office Equipment 53600 Office Equipment Notes Payable 16020 Interest Payable 20000 Salaries Payable Unearned fee Hamid Hassan's Capital Hamid Hasan's Drawing Legal Fee Earned 8250000 Salaries Expense Misc Expenses Office Rent expense Office Supplies Expense Depreciation Expense-Office Equipment Interest Expense Insurance Expense Total 53600 Total 53600 Other Information No interest has yet been paid on the note payable. Accrued interest at April 30 amounts to Rs.180. Salaries earned by the office staff but not yet recorded or paid amounted to Rs.3,470 at April 30. Many clients are asked to make an advance payment for the legal services to be rendered in future months. These advance payments are credited to the Unearned Retainer Fees account. During April, Rs.7,700 of these advances were earned by the business. Some clients are not billed until all services relating to their matter have been rendered. As of April 30, services priced at Rs.4,780 had been rendered to these clients but had not yet been recorded in the accounting records. A professional liability insurance policy was purchased on April 1. The premium of Rs.3,000 for the first six months was paid and recorded as Unexpired Insurance. The business rents an office at a monthly rate of Rs.1,600. On April 1, three months' rent was paid in advance and charged to the Prepaid Office Rent account. Office supplies on hand at April 30 amounted to Rs.1,100. The office equipment was purchased on April 1 and is being depreciated over an estimated useful life of 10 years. Required :

Jaleel Limited (JL) is engaged in the production of three products J1, J2 and J3 which it sells in the local market. Presently, JL's manufacturing plant is operating at 80% of its capacity. Following information has been extracted from JL's records for the year ended 31 August 2025: Particulars J1 J2 J3 Production/sales (units) 3,500 6,000 7,000 Machine hours per unit (hours) Selling price per unit in Rs. 6,200 5,000 7,000 Variable cost per unit in Rs. Direct material 1,000 Direct labour Variable overheads Fixed overheads Rs. 8,250,000 In order to enter into the international market, on 1 August, 2025, JL hires the services of an export house to market its products, at a monthly payment of Rs. 100,000. JL resultantly receives first export order from a USA based company, Asteroid Limited. Details of the export order are as follows: Product Units Selling price per unit in Rs. J1 6,500 J2 J3 It is estimated that due to additional packaging, the direct material cost will increase by 10% and due to quality control, other variable overheads will increase by 15%. A toll manufacturer offers JL to produce J1, J2 and J3 at Rs. 1,800, Rs. 1,600 and Rs. 2,500 respectively subject to provision of material by JL. The management has decided to produce local orders on priority. Required: Prepare a product wise plan for in-house production and outsourcing to maximize JL's profitability for the upcoming year.