Attempt JAIIB AFM Case Study Practice Quiz and Download PDF

1. A manufacturing company with a turnover of ₹50 crore adopted Ind AS 115 for revenue recognition in the current financial year. Under the new standard, the company recognised revenue at the point of control transfer rather than risk and reward transfer. This resulted in deferral of ₹3.2 crore of revenue from the current year to the next. Prior-period figures were restated. Management disclosed the change along with a reconciliation of reported profits. The auditors confirmed compliance with the notified standard. The board raised a query on whether this change impacted distributable profits and the classification of retained earnings. Which of the following best describes this change?

2. A retail trading firm purchased office furniture costing ₹2,40,000 but erroneously debited the entire amount to general expenses. The trial balance tallied since both debit and credit sides were correctly posted. The error was detected during the internal audit conducted after books were closed for the quarter. The management asked the accountant to pass a rectification entry without reopening ledgers. The CFO is concerned about the impact on profit and fixed asset reporting. Which rectification entry is most appropriate?

3. A company’s cash book showed a bank balance of ₹4,75,000 as on 31st March. On reconciling with the bank statement, the following were observed: cheques issued but not presented to the bank amounted to ₹65,000; a direct deposit by a customer of ₹40,000 was not recorded in the cash book; bank charges of ₹2,500 were debited by the bank but not entered in the cash book; and a cheque of ₹18,000 deposited but not yet credited by the bank. Management needs to arrive at the correct bank balance as per the pass book. Which of the following correctly states the balance as per pass book?

4. A company purchased a machine on 1st July for ₹8,40,000. It follows the Written Down Value method at 15% per annum. The company closes its books on 31st March every year. Management wants to compute the depreciation for the first year of purchase and the book value at the end of year two. Which of the following is the correct depreciation for the first year?

5. A partnership firm has three partners A, B, and C sharing profits in 3:2:1 ratio. The firm’s net profit before interest on capital and salary was ₹3,60,000. Interest on capital is payable at 10% p.a. on capital balances of ₹1,00,000, ₹80,000 and ₹60,000 respectively. Partner B is entitled to a salary of ₹24,000 per annum. After all appropriations, the remaining profit is shared in the agreed ratio. What is the share of profit for partner A?

6. A company forfeited 5,000 shares of ₹10 each on which ₹7 per share had been called up and ₹5 per share had been paid (including application money of ₹3 and allotment money of ₹2). The forfeited shares were later reissued at ₹6 per share as fully paid up. Management wants to know the amount to be transferred to capital reserve after reissue. What is the amount transferred to capital reserve?

7. A limited company has an authorised capital of ₹50,00,000. It issued 2,00,000 equity shares of ₹10 each at a premium of ₹5 per share. Application money was ₹4 per share, allotment money ₹6 per share (including premium), and the balance as first and final call. All amounts were duly received. The company later issued 50,000 bonus shares in the ratio of 1:4 from the securities premium reserve. After the bonus issue, what is the paid-up share capital of the company?

8. A garment manufacturer uses batch costing. A batch of 500 units was produced incurring material cost of ₹1,00,000, direct labour of ₹60,000, and factory overheads absorbed at 75% of labour cost. During quality inspection, 20 units were rejected as normal loss and another 10 units were found defective due to a machine breakdown, classified as abnormal loss. The scrap value of normal loss units is ₹200 per unit. Management wants to determine the cost per good unit. What is the cost per good unit?

9. A firm has a contribution margin ratio of 35% and fixed costs of ₹7,00,000. The sales manager wants to know the margin of safety in rupees when actual sales are ₹30,00,000. What is the margin of safety?

10. Under standard costing, a company set the material standard as 4 kg per unit at ₹25 per kg. Actual production for the period was 800 units. Actual material used was 3,400 kg purchased at ₹27 per kg. Management wants to analyse both the price and usage variances to identify where the deviation occurred. What is the material price variance?

11. A company is evaluating a capital project requiring an initial investment of ₹12,00,000. The project generates cash inflows of ₹2,50,000 in Year 1, ₹3,50,000 in Year 2, ₹4,00,000 in Year 3, ₹4,50,000 in Year 4, and ₹3,00,000 in Year 5. The cost of capital is 10%. PV factors at 10% are: Year 1 = 0.909, Year 2 = 0.826, Year 3 = 0.751, Year 4 = 0.683, Year 5 = 0.621. What is the NPV of the project?

12. An investor deposits ₹60,000 at the end of each year into a fixed deposit account earning 9% per annum for 6 years. The present value annuity factor at 9% for 6 years is 4.486. Management is comparing this with an annuity due arrangement where deposits are made at the beginning of each year. What is the present value of the ordinary annuity?

13. A bank is assessing the creditworthiness of a borrower who has applied for a term loan. The borrower’s EBIT is ₹24,00,000, annual interest obligation is ₹6,00,000, principal repayment per year is ₹4,00,000, and the tax rate is 30%. The credit officer uses DSCR to evaluate repayment capacity. What is the Debt Service Coverage Ratio (DSCR)?

14. A company’s capital structure consists of equity capital of ₹50 lakh (cost 16%), preference capital of ₹20 lakh (cost 12%), and term debt of ₹30 lakh (pre-tax cost 10%). The corporate tax rate is 35%. What is the Weighted Average Cost of Capital (WACC)?

15. Using the Capital Asset Pricing Model, a financial analyst is estimating the required return on an equity investment. The risk-free rate is 7%, the expected market return is 15%, and the beta of the security is 1.30. The company’s CFO wants to use this to determine the minimum acceptable return for a new equity-funded project. What is the cost of equity using CAPM?

16. A bond with face value of ₹1,000 carries a coupon rate of 9% payable annually. The bond has a remaining maturity of 8 years. The current market yield (YTM) is 7%. Management is comparing this bond with a similar 4-year bond to assess price sensitivity to interest rate changes. Which bond has a higher duration and why?

17. A sole trader’s books showed opening capital of ₹3,20,000, drawings of ₹60,000 during the year, fresh capital introduced of ₹40,000, and closing capital of ₹3,80,000 as per the balance sheet. The business also reported total sales of ₹12,00,000 and total expenses of ₹10,50,000 according to the profit and loss account. Management wants to verify net profit using the capital comparison method. What is the net profit as per the capital method?

18. A company presents its trial balance as on 31st March. Included in the figures are: insurance paid ₹48,000 covering 12 months from 1st October, rent received in advance ₹36,000 for 9 months from 1st January, and depreciation for the year not yet recorded at 10% on machinery of ₹2,00,000. Management asks the accountant to pass all necessary year-end adjusting entries. What is the net effect on profit after all three adjustments?

19. A company’s current assets consist of cash ₹50,000, accounts receivable ₹1,50,000, inventory ₹3,00,000, and prepaid expenses ₹20,000. Current liabilities include trade payables ₹1,40,000, bank overdraft ₹60,000, and accrued liabilities ₹40,000. Management wants to assess both the current ratio and quick ratio. What is the quick ratio of the firm?

20. A manufacturing company set labour standards at 3 hours per unit at ₹40 per hour. In the current period, actual production was 600 units. Workers took 1,900 hours at an actual rate of ₹42 per hour. The HR manager wants to identify whether the deviation is due to rate or efficiency. What is the labour efficiency variance?