Specialized Accounting Techniques Question Paper
Specialized Accounting Techniques
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2010/2011
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 303-A: SPECIALIZED ACCOUNTING TECHNIQUES (DAY +EVENING)
DATE: DECEMBER 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL questions
QUESTION ONE
Hayaki company Ltd. sells its goods in returnable containers. The following information is relevant:
1. The containers are purchased at Sh. 600 each. Customers pay a deposit of Sh. 700 per
container issued to them and a refund of Sh. 650 is made for each container returned
within two weeks.
2. On 1 January 2003, there were 15,000 containers in the company’s warehouse and
10,000 containers in customers’ hands the return period of which has not expired.
3. In the year ended 31 December 2003, the Company purchased 30,000 containers.
During the same period, the company issued 95,000 containers to customers. As at 31
December 2003, the customers still held 15,000 containers. The return period of 5,000
of the containers still held by customers as at 31 December 2003 had expired.
4. The company scrapped 5,000 containers and sold them at Sh.250 each. Apart from the
containers scrapped, 1,500 containers could not be accounted for and were written off.
5. In order to maintain the containers in proper condition, each container returned by a
customer is polished at a cost of Sh.4 each.
6. At the end of the year, the company values containers in the warehouse and in
customers’ hands at Sh.300 each for stock taking purposes.
2
Required:
(i) Containers stock account for the year ended 31 December 2003 (8 marks)
(ii) Containers suspense account for the year ended 31 December 2003 (6 marks)
(iii) Containers profit and loss account for the year ended 31 December 2003
(6 marks)
(Total: 20 marks)
QUESTION TWO
(a) Define “hire purchase” and Substance over form concept with regard to Hire Purchase (6 marks)
(b) Arnold Limited bought plant and machinery on hire purchase terms. The transactions involved the
following:
(i) The cash price Sh.4,000,000
(ii) Hire purchase interest 20%
(iii) Deposit 20% of cash price
(iv) 3 annual equal installments.
The purchase was effected on 1st January 2007.All payments were made. Depreciation is at a rate of
10% per annum on straight line.
Required:
(a) Assets and hire purchase company account.
(b) Profit and loss account extracts (use actuarial method to account for hire purchase interest)
(9 marks)
(Total: 15 marks)
QUESTION THREE
a) Explain the difference between a fixed price contract and a cost plus contract. (4 marks)
b) Jenga Ltd., is a construction company whose financial year ends on 31 March. The information
provided below was extracted from the books of the company in connection with the three
construction contracts undertaken by the company during the financial year ended 31 March 2005.
Contract
No.468
Sh.’000’
Contract No.469
Sh.’000’
Contract No.470
Sh.’000’
Contract price 3,600 4,800 2,500
Costs incurred up to 31 March 2004 1,800 3,000 1,500
Costs incurred during the year 600 1,000 500
3
Estimated total cost of the contract 3,000 5,200 2,300
Total billings to date 2,800 4,500 1,800
Total cash received to date 2,600 4,200 1,700
Total profit (loss) reported on the
contract to date 360
30 (20)
General administration expenses 60 120 30
Required:
Using the percentage of completion method of accounting for long-term construction contracts.
(i) Calculate the profit or loss realized on each contract for the year ended 31 March 2005. (6 marks)
(ii) Prepare profit and loss account extracts for each contract for the year ended 31 March 2005.
(4 marks)
(iii) Prepare balance sheet extracts as at 31 March 2005. (6 marks)
(Total: 20 marks)
QUESTION FOUR
ABC Ltd. purchases gas cookers at Sh.3,500 each and sells them through consignees at Sh.5,000 each.
Each consignee is entitled to a commission of 5% on sales from consigned goods and full
recovery from sales made of any expenses incurred on the consigned goods.
The following transactions took place between ABC Ltd. and XYZ., a consignee, during the
three-month period ended 30 June 2006:
1. ABC Ltd. sent 200 gas cookers to XYZ Ltd. and incurred the following costs:
• Package - Sh.16,000
• Insurance - Sh.30,000
• Transport - Sh.42,000
2. On receipt of the cookers, XYZ Ltd. incurred Sh.12,000 on unpacking and preparing the
cookers for sale.
3. XYZ Ltd. sold 160 cookers and incurred carriage out costs of Sh.18,000. Other costs
incurred by XYZ Ltd. in the period included casual wages Sh.15,000, advertising
expenses Sh.5,000 and storage cost Sh.12,000.
4. Some customers returned gas cookers to XYZ Ltd. after experiencing gas leakage.
XYZ Ltd. spent sh.10,000 to repair the cookers.
5. In order to sell the remaining 40 Cookers, they were all fitted with additional safety
gadgets at a total cost of Sh.12,000 which was paid by XYZ Ltd.
4
6. XYZ Ltd. sold 30 of the cookers fitted with the additional safety gadgets at Sh.6,000
each.
7. XYZ Ltd. sent ABC Ltd. an account sales on 30 June 2006 enclosing a cheque for
Sh.800,000.
Required:
The accounts listed below in the books of ABC Ltd. for the three-month period ended 30 June
2006.
(i) Goods sent on consignment account. (7 marks)
(ii) XYZ Ltd. account. (8 marks)
(Total: 15 marks)
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