Intermediate Accounting I Question Paper
Intermediate Accounting I
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
FIRST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 102 : INTERMEDIATE ACCOUNTING I (DAY &EVENING CLASS)
DATE: AUGUST 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
a) Techno Mpya ltd. is implementing a new computer system. It has recently purchased a number
of computers and printers at a cost of Sh 1,200,000. The supplier of the equipment charged Sh
136,000 for installation of the equipment and an additional Sh 44,000 for the installation of
special electrical wiring of the computers. After testing the equipment, it was found necessary
to make some modifications costing Sh 96,000. The machines were insured against fire and
theft at a premium of Sh 19,600 per annum. A maintenance agreement was signed at Sh
140,000 per annum.
Required:
Calculate the total cost to be capitalized for the computers and the printers. (5 Marks)
b) At the beginning of the financial year on 1st April 2009, a company had a balance on plant
account of Sh 3,720,000 and on provision for depreciation of plant account of Sh 2,054,000.
The company’s policy is to provide depreciation using the reducing balance method applied to
the fixed assets held at the end of the financial year at the rate of 20% per annum.
2
On 1st September 2009 the company sold for Sh 137,000 some plant which it had acquired on
31st October 2005 at a cost of Sh 360,000. Additionally, installation cost totaled Sh 40,000.
During 2007 major repairs costing Sh 63,000 had been carried on this plant and in order to
increase the capacity of the plant, a new motor had been fitted in December 2007 at a cost of Sh
44,000. A further overhaul costing Sh 27,000 had been carried out during 2008.
The company acquired new replacement plant on 30th November 2009 at a cost of Sh 960,000,
inclusive of installation charges of Ksh 70,000.
Required:
i. The provision for depreciation of plant at 31st March 2009 (10 Marks)
ii. The disposal account (5 Marks)
QUESTION TWO
In the draft accounts for the year ended 31st October 2009 of San Fan Thames, a garage proprietor, the
balance at bank according to the cash book was Sh 89,468.
Subsequently the following discoveries were made:
1. Cheque number 176276 dated 3rd September 2009 for Sh 31,084 in favour of G Abdi ltd has
been correctly in the bank statement, but included in the cash book payments as Sh 30,184.
2. Bank commission charged of Sh 16,956 and bank interest charged of Sh 10,910 have been
entered in the bank statement on 23rd October 2009, but not included in the cash book.
3. The recently received bank statement shows that a cheque of Sh 2,931 received from T
Nyapola and credited in the bank statement on 9th October 2009 has now been dishonoured and
debited in the bank statement on 26th October 2009. The only entry in the cashbook for this
cheque records its receipt on 8th October 2009.
4. Cheque number 177145 for Sh 1,510 has been recorded twice as a credit in the cash book.
5. Amount received in the last few days of October 2009 totaling Sh 189,560 and recorded in the
cashbook have not been included in the bank statement until 2nd November 2009.
6. Cheques paid according to the cash book during October 2009 and totaling Sh 39,580 were not
presented for payment to the bank until November 2009.
3
7. Traders’ credits totaling Sh 21,010 have been credited in the bank statement on 26th October
2009, but not yet recorded in the cash book.
8. A standing order payment of Sh 1,500 on 17th October 2009 to East African Publishers has
been recorded in the bank statement but is not mentioned in the cash book.
Required:
a) Prepare a computation of the balance at bank to be included in San Fan Thames Balance Sheet
as at 31st October 2009. (10 Marks)
b) Prepare a bank reconciliation statement as at 31st October 2009. (5 Marks)
QUESTION THREE
a) Kilimo ltd is considering upgrading its billing system. Kilimo completed a feasibility study that
considered several software systems before deciding whether to go ahead with the upgrade.
Kilimo subsequently decided to upgrade its billing system.
The development will take six months to complete. Kilimo will use internal resources to
customise the software.
The total cost is expected to be 250,000, including 10,000 for the feasibility study, 25,000 to
train the personnel who will be using the billing system and 215,000 of labour time for those
personnel who were dedicated to the customisation and upgrade of the billing system
Required:
As per the requirements of IAS 38 on Intangible assets, explain the treatment of each cost I
ncurred by Kilimo ltd. (5 Marks)
b) In relation to international accounting committee “framework for the preparation and
presentation of financial statements.”
a) What is the objective of financial statements? (2 Marks)
b) What factors affect financial position of an enterprise? (3 Marks)
c) “Qualitative characteristics are the attributes that make the information provided in
financial statement useful to users”
4
Discuss the main qualitative characteristics with reference to the providers of
risk capital to an enterprise. (10 Marks)
QUESTION FOUR
The following trial balance was extracted from the books of Mzee Salim, a sole trader as at 30 June
2009.
Shs Shs
Capital 25,054,200
Drawings 2,829,600
Debtors and creditors 10,587,200 7,092,400
Sales 116,148,400
Purchases 86,820,200
Rent and rates 776,000
Electricity 49,000
Salaries and wages 11,273,500
Provision for doubtful debts at 1 July 2008 434,900
Stock at 1 July 2008 12,654,800
Insurances 34,400
General expenses 786,600
Bank balance 2,116,400
Motor vehicles or cost 11,300,000
Provision for depreciation of motor vehicles at 1
July 2008
4,920,000
Proceeds of sale of motor vehicle 350,000
Motor vehicle expenses 772,2000
Freehold premises at cost 14,000,000 _______
153,999,900 153,999,900
Notes:
1. Stock at 30 June 2009 was valued at Shs 13,376,800
2. Electricity due on 30 June 2009 was Shs 120,000
5
3. Prepaid rates and insurances amounted to Shs 18,000 and Shs 19,400 respectively as at 30 June
2009
4. Of the debtors, Shs 167,200 are regarded as bad and --- provision for doubtful debts is to be
adjusted to 5% of the remaining debtors.
5. Depreciation on motor vehicles is to be provided for at 10% per annum on straight line method.
6. Rent receivable at 30 June 2009 was Shs 15,000.
7. On 1 January 2009, a motor vehicle which had been purchased for Shs 1,400,000 on 1 July 1994
was sold for Shs 350,000. The only record of the transaction is the credit of Shs 350,000 to the
proceeds from the sale of motor vehicle account. Full depreciation is provided in the year of
acquisition and none in the year of disposal.
Required:
a) Trading, profit and loss account for the year ended 30 June 2009. (10 Marks)
b) Balance sheet as at 30 June 2009. (10 Marks)
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