Acct 411: Advanced Financial Accounting I Question Paper
Acct 411: Advanced Financial Accounting I
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2010
QUESTION ONE (COMPULSORY)
William consigned four (4) crates, each containing 30 identical balls valued at sh.15, 000
per crate to his agent Sammy on 1st April 2008. Other information was as follows:
• Insurance and transport costs paid by William amounted to ksh 1,500 and ksh 2,500
respectively
• Sammy paid insurance of ksh. 2,000, storage charges of ksh 3,000 and delivery
charges (marketing) ksh 500
• By the end of the period Sammy had sold 90 balls for ksh 72,000. He sent a cheque
for the amount due after deducting his agreed sales commission of 10% on sales
(a) Provide journal entries and ledger accounts in the books of:
i. Consignor (William) (18marks)
ii. Consignee (Sammy) (8marks)
(b) Explain the rights and obligations of the consignee (9marks)
QUESTION TWO:
On January 1st, 2007, Londian ltd opened a branch operation in the nearby community of
Molo. During the year that followed, the home office incurred the following transactions
in connection with this newly formed branch:
Year 2008:
Jan. 1st 2008: Transferred several items to the Molo branch:
• Cash- $30,000
• Inventory- $36,000 (cost)
• Equipment- $122,000 (cost).
June. 2nd, 2008: Transferred inventory costing $18,000 to the Molo branch.
July.1st, 2008: Paid 2008 property taxes of $5,000 assed on assets held by the Molo
branch.
Sept. 1st, 2008: Transferred inventory costing $26,000 to the Molo branch.
Dec.31st, 2008: Allocated a $6,000 portion of general corporate expenses to the Molo
branch.
Dec.31st, 2008: received cash transfer from Molo branch.
During this same period, the Molo branch recorded the following events:
Year 2008:
Jan. 10, 2008: Received initial transfer from the home office.
Jan. 20th, 2008: Paid $4,000 rent expense for the year.
Feb. 1st, 2008: Sold half of inventory on hand for $27,000 cash.
April. 1st, 2008: Sold remaining inventory for $33,000 cash.
May. 1st, 2008: Paid miscellaneous expenses of $7,000.
June 5, 2008: Received shipment of inventory.
July. 6th, 2008: Received communication concerning property tax payment.
Sept. 9th, 2008: Received shipment of inventory.
Oct. 1st, 2008: Sold the June inventory for $26,000 in cash (a FIFO costing system is
used).
Nov.1st, 2008: Paid miscellaneous expenses of $4,000.
Dec.22nd, 2008: Transferred $63,000 cash to the home office.
Dec.31st, 2008: Calculated and recorded depreciation expense of $4,000.
Dec, 31st, 2008: Received communication from home office concerning expenses
allocation.
Required:
a) Prepare all the necessary journal entries and ledger accounts for both the branch and
the home office. (20marks)
b) Prepared an income statement for the Molo branch for the period ended 31st
,
December 2008. (13marks)
QUESTION THREE:
• Kab ltd sells goods in containers which are charged to customers at $2 each.
Customers are credited with $1.25 for each container returned within four months.
• On 31st December 2007, there were 1,580 containers on the company’s premises and
5,520 containers, the time limit for the return of which has not expired, were held by
customers.
• During 2008:
(a) Kab ltd purchased 8,700 containers for $1 each.
(b) 26,460 containers were charged to customers.
(c) 26,720 containers were returned by customers and credited to them.
••• On 31st December 2008, customers held 6,000 containers, the time limit for the return
of which had not expired
••• For purpose of the annual accounts of kab ltd, all stocks of containers on the
company’s premises and returnable containers in the possession of customers are
valued, at $1 each.
Required:
(a) Journal entries for the above information for the year 2008
(18marks)
(b) Containers stock account and the containers trading accounts for the year 2008
(15marks)
Note: the accounts should provide additional memorandum columns in which
quantities are to be shown
QUESTION FOUR:
Bungoma ltd wishes to expand their transport fleet and have purchased three heavy
Lorries with a list price of $18,000 each. Bungoma ltd has negotiated hire purchase
finance to fund this expansion, and the company has entered into a hire purchase
agreement with Garage ltd on 1st January 2001. The agreement states that Bungoma ltd
will pay a deposit of $9,000 on 1st January 2001, and two annual instalments of $24,000
on 31st 2001, 2002 and final instalment of $20,391 on 31st December 2003.
Interest is calculated at 25% on the balance outstanding on 1st January each year and paid
on 31st December each year. The depreciation policy of Bungoma ltd is to write off the
vehicle over a four year period using straight line method and assuming a scrap value of
$1,333 for each vehicle at the end of its useful life
The cost of the vehicle to Garage ltd is $14,400 each.
Required:
Prepare journal entries, ledger accounts, profit and loss account and balance extract for
the years 2001, 2002 and 2003 in the books of Bungoma ltd.
(33marks)
QUESTION FIVE.
(a) Differentiate between CUM interest and Ex-interest price quotation of financial
securities. (6 marks)
(b) Lake Nakuru Ltd purchased Ksh. 1,200,000, 10% NCC bonds on 1st September 2005,
at 90% CUM interest. Interest is payable Semi-annually on every 30th June and 31st
December. Assume Lake Nakuru Ltd financial years end on every 30 September.
Required:
i. Prepare Journal entries and a three columnar ledger in the investor''s books of
account (L. Nakuru Ltd) for the period ending 30th September 2006.
(22 Marks)
ii. Assuming that the price was quoted as ex-interest" provide journal entries to
record the disposal of the above bonds by NSE (seller) as at 15t September 2005.
(5 Marks)
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