Acct 422: International Accounting Question Paper

Acct 422: International Accounting 

Course:Bachelor Of Commerce

Institution: Kabarak University question papers

Exam Year:2010



KABARAK UNIVERSITY
UNIVERSITY EXAMINATIONS
2009/2010 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF COMMERCE
COURSE CODE: ACCT: 422
COURSE TITLE: INTERNATIONAL ACCOUNTING

INSTRUCTIONS
1. Answer all questions in Section A and two questions in Section B.
2. Show all your workings
3. Answers should be very precise and concise
4. Marks are shown at the end of the question.

PLEASE TURNOVER



SECTION A

QUESTION 1

Mining Inc. Based in Washington DC has two divisions.

1. Kisumu Mining Division-Operates a mine containing a rich body of raw diamonds.
2. Washington Processing Division-processes the raw diamonds into polished diamonds
used in industrial applications.

The costs of the Kisumu Mining Division are: -
• Variables costs - Ksh. 2,000 per 1b of raw industrial diamonds.
• Fixed costs - Ksh. 4,000 per 1b raw industrial diamonds.

Mining Inc. has a corporate policy of further processing in Washington all raw diamonds
mined in Kisumu, Kenya. Several diamond-polishing companies in the Kenya buy raw
diamonds from other local mining companies at Ksh 8,000 per pound. Assume that the
current foreign exchange rate is Ksh 80 = US1(1USdollar).ThecostsoftheWashington(U.S.)ProcessingDivisionare:VariablecostsUS100 per 1b of polished industrial diamonds.
• Fixed costs -US600per1bofpolishedindustrialdiamonds.Assumethatittakestwopoundsofrawindustrialdiamondstoyieldonepoundofpolishedindustrialdiamonds.Polisheddiamondssellfor4,000 per pound.

Required:
i. Compute the transfer price (in U.S)foronepoundofrawindustrialdiamondstransferredfromtheKisumuMiningDivisiontotheU.S.ProcessingDivisionundertwomethods:a)300U.S.) for each division of
Mining Inc. under each transfer-pricing method in requirement
(i) above. (8 marks)
iii. Assume the corporate income tax rate is 20% in Kenya and 35% in the United States.
Compute the after-tax operating income (in U.S.)foreachdivisionundereachtransferpricingmethodinrequirement(i)above.(4marks)(Total20marks)QUESTION2a)Explainthemeaningofthefollowingtermsasusedinforeigntransaction.i.ForeignExchange(2marks)ii.MonetaryItems(2marks)iii.Nonmonetaryitems(2marks)b)b)TheTrialBalanceoftheKenyanBranchofHomePLC,aUnitedStates(US)co.asat31122009wasasfollows:DrKshCr.KshTangibleFixedAssists(atcost)600,000Provisionfordepreciation90,000Debtors330,000Stockat1/1/2009280,000Creditors260,000Goodsfromheadoffice(HO) 940,000Sales1,440,000Expenses130,000BankandCash180,000HeadOfficeCurrentAccount670,000Totals2,460,0002,460,000Closingstockat31/12/2009wasKsh200,000Fixedassetsarepresentedasperexchangeratesrulingondateofacquisition:CostAccumulatedexchangeKshs.Depreciationrate750,00075,000US 1= Ksh 70
150.000 15,000 US1=Ksh.80TotalperTrialBalance600,00090,000Exchangeratesduringtheyearwereasfollows:Kshs.=US 1
01-01-2009 70
31-12-2009 80
Average for 2009 75

In the head of office ledger, balances at 31/12/2009 included:
Goods to branch US6,000KenyanBranchaccountUS 3,000

Required:
Translate the Kenyan Branch trial Balance at 31-12-2009 into USusingthetemporalmethodandpreparethefinalaccountsinUS. (14 marks)

(Total 20 marks)

SECTION B
QUESTION 3

a) State the problems hindering harmonization of accounting standards.
(5 marks)
b) Briefly explain the benefits of using international accounting standards in Kenya.
(10 marks)

(Total 15 marks)

QUESTION 4

a) Describe any four approaches that multinational corporations take to accommodate
their foreign readers and indicate the suitability of each.
10 marks)
b) Discuss three problems experienced by multinational corporations in reporting.
(5 marks)
(Total 15 marks)



QUESTION 5

Discuss any five methods of performance evaluation followed by multinational
corporations. (15 marks)






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