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Hbc2104:Introduction To Accounting Ii Question Paper
Hbc2104:Introduction To Accounting Ii
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2014
QUESTION ONE – (30MARKS)
a) The following balances were extracted from the books of Kariobangi Ltd as at 31 March 2014:
Sh.
Ordinary shares of Sh.20 each fully paid 600,000 8% preference shares. 20% each fully paid 100,000 Share premium account 80,000 6% loan stock 100,000 Trade creditors 148,000 Trade debtors 330,000 Sales 4,800,000 Purchases 4,220,000 Discount allowed 5,000 Discount received 13,000 Buildings – cost 500,000 - accumulated depreciation 50,000 Fixture and fittings – cost 640,000 - accumulated depreciation 256,000 Stock: 1 April 2013 420,000
2
Returns outwards 80,000 Establishment expenses 130,000 Administration expenses 56,000 Selling and distribution expenses 167,000 Bad debts written off 4,000 Provision for bad debts 18,000 Retained profit – 1.4.2013 362,000 Goodwill 160,000 Bank overdraft 25,000
Additional Information:
1. Depreciation is to be provided annually on the cost of non-current assets held at the end of the year as follows: - Buildings at 20% and fixtures and fittings at 10% 2. The trade debtors balance includes Sh.10,000 due form Winfred who has now been declared bankrupt. Hence, it has been decided that the debt be written off as a bad debt. 3. The provision for doubtful debts as at 31 March 2014 is to be 5% of trade debtors. 4. Establishment expenses prepaid at 31 March 2013 amounted to Sh.4000 5. Administration expenses accrued as at 30th March 2014 amounted to Sh.7000 6. Provide for interest on loan stock for the year. 7. Closing stock was valued at Sh560,000 8. The company directors propose that the preference share dividend be paid and 10% dividend be paid to the ordinary shares.
Required Prepare an income statement and statement of financial position for the period ended 31 March 2014. (20 Marks) b) Discuss the importance of completing record of organization which keeps incomplete records. (10 Marks)
QUESTION TWO – (20 MARKS)
(a) Explain the meaning of “Statement of affairs” (2 Marks) (b) Explain the main features of manufacturing accounts. (3 Marks) (c) You are provided with the following information about KATANA Co. LTD. Number of ordinary shares 100,000 Nominal value per ordinary shares Shs.2 Market price per ordinary share Shs.2 Net profit before corporation tax Ksh,50,000 Rate of corporation tax 50%
3
Dividend rate 10% Required to calculate: (i) Dividend cover (2 Marks) (ii) Dividend yield (2 Marks) (iii) Earnings per share (2 Marks) (iv) Price earnings ration (2 Marks)
(d) Discuss the limitations of ratio analysis. (7 Marks)
QUESTION THREE – (20 MARKS)
The trial balance of “A” and “B” partnership as at 31.12.2002 is as follows
DR. Shs. “000” CR. Shs. “000”
Land and buildings 3000
Motor vehicles 2000
Furniture 1500
Capital A 4000
B 3000
Current A/C A 500
B 1000
Drawings A 500
B 500
Sales 10000
Purchases 6000
Stock 1000
Debtors 3000
Bank 1000
Expenses 2000
Creditors 3000
21000 21000
4
Additional information:
“A” and “B” share profits in the ration 2:1 respectively after charging interest on capital at 10%, partners drawings at the rate of 6% and partners salary at Shs.100,000 and Shs.80,000 per annum respectively. Closing stock amount to Shs.3,000,000. Depreciation is charged at the rate of 2.5% on land and buildings, 10% on motor vehicle and 15% on furniture as at 31/12/2002
Required
(a) Trading, profit and loss account for the year ended 31.12.2002. (7 Marks) (b) Appropriation account (3 Marks) (c) Partners current account (5 Marks) (d) Balance sheet as at 31.12.2002 (5 Marks)
QUESTION FOUR – 20 MARKS)
(a) Discus the role of the international financial reporting standards committee (IFRS) in the accounting discipline. (3 Marks) (b) What is the purpose of control accounts? (3 Marks) (c) Abel, Brian and Chris are in partnership with capitals of sh400,000, Sh.200,000 and Sh.400,000 respectively. Their partnership agreement provide that: (i) Partners earn an interest of 10% per annum on their capital a/cs (ii) Brian is entitled to a salary of Sh.100,000 per annum (iii) Interest is to be charged on drawings at the rate of 5% per annum. (iv) Profits and losses are to be shared on the basis of capital accounts
During the year ended 31 December 2013, the partnership made a profit of Sh.400,000. The balances on the partners current accounts (all credits) were Abel Sh.60,000, Brian Sh.42,000 and Chris Sh.53,000. The partners’ drawings for the year amounted to Sh.16,000, Sh.14,000 and Sh.10,000 respectively.
Required 1. Profit and loss appropriation account. (8 Marks) 2. Partners current accounts as at 31.12.13 (4 Marks) 3. Partners’ capital accounts as at 31.12.13 (2 Marks)
5
QUESTION FIVE – (20 MARKS)
(a) Discuss the purpose of preparing a manufacturing account. (5 Marks) (b) Why is it necessary to prepare a cash flow statement? (5 Marks) (c) Distinguish between each of the following pairs of terms (i) Balance sheet and statement of affairs. (2 Marks) (ii) Non-current assets and current assets (2 Marks) (iii) Capital expenditure and revenue expenditure (2 Marks) (d) Describe any two concepts of accounting which are generally applied in recording and interpreting financial transactions. (4 Marks)
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