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Accounting For Equities And Liabilities Question Paper
Accounting For Equities And Liabilities
Course:Bachelor Of Education
Institution: Kenyatta University question papers
Exam Year:2008
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
SELF-SPONSORED
PROGRAM - SCHOOL BASED
EXAMINATION FOR THE DEGREE OF BACHELOR OF EDUCATION
BAC 201: ACCOUNTING FOR EQUITIES AND LIABILITIES
DATE: WEDNESDAY, 30TH APRIL 2008
DATE: 4.30 P.M. -6.00 P.M.
INSTRUCTIONS:
ANSWER ALL QUESTIONS.
Question one
a) Explain the circumstances under which the Kenya Comapanies Act permits use of
the share premium Account
(4 marks)
b) Kimberly limited offered Ksh 5,000,000,7% bond maturing in 5 years with
interest payable semi-annually. the bond yields 6%
Required:
1.
Journal entries to record the issue of the bonds.
(4 marks)
11.
Prepare journal entries to record interest expense and amortization at the end of
the first year under straight line method
(6 marks)
Question two
(Total 10 Marks)
a) Explain the criteria that is used to classify a lease as a capitallease.( 5 marks)
b) Kosovo limited entered into lease agreement dated January 1st 2008. the lease
terms is 5 years non-cancellable.
The fair market value of the lease equipment is sh 3,000,000 and has no residual value.
The lease has no renewal option, thus will be lessor's property at the end of the lease.
The discount rate for Kosovo limited, the leasee, and of the lessor is 10%. Assuming this
lease qualifies to be a financial lease:
1.
Record the journal entry to recognize the lease in the books of the leasee
(2
marks)
11.
Record the journal entry to record the first lease payment
(3 marks)
Ill.
Prepare a lease amortization schedule for Kosovo limited
(10 marks)
(Total 20 Marks)
Question three
. -
The following details were extracted from the books of Shirikisho Stores for the year
ended 31st december, 2007.
i.
Sales are made mainly on credit basis. No records of sales have been made but Sh
100,000 has been received in cash from persons to whom goods had been sold.
11.
Payments to suppliers during the year amounted sh 720,000.
lll.
Expenses settled during the year were: Rent sh 25,000 by cheque, and general
expenses sh 18,000 by cheque.
IV.
The owner of the stores took sh 1,000 cash every week for personal use (for 52
weeks) .
v.
The fixed assets constituted fixtures only valued at sh 80,000 on 31st December
2006. these were depreciated at 10% per annum on a straight line basis.
VI.
Year end balances were as follows:
31/12/2006
3111212007
Ksh
Ksh
Debtors
110,000
132,000
Creditors (Trade)
40,000
65,000
Rent Owing
-------
5,000
Bank Balance
113,000
305,000
Cash Balance
8,000
1,000
Stock
159,000
170,000
Required:
Prepare our income statement for the year ended 31st December 2007.
(15 marks)
3 (b)Explain the reasons that may lead to incomplete records
(5 marks)
(Total 20 Marks)
Question four
(a)Explain the following :-
i.
Scrip issue
(2 marks)
11.
Right issue
(2 marks)
111.
Bonus issue
(2 marks)
IV.
Stock split
(2 marks)
(b)The net income of Kahawa Limited for the year ended 31st December, 2006 was sh
Ksh 4,000,000 and the number of shres outstanding were 1 million. The company had
two convertible debentures issues outstanding. One has a par value of Sh 100 (Total sh
100 million) convertible into 200,000 ordinary shares. The other with a par value of sh
100 (Total Sh 2 million) is convertible to 320,000 ordinary shares in the year 2007. the
tax rate is 30%
Required:
i.
Compute the adjusted net income after dilution
(2 marks)
11.
The average number of shares adjusted for dilutive (extra) shares
(2 marks)
111.
Basic earnings per share
(3 marks)
IV.
Diluted earnings per share
(5 marks)
(Total 20 Marks)
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