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Hbc2115:Intermediate Accounting I Question Paper
Hbc2115:Intermediate Accounting I
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2010
QUESTION ONE – (25 MARKS)
Maono Ltd has an authorized share capital of Shs750 million, made up of ordinary shares of Shs100 each. On 30th June 2010, the following balances were extracted from the books.
Shs(000)
Ordinary shares, fully paid 500,000 General reserves 400,000 Plant replacement reserves 300,000 Leasehold land & buildings at cost 655,000 Motor vehicles at cost 106,650 Plant & machinery at cost 544,000 Creditors 324,000 Bank 892,100 Stocks as at 1.7.09 106,400 Sales 2,805,250 Purchases 1,825,200 General expenses 194,560 Selling expenses 164,280 Administrative expenses 223,920 Profit and loss account bal b/f 292,460 Taxation, year to 30.6.09 70,000 Debtors 567,500 Interim dividends paid 24,500
Accumulated depreciation 1.7.09 Leasehold land & buildings 327,500 Plant & machinery 302,900 Motor vehicles 64,200 Provisions for doubtful debts 1.7.09 10,300 Cash 72,500 Patents 10,000 10%, short term treasury bills, 1yr Shorter investment 10,000,000
Additional information.
1. Stock at hand, 30.6.10, Shs114,500,000 2. Administrative expenses includes salaries of managing director and sales director of Shs100,000,000 and Shs60,000,000 respectively. 3. Provision for doubtful debts to be adjusted to 2% of the outstanding trade debtors as at 30.6.2010. 4. Provisions are to be made for: - Audit fees Shs3,150,000 - Non-executive director fees, Shs10,000,00. - Depreciation on leasehold land & buildings at 5% in cost, plant & machinery at 12.5% on cost and motor vehicles at 20 % on cost. 5. Taxation for the year ended 30th June 2010 is estimated at Shs76,000.000. 6. Interest on 10% Treasury bill is yet to be received. 7. Patents are to be amortized on straight line basis for 10 years. 8. Directors recommend a transfer of Shs100,000,000 to General Reserves and that dividends of Shs7 per share be paid.
Required: Prepare in a form suitable for publication and in compliance with the minimum requirements of the companies Act. (a) Income statement for the year ended 30th June 2010. (15 Marks) (b) Statement of financial position as at 30th June 2010. (10 Marks)
QUESTION TWO – (10 MARKS)
Magi Ltd undertook the following transactions during the month of march 2010.
MARCH 2010 PURCHASES
Date Quantity (Units) Price per Unit Shs
13 1,000 38 20 1,200 39
25 1,600 40 28 500 38
MARCH 2010 SALES Date Quantity (Units) Price per Unit Shs 3 350 46 4 500 45 16 400 46 24 900 43 26 1,900 44
Additional Information
1. Closing stock for the month of February 2010 was 2,500 Units valued at Shs90,000. 2. Customers made returns as follows: - 14.3.10, 75 units which had been sold on 3.3.10 - 27.3.10, 175 units which had been sold on 24.3.10. 3. Operating expenses for the month of march 2010 amounted to Shs7,500. 4. Company uses FIFO method of stocks valuation.
REQUIRED:
Income statement for the month ended 31.3.010. (10 Marks)
QUESTION THREE (25 MARKS)
Njora Ltd Assets for the period 2006 – 2010 were as follows:
ACQUISITIONS
Asset Date of Purchase Kshs Plant and machinery 1.4.07 10,000,000 Motor vehicles 1.4.06 6,000,000 Buildings 1.4.06 15,000,000 Equipments 1.4.08 2,000,000 Computers 1.4.08 3,000,000 Bank Account 1.4.06 1,800,000 Notes:
1. Depreciation of assets is done as follows: Asset Rate Method used Plant & Machinery 20% Reducing method basis Motor vehicles 20% Straight-line basis
Buildings 5% Reducing basis Equipments 30% Reducing basis Computers 40% Reducing basis 2. Assets disposals within the period 2006 – 2010 were as follows. Dates of Nature and Value Accumulated Depreciation Nature of Disposal/Sales Disposal Of Assets Disposed at Disposal date transaction and disposal Price Shs Shs. Received. 1.4.010 Moto vehicles Original cost 2,000,000 1,200,000 1,000,000 in part exchange of new vehicles worth 3m. Njora Ltd paid Cheque of 2m. 1.4.09 Buildings Original Cost 8m 1,200,000 9,000,000 – Cash disposal
1.4.09 Computers Original cost 2m 1,100,000 1,000,000 – Cash disposal
1.4.10 Equipments original Cost 1.5m 735,000 650,000 – Cash disposal
1.4.10 Motor vehicles Original cost 4m 3,200,000 1,600,000 – Cash disposal 3. Disposal sales proceeds were all received by cheque. 4. On 1.4.10 Njora Ltd acquired a small new modern state of the art office building at a cost of 12 Million shillings. Settlement done by cheque. Required: (a) Company’s Assets Accounts as at 1.4.010. (8 Marks) (b) Company’s Assets Accumulated depreciation account as at 1.4.10 (8 Marks) (c) Assets Disposals account as at 1.4.010. (6 Marks) (d) Explain why accounting Freehold Land is not regarded as a depreciable asset. (3 Marks)
QUESTION FOUR – (10 MARKS)
(a) Explain four basic assumptions underlying the preparation of financial statements. (4 Marks) (b) Outline six reasons that may make an investor(s) Purchase a business as a going concern over and above the total value of its assets. (6 Marks)
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