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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:2012
QUESTION ONE (25 MARKS)
The chief accountant of CBK Ltd has encountered difficulties while accounting for fixed assets and the related depreciation in the company`s draft accounts for the year ended 30 April 2012. He has decided to seek your professional advice and presented the following balances of fixed assets as at 1 May 2011.
Acquisition Accumulated Depreciation
Cost (shs. Depreciation sh. Rates %
Furniture 900,000 300,000 12.5 Trucks 3,525,000 1,470,000 25 Plant and machinery 7,387,500 4,462,500 10 Land 2,775,000 - Nil. Buildings 2,925,000 292,500 2.5
The following additional information was also available:
1. 2. Depreciation is fully charged in the year of acquisition and none in the year of disposal 3. A three year old machine acquired for sh. 187,500 was sold for sh. 15,750. 4. It has been decided to adjust and charge depreciation on buildings at 4%
2
5. A used delivery truck purchased three years ago for sh. 248,250 was traded in during the year at a value of sh. 157,500 in part exchange of the new delivery truck costing sh. 450,000. 6. Land, buildings and machinery were acquired for sh. 1,350,000 from a company that went out of business. At the time of acquisition sh. 90,000 was paid to have the assets revalued by a professionally qualified valuer. The revaluation indicated the following market values.
Sh. Land 900,000 Buildings 600,000 Machinery 300,000
Required: A schedule of movement of fixed assets as requested by the Chief Accountant for inclusion in ( 15 Marks)
QUESTION TWO ( 15 MARKS)
(a) Explain, clearly the:
(i) Qualitative and quantative characteristics/features of good financial information. ( 3 Marks) (ii) Explain in detail FIVE accounting concepts underlying the preparation of financial statements, ( 5 Marks) (b) (i) Highlight the components of cash flow statement. ( 4 Marks) (iii) Explain clearly cash and cash equipments. ( 3 marks)
QUESTION THREE (15 MARKS)
On 1.9.2011, Nene Ltd paid shs. 20,000,000 to Rono and Koech brokers, for purchases of 200, shs. 1000,000 bounds in Kakuzi Ltd. Kakuzi bonds are compensated at 10%. 5 years, interest payable semi-annually on 31.8. and 28.2. Nene Ltd closes its books of accounts on 31st December.
The bounds were bought on the same day and the company paid shs. 20,000 as brokerage fees.
3
Other transactions
On 1.5.2012, Nene Ltd sold 120, shs. 100,000 Kakuzi bounds at 104% plus accrued interest and paid shs 40,000 as brokerage fees. On 1.8.2012 Nene Ltd sold the remaining 80, shs. 100,000 kakuzi bonds at 102% plus accrued interest paying shs. 30,000 as brokerage fees.
Required: (i) Journal entries to record Nene Ltd short-term investment in Kakuzi bonds on 1.9.11. (2 Marks) (ii) Journal entries to record Nene Ltd closing of books with regard to interest on short-term investments on 31.12.11 ( 2 Marks) (iii) Journal entries to record receipt of interest on 28.2.12 ( 2 Marks) (iv) Journal entries to record partial sales of shorter investments on 1.5.2012 and on 1.8.12. ( 4 Marks)
QUESTION FOUR ( 15 MARKS)
Two sisters Naliaka and Nekesa, formed a business to import and sell new brand of cosmetic locally. The following is a summary of their transactions for the first 6 months of trading, ending 30th June, 2012.
January 2012
Bought 1200 sets @ shs 300 per set sold 1000 sets @ shs 500 per set.
February 2012
Bought 1500 sets @ shs. 400 per set.
Sold 1600 sets @ shs. 600 per set
March 2012
Bought 1800 sets @ shs. 380 per set
Sold 2100 sets @ shs. 700 per set.
April 2012
Bought 2500 sets @ shs. 400 per set
Sold 2500 sets @ shs. 680 per set
May 2012
Bought 2300 sets @ shs. 400 per set
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June 2012
Bought 2000 sets @ shs. 420 per set
Sold 2200 sets @ shs. 720 per set In the half year period ending 30th June 2012. Business expenses amounted to shs. 680,000. Each partner (sister)
Calculated her gross profit made in the first 6 months and their figures do not seem to agree. On investigation it was discovered that Naliaka used FIFO (first in first Out) method and Nekasa used LIFO ( Last in first Out) method.
Required:
(a) Determine the value of the sock using both FIFO and LIFO method. ( 6 Marks) (b) Trading, profit and loss account, using FIFO and LIFO. (4 marks) (c) Highlight circumstances or reasons that may account for net realizable value on stock being less than the original cost of the same stocks. ( 5 Marks)
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