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:2013
QUESTION ONE (30 MARKS)
The following information was extracted from the books of Memo Ltd as at 1.9.011
Non- current assets Cost Accumulated depreciation Net book value Shs.000 Shs. 000 Shs. 000 Plant and machinery 12,000 6,000 6,000 Motor vehicles 10,000 3,600 6,400 Furniture 2,000 750 1,250 Equipment 6,000 3,600 2,400 Computers 1,500 750 750 Buildings 20,000 4,000 16,000 Land 10,000 ------- 10,000
Company depreciation policy is as follows; Plant and machinery 10% straight line Buildings 4% straight line Motor vehicles 20% reducing balance Furniture and fittings 12 ½ % straight line Equipment 20% straight line Computers sum of years digits 3 years useful economic life
Other transactions in the year to 31.8.12
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? On 1.3.12, motor vehicle bought on 28.2.09 for shs 3 million was traded in for a new vehicle costing shs.4.5 million, at a trade in value of shs. 1.8 million with the company paying for the difference in cash. ? On 31.12.011, furniture with an original cost of shs 300,000 which had been bought on 1.9.07, was donated to the Mituntu orphaned children home free of charge in line with the company policy of social responsibility. ? On 31.8.12, land was valued by Githongo brightvaluers to a new value of shs. 12.5 million. Required; a) Journal entries to record above transactions. (4 Marks) b) Determine depreciation charge on fixed assets for the year ended 31.8.12. (10 Marks) c) Assets disposal account. (6 Marks) d) Fixed assets movement schedule for the year to 31.8.12. (10 Marks)
QUESTION TWO (20 MARKS) Kepo Ltd financial position as at 31.12.10 and 31.12.11 was as follows. 2010 2011 2010 2011 shs. 000 shs. 000 shs. 000 shs. 000 Share capital 10,000 20,000 fixed assets 40,000 79,600 Retained earnings 44,000 63,000 Share premium --------- 30,000 depreciation (15,400) (22,000) 15% loan --------- 20,000 investments --------- 20,000 Creditors 16,000 18,000 stock 32,000 46,000 Overdraft 5,000 -------- debtors 18,400 20,400 Bank ------- 7,000 75,000 151,000 75,000 151,000
? The profit for the year ended 31.12.11 was shs. 30 million and an interim dividend of shs 11 million was paid. No final dividend and taxation should be ignored. ? Fixed assets which had cost shs. 10 million and which had been depreciated by shs. 4 million were sold for shs. 5,400,000.
Required:
Prepare cashflow statement for the year ended 31.12.011. (20 Marks)
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QUESTION THREE (20 MARKS)
a) Explain in your own words the following terms and concepts as used in accounting i. Journal entry of business events and transactions. (2 Marks) ii. Recoverable amount and realizable amounts. (2 Marks) iii. Financial assets and real assets. (2 Marks) iv. Relevant cost of an asset and present value of an asset. (2 Marks) v. Economic value of an asset and salvage value of an asset. (2 Marks) b) Highlight in details, five accounting concepts, principles and fundamentals assumptions underlying the preparation of financial statements and accounts (10 Marks)
QUESTION FOUR (20 MARKS)
Two sisters, Karambu and Kathure formed a business on 2.1.12. to import and sell a new brand televisions locally. Below is a summary of their transactions for the 1st quarter of trading period.
January 2012
Bought 1200 pieces at shs. 5,000 per piece
Sold 1000 pieces at shs.16,000 per piece
February 2012
Bought 1500 pieces at shs. 7,500 per piece
Sold 1400 pieces at shs 16,500 per piece
March 2012
Bought 1800 pieces at shs. 8,000 per piece
Sold 2000 pieces at shs 16,500 per piece.
In an effort to determine the value of closing stock each sister did her own computations but their total could not agree. However, Kathure having graduated with B.Com honours from MUCST realized that Karambu used FIFO method whilst Kathure used LIFO methods.
a) Determine the value of closing stock using; i. FIFO method. (3 Marks) ii. LIFO method. (3 Marks) b) If the operating expenses for the1st quarter of Karambu/Kathure enterprise amounted to shs 30 million, determine the net profit/income for the quarter period using LIFO and using FIFO. (6 Marks) c) Highlight the advantages of the following stock valuation methods: i. LIFO ii. FIFO d) Highlight reasons that may account for net realizable value on stocks being less than the original costs of the same stocks. (4 Marks)
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