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) a) The Asset register of Yoda Machines Account showed the following on 1st October 2013.
Machine Costs Shs. Million Date and Year of purchase A 5 01/10/2004 B 6 01/10/2006 C 7.5 01/10/2008 D 9 01/10/2011 E 10 01/10/2012
The machine depreciation policies are as follows:
Machine A and B on straightline basis assuming no scrap value over 10 years. Machine C on reducing balance basis at 20% on net book value. Machine D on sum of years digits for 5 years, with no scrap value Machine E on a straightline basis subject to a scrap value of 10% on cost over 5 years. Yoda Limited closes its books of accounts on 30th September every year.
Required:
i) Ledger account depreciation provision. (5 marks)
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ii) Prepare a table showing for each machine cost, depreciation to date and the net book value. (8 marks) b) Explain the following terms as used in accounting for assets: i) Useful economic life of an asset. ii) Useful economic value of an asset iii) Revaluation of an asset. iv) Residual value of an asset. (6 marks)
c) Sese Limited acquired a motor vehicle on 01/04/2013 for Shs.2 million on credit from Ezesha Motor Company to be paid in full on 31st March 2014. The market rates of interest for the year to 31st March 2014 were steady at 18% per annum. On 31st March 2014, Sese Limited paid Shs.2 million in full settlement of the motor vehicle.
Required:
i) Journal entries to record the above transactions in the books of Sese Ltd (4 marks) ii) Highlight at THREE ways in which enterprises acquire assets into their organizations. (3 marks) d) Highlight the merits and demerits of straightline techniques as a method of estimating depreciation on assets. (4 marks)
QUESTION TWO (20 MARKS)
The following is a summarized balance sheet of Chaka Limited as at
ASSETS 31/03/2013 Shs.’’
31/03/2012 Shs. ’ Non Current Assets 13,000 10,000 Less Depreciation (6,000) (4,000) 7,000 6,000 Investments 1,000 4,000 Current Assets: Stocks 14,000 8,000 Debtors 31,000 27,000 Cash & Bank - 2,000 53,000 47,000 Current Liabilities: Bank Overdraft 1,200 - Creditors 15,800 13,000 Taxation 3,800 4,600 Proposed Dividends 2,600 3,000 Share capital Shs.10 par value 15,000 10,000
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Share premium 4,000 3,000 Profit & Loss (Surplus) 10,600 13,400 53,000 47,000
Additional transactions for the year: 1. During the year ended 31st March 2-13, some fixed assets originally costing Shs.500,000 were sold for Shs.400,000. The amount was received in cash. The accumulated depreciation on these fixed assets at 31/03/2007 amounted to Shs.200,000. In addition, investments originally costing Shs.3,000,000 were sold for cash at their book value. 2. No interim dividends were paid during the year and taxes were paid on their due dates. 3. During the year ended 31/03/2013, the company made a one for two rights issue of 500,000 ordinary shares shss.10 par value at Shs.12 per share.
Required:
i) Chaka Limited cash flow statement for the year ended 31/03/2013. (20 marks)
QUESTION THREE (20 MARKS)
Cord Limited records of transactions for the month of April 2013 was as follows:
Purchases: Shs. 01/04/13 Balance on Hand 100 units @ Shs.50 04/04/13 Balance on Hand 400 units @ Shs.52 11/04/13 Balance on Hand 300 units @ Shs.54 18/04/13 Balance on Hand 200 units @ Shs.53 26/04/13 Balance on Hand 500 units @ Shs.52 30/04/13 Balance on Hand 200 units @ Shs.56 Sales 05/04/13 300 units @ Shs.75 12/04/13 200 units @ Shs.80 27/04/13 800 units @ Shs.85 28/04/13 100 units @ Shs.94 Required:
a) Compute the value of closing stock and cost of goods sold using: i) First In, First Out (FIFO) method. (5 marks) ii) Last In, First Out (LIFO) Method (5 marks) b) Balances and transactions affecting the control accounts of Green House Limited for the month of November 2013 are listed below
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Shs. Balances as at 01/11/2013 Sales Ledger 32,000 (debit) 128 (credit Purchase Ledger 17,520 (credit) 118 (debit) Transactions during November 2013: Sales on credit 92,000 Receipts from Customers 64,480 Discounts allowed 3,296 Contra Settlements 6,092 Allowances to customers 3,440 Bills receivable Cash receipts from Credit Customers 4,402 Refunds to Customers for over payments on accounts 106 Customers cheques dishonoured 978 Balances as at 30/11/2013 Sales Ledger 136 (credit) Discounts allowed to customers but subsequently disallowed 40
Required:
i) Debtors control account for the month of November 2013. (10 marks)
QUESTION FOUR (20 MARKS)
a) The following relates to Tangaza Limited assets as at 01/12/2010 upon incorporation as a Limited Liability Company.
Asset Acquired Cash (Shs.) Land 5,000,000 Motor Vehicles 4,000,000 Buildings 15,000,000 Equipment 1,000,000 Furniture & Fittings 2,000,000
The company opted for assets depreciation policy as follows:
Motor Vehicles 20% on cost Buildings 2% on cost Equipment 12.5% on reducing balance Furniture & Fittings 10% on cost
In the year ended 30th November 2013, the following transactions occurred:
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A motor vehicle with an original cost of Shs.2,000,000 was disposed in cash for Shs.1,200,000 on 30th September 2013. Equipment item with an original cost of Shs.500,000 was traded in for Shs.300,000 on 30th June 2013 in part exchange for a new equipment costing Shs.800,000. The difference was topped up in cash. Furniture and fittings item with an original cost of Shs.400,000 were donated on 30th August 2013 to Soweto Orphan Children’s Home, free of charge in line with the Company’s social responsibility to the disadvantaged in society.
Required: Prepare the Assets Disposal Account, for Tangaza Limited as at 30th November 2013. (7 marks)
b) Explain clearly the following categories of Assets, giving examples: i) Intangible assets (3 marks) ii) Real Assets (1 mark) iii) Financial assets (1 mark)
c) Highlight why depreciation is not charged against the asset of land. (2 marks) d) Coco Limited had excess funds with their Bank Account. The company ordered Keke Brokers to purchase 500, Shs.50,000 Mutindwa Bonds on 01/06/2013. Mutwindwa Bonds were issued on 01/03/2012 componated at 10%, 5 year bonds interest payable on 31st August and on 28th February. The bonds were bought on same day at 102% plus accrued interest. The company made a short investment in Mutindwa Bonds awaiting a project commencement for funds. Coco Limited paid Shs.40,000 to Keke Brokers as brokerage fees.
Required:
i) Journal entries to record the above transaction in the books of Coco Limited. (6 marks)
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