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Hbc2116:Intermediate Accounting Ii Question Paper
Hbc2116:Intermediate Accounting Ii
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2012
QUESTION ONE (30 MARKS) Momo Ltd has the following shareholders equity section as at 30th September 2012.
SHS.
Preference shares shs. 100, par, 8% cumulative and voting 10,000 shares issued and paid up. 1,000,000
Ordinary shares shs. 20 par 100,000 shares Authorized, 70,000 shares issued and paid up. 1,400,000
Preference share premium 50,000
Ordinary share premium 700,000
Retained Earnings 3,000,000
Total shareholders funds 6,150,000
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Other information 1. There are no dividends arrears on preference shares. Company made a profit after tax of 6 million shillings for the year to 30.9.12. 2. In the year ended 30th September 2012, Directors of Momo Ltd declared dividends as follows: 20% cash dividends on ordinary share capital 10% stock dividend on ordinary shares. The fair or market value of ordinary share on the date of stock declaration was shs. 5 per share. A participating of dividend of shs.10 to each preference share held as at 30.9.12 and preference divided paid. In order to familiarize shareholders with the company new products, the board declared product dividend of one litre of perfume to every ordinary share held as at 30.9.12. the cost of perfume is shs. 28 per litre pack and the wholesale price is shs. 40 per the one litre pack. Any gain or loss is already included in the earning reported. This excludes shares from stock dividends. Product dividends were computed at wholesale price. Ignore withholding taxes. AGM was held on 22.10.12 and approved dividends as proposed by the directors. Required: a) Compute the dividends payable. ( 4 Marks) b) Show the amount of dividends capitalized as permanent capital. ( 2 Marks) c) Journal entries to record dividends payable . ( 4 Marks) d) Journal entries to record payment of dividends and capitalization. ( 4 Marks) e) Calculate the gains made on disposal/sale of stocks by way of dividends. ( 3 Marks) f) Determine the issue price per share of ordinary shares and preference shares at time of offer or issue by the company. ( 4 Marks) g) Discuss the rights entitled to ordinary shareholders. ( 5 Marks) h) Highlight four types of dividends issued by the Kenyan companies. ( 4 Marks)
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QUESTION TWO ( 20 MARKS) Njaa Ltd issued a five year bond with a face value of shs. 800,000, 8% coupon rate of interest on 1st January 2008. The Bond is issued to yield( Market Rate) at 10%, with interest payable annually on 30th December. Bond issue cost shs. 100,000
Required: a) Calculate the issue price for the 8%, five year Bonds. ( 2 Marks) b) Show hjournal entries to rcord issuance of bonds on 1.1.2008. ( 2 Marks) c) Prepare schedule for ammortisation premium discount any. Use straightline method. (10 Marks) d) Prepare journal entries to record the first interest payment on the bonds on 30.12.08. ( 3 Marks) e) Show the position of the bond in the balance sheet of Njaa as at 31.12.08. ( 3 Marks) QUESTION THREE ( 20 MARKS) The following information was extracted from the books of Nono Ltd as at 31st August, 2012.
Dr. Cr. Shs. Shs. Stock 1.9.11 500,000 Buildings 16,000,000 Debtors 11,900,000 Purchases 28,000,000 Administration Expenses 10,160,000 Creditors 4,180,000 Miscellaneous income 6,650,000 Sales 62,000,000 General Reserves 1,000,000 Land 20,000,000 Retained Earnings 5,000,000 Bank 13,240,000 Cash 240,000 Share capital 1,000,000 ordinary shares shs. 20 par value 20,000,000 10% preference share shs 20, per value 500,000 shares 10,000,000 15%, 5 year Bank loan 10,000,000
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urnture’s 2,500,000 Plant & Machineries 14,000,000 Sales & Marketing expenses 1,790,000 118,830,00 118,830,00
Other transactions Stocks as at 31.8.12 shs. 600,000 Provide shs. 2,000,000 as depreciation on fixed assets. Included in Account of sales is shs. 8,500,000 on account of VAT ( value added tax) and no entry have been made in the books. Interest on Bank loan has also accrued and has not been paid Shs. 1,175,000 and shs. 750,000 to be accrued as directors fees and audit fees respectively. Corporate tax to be determined at 30% On 30.6.12 a Kenyan obtained orders in court to be paid shs. 1,750,000 for injuries by company vehicle at 12% interest. As at the close of books the company had not discharged this liability. No adjustments had been made in the books. As at 31.8.12 warranty claims against products defects amounted to shs. 1,320,000. No adjustments had been made in the books of the company. No dividends were declared but directors proposed to transfer shs. 2,000,000 to General Reserves. Salaries, Items of NSSF, NHIF, Income tax, Helb, SACCO remittances, union dues amounting to Sh300,000 for the month of August have not been adjusted in the books nor remitted. Required: a) Income statement for the year ended 31st August, 2012. ( 10 Marks) b) Balance sheet as at 31.8.12. ( 10 Marks)
QUESTION FOUR (20 MARKS) a) (i) Define a capital lease. ( 2 Marks) (ii) Highlight the characteristics of a capital lease. ( 3 Marks)
b) (i) Differentiate between a liability and a commitment. ( 2 Marks)
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(ii) Distinguish between liabilities depended on results and third party liabilities, give examples. ( 4 Marks)
c) Explain with examples, forms of loss contingencies as has been highlighted by the international accounting standards Board. ( 6 Marks) d) Discuss three ways of accounting and reporting loss contingencies. ( 3 Marks)
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