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Hbc2211:Advanced Accounting I Question Paper
Hbc2211:Advanced Accounting I
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2011
QUESTION ONE – (30 MARKS)
Kimeu, Mambo and Rono have been in partnership sharing profits and losses salaries as follows:
Shs Kimeu 150,000 Mambo 90,000 Rono 90,000
On 30.11.2010, they decided to convert the partnership into a limited liability company, on the following terms.
(i) The company is to be called Kimero Ltd. (ii) Goodwill is to be valued at Sh1,350,000 (iii)other assets are to be valued as follows: Freehold property Shs2,700,000 Furniture and fittings Shs240,000 Motor vehicle Shs600,000 (iv) ambo’s loan is to be conerted into share caital at ar. artners are to be directors of Company. (v) Shares are to be issued to partners at par in respect of their equity holding as at 30th November 2010. The company was incorporated on 1.12.10 but the books of accounts were not written even after incorporation.
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(vi) On 30.11.2011 trial balance in form of partnership accounts showed the following position:
Shs000 Shs000
Capital Accounts Kimeu 1800 Mambo 900 Rono 900 Stocks 30.11.2010 1440 Cost of sales 3600 Administrative expenses 6000 Selling expenses 600 Accounts and audit expenses 300 Incorporation expenses 120 Drawings during the year Kimeu 150 Mambo 90 Rono 90 Freehold property at cost 2580 Furniture and fittings at cost 600 Motor vehicles at cost 1200 Accumulated Depreciation Furniture and fittings 360 Motor vehicles 360 Accounts receivables/payables 900 720 Loan Mambo (10% interest) 900 Prepayments and accruals 60 30 Bank Account ______ 120__ 11,790 11,790
Notes:
1. Depreciation is to be provided on cost as follows Free hold property 4%. Furniture and fittings 10% p.a Motor Vehicles 20% p.a 2. Preliminary/formation/incorporation expenses be written off against the profits. 3. Goodwill of Kshs350,000 to be written off against profits.
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REQUIRED
(a) Journal entries to record assets revaluations and issue of shares to partners and the ledger accounts for the same. (10 Marks) (b) Income statement for Kimero Ltd for the year 30.11.11 (10 Marks) (c) Statement of financial position as at 31.11.11. (10 Marks)
QUESTION TWO – (20 MARKS)
Samrat supermarkets have a central warehouse plus head office in Nairobi and four branches in Nyeri, Meru, Machakos and Nakuru. Branches are notified of expected selling prices of goods sent from head office and prices can only be reduced by an agreed procedure, the head office being informed by details. The branch Managers get a commission of 2% of turnover but from this is deducted 25% of the cost of stock shortages.
All accounting records are kept at Head office. Credit up to an agreed limit can be given at the branches; the head office sends invoices and statements following advice from branches. Accounts are kept in such a way as to enable a actual stock (at selling prices) to checked at intervals. Though head office has access to informal on cost price as well as selling price of goods sent to branches, for other purposes an average mark up of 50% on cost is assumed. The following figure relate to Meru Branch for the year to 31st July 2011.
Selling price in Shs000
Opening stock 1.8.010 (cost Shs606,000) 912 Goods from head office (cost 5,430,000) 8,223 Transfers to other branches 75 Transfers from other branches 60 Returns to head office 120 Increases in selling prices for goods already at branch as notified by head office 43 Reductions in selling price as notified by head office 225 Credit sales 1065 Returns by customers to branch 30 Cash sales 6,620 Closing stock 1,071
REQUIRED
(a) (i) Branch stock account (at selling prices) (8 Marks) (ii) Mark up account. (5 Marks)
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(b) What are the likely challenges in evaluating the performance of a branch manager? (7 Marks)
QUESTION THREE – (10 MARKS)
Mr. Patel enterprises assembles sewing machines, which he consigns to various agents on commission basis, usually at 10% on all cash sales plus 5% all credere on all credit sales. The following relate to transactions between Patel and Mr. Kinoti, his Meru agent, for the 1st quarter ending 31.3.2011.
2.1.11 Stock balance with consignee Shs Comprises of 40 machines at an invoice price @4000/= 160,000 15.1.11 Patel sends goods on consignment of 200 machines @4000/= 800,000 15.1.11 Patel paid transport charges 40,000 `` `` paid insurance 20,000 20.1.11 Kinoti paid storage charges 30,000 20.1.11 Kinoti paid insurance 20,000 31.1.11 Kinoti sells 100 sewing machines @ 6000/= in cash 600,000 28.2.11 Kinoti allows discounts 25,000 28.2.11 Kinoti sells 50 machines at 6500/= in cash. 325,000 15.3.11 30 Machines were damaged which Kinoti was compensated for by Insurance 90,000 20.3.11 Kinoti sold damaged machines 45, 000 23.3.11 Kinoti remits by bank, transfer to Patel 700,000 25.3.11 50 machines sold on credit 350,000 27.3.11 Kinoti paid for general expenses. 15,000 29.3.11 Kinoti paid received cash from debtors 330,000 30.3.11 Kinot write offs bad debts on debtors. 20,000
REQUIRED Consignment accounts to record the above transactions. (10 Marks)
QUESTION FOUR – (10 MARKS)
(a) Distinguish the differences between cum interest and ex-interest term with regard to investments accounting. (2 Marks) (b) Highlight four characteristics of a good investment. (4 Marks) (c) Kaku Ltd bought Shs600,000, 10% bonds in Sasa Ltd on 1.3.2010 at 90 cum interest, interest is payable half yearly on 30.6 and 31.12. Required: Show the above investments entries in Kaku Ltd ledger for the year ended 31.12.2010. (ignore taxation) (4 Marks)
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