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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:2013
QUESTION ONE (30 MARKS)
a) Osman mills, Nairobi consigned 5000kgs of cooking fat to Omamo Wholesalers of Kisii. Each kg of fat costs Shs.80. Osman Mills paid Shs.500 as carriage, Shs.2,500 as freight and shs.2,000 as insurance in transit. During transit, 500kgs were accidentally destroyed which the insurance company paid directly to the consignors Shs.25,000 in full settlement of the claim. Three months later, Omamo Wholesalers reported that 3,500kgs of fat was sold at Shs.95 per kg; and expenses were: Godown rent Shs.5,000, Salesman salary Shs.7,500, Commission 5% of sales. Omamo wholesalers also reported a loss of 20kgs due to leakage. This is an expected loss (normal loss) Required: Record the above entries in the necessary accounts. (15 marks) b) Explain clearly what is meant by the following terms: (15 marks0 i) Purchases of shares cum-dividend ii) Purchase of Investment Ex-Interest iii) Minimum rent iv) Short workings v) Sub tenancy agreement vi) Consignor vii) Consignee viii) Royalties payable
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QUESTION TWO (20 MARKS)
Khaemba, Owino and Wawira were partners in a manufacturing and retail business and shared profits and losses in the ratio 2:2:1 respectively. Given below is the balance sheet of the partnership as at 31st March 2001: Balance sheet as at 31st March 2001
Assets Shs. Shs. Non Current assets: Fixed assets 465,000 Current Assets: Stock 294,000 Debtors 209,000 503,000 968,000 Capital and Liabilities: Capital accounts: Khaemba 160,000 Owino 140,000 Wawira 200,000 500,000 Current accounts: Khaemba 65,300 Owino 49,000 Wawira 53,000 167,300 667,300 Current Liabilities: Bank Overdraft 48,000 Trade Creditors 252,000 300,700 968,000
Additional information: 1. On 1st April 2001, Wawira retired from the partnership and was to start a business as a sole trader while Khaemba and Owino continued in partnership. 2. On retirement of Wawira, the manufacturing business was transferred to him while Khaemba and Owino continued with retail business. The assets and liabilities transferred to Wawira were as follows:
Shs. Shs. Fixed assets 260,000 306,000 Stocks 166,000 157,000 Debtors 172,000 165,000 Creditors 156,000 156,000
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Wawira obtained a loan from a commercial Bank and paid into the partnership the net amount due for him.
3. On retirement of Wawira from the partnership, goodwill was valued at Shs.200,000 but was not to be maintained in the books of the partnership of Khaemba and Owino. 4. After retirement of Wawira on 1st April 2001, Khaemba and Owino agreed on the following terms and details of the new partnership: a. Khaemba and Owino to introduce additional capital of Shs.48,000 and Shs.68,000 respectively. b. Each partner was entitled to interest on capital at 10% per annum with effect from 1st April 2001 and the balance of the profits be shared equally after allowing for annual salaries of Shs.72,000 to Khaemba and Shs.60,000 to Owino 5. The profit of the new partnership before interest on caitals and artners’ salaries as Shs.240,000 for the year ended 31st March 2002. 6. The profits made by the new partnership increased stocks by Shs.100,000; debtors by Shs.90,000 and bank balance by Shs.50,000. 7. Drawings by the partners in the year were Khaemba Shs.85,000 and Owino Shs.70,000.
Required: a) Profit and loss and appropriation account for the year ended 31st March 2002. (4 marks) b) Capital accounts for the year ended 31st March 2002. (4 marks) c) Current accounts for the year ended 31st March 2002. (4 marks) d) Balance sheet of the new partnership as at 31st March 2002. (8 marks)
QUESTION THREE (20 MARKS) a) The following transactions took place during the two years ended 31st March 19_5:
19_4 £
19_5 £ Cash sales 32,022 43,770 Installments Sales 282,978 397,980 New TV sets Purchased 231,000 250,379 Cash collections on instalments contracts: Initial deposit 94,326 132,660 Monthly instalments: 19_4 Sales 64,413 92,079 :19_5 sales 83,940 Stocks at 31st March : New sets at cost 54,600 72,015
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Required:
i) Prepare trading accounts in respect of cash sales for each of the years ended 31st March, 19 _4 and 31st Mach, 19_5. (5 marks) ii) Show the gross profit on instalment sales for each of the years ending 31st March, 19_4 and 31st March19_5. (5 marks) b) Ogopa Limited leased a section of Karura Forest to Ogoplet Limited (charcoal makers) on 1st January 1994 at a minimum rent of Shs.30,000 merging into a royalty of Shs.150 per ton with the power to recoup short workings during the first 3 years of the lease only. Output over the next 5 years was 90, 150, 270, 170 and 280 tonnes respectively. Required: i) Show the above transactions as they would appear in the books of Ogopa Limited . (10 marks)
QUESTION FOUR (20 MARKS)
The following transactions took place in the books of Maua Limited during the year ending 31st December 2013:
January 1st Purchased 200 6% debentures of Shs.100 each of Nchiru Limited (interest payable December 31st and June 30th at Shs.98 ex-interest) February 1st Purchased 300 £ 1 ordinary shares of Kaithe Limited for £24 (Shs.48) each. March 31st Kaithe Company: a) Paid a six months interim dividend of 10% b) Made a bonus issue of 1 for 4 April 30th Sold 50 of the debentures at Shs.101 Cum-interest June 30th Received the debentures interest July 1st Sold 100 of the ordinary shares at £2.50 (Shs.50 each) September 30th Kaithe Company: a) Paid a 5% final dividend b) Gave the right to shareholders to apply for one new share for every three held at the price of £2.00 (Shs.40) per share payable in full on application. November 15th Sold one half of the rights at £0.60 (Shs.12) each November 20th Exercised the remaining rights
Required:
i) The investment accounts in the books of Maua Limited. It is not the company policy to apportion dividends. Ignore withholding tax, brokerage fees, stamp duty and other expenses. Workings should be shown. (20 marks)
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