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Bac201: Accounting For Liabilities And Equity Question Paper
Bac201: Accounting For Liabilities And Equity
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2012
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
INSTITUTION BASED PROGRAMME (IBP) DECEMBER SESSION
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 201: ACCOUNTING FOR LIABILITIES AND EQUITY
DATE:
Thursday 3rd May 2012
TIME:
11.00a.m – 1.00p.m
INSTRUCTIONS: Attempt ALL questions
Question One
a) Name and explain three classifications of current liabilities and give an example of each.
[6marks]
b) A company has decided to provide a bonus to its outgoing managing director.
There are two plans.
i)
Bonus to be equal to 0.25% of the banks income after deducting the income tax
but before deducting bonus.
ii)
Bonus to be equal to 0.25% of the banks income after deducting the income tax
and the bonus.
Assuming the income before tax and bonus is shs. 7,500,000 compute the bonus under
each of the above plan. Assume tax rate is 20%.
[6marks]
c) In the year ended 31st December 2011 ABC Ltd carried out several transactions involving
notes payable. The company uses a 360day year in making all interest calculations.
Listed below are the transactions relating to notes payable.
Jan 1 borrowed 20 million from Holden investment by issuing a 60 day 10% note payable
to Holden as evidence of indebtedness.
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Feb. 18 bought office equipment from Super office Suppliers. The invoice amounts was
shs 18 million and supper supplier accepted as full payment of 10% payment, three
months note for this amount.
March 2 paid Holden note for shs 20 million plus interest.
Required
Prepare journal entries for the above transactions.
[6marks]
[Total 18marks]
Question Two
XYZ Ltd issued shs 1000,000 9%, 4 year bonds on January 1, 2012. Interest is payable semi-
annually on June 30 and December 31. The yield rate is 10%. The company uses effective
interest of amortization.
Required
a) Calculate the prices of the bond and provide bond issue proceeds as a % (percentage) of
face value.
[4marks]
b) Prepare bond amortization schedule for the first two years.
[6marks]
c) Prepare journal entries to record the bond issue and the first and second interest payment
together with amortization.
[6marks]
Question Three
a) Differentiate between an operating lease and a capital lease.
[4marks]
b) Differentiate between basic EPS and diluted EPS.
[2marks]
c) Outline and briefly explain the components of published accounts.
[10marks]
[Total 16marks]
Question Four
Belida owns a florist shop. She does not keep proper books of accounts but has supplied you
with the following information for the financial year ended 30 November 2011.
Summarized Bank account for the year ended 30.1. 2011
Shs
shs
Balance 1st Dec 2010
648 Payment to creditors
28,361
Takings banked
51,723 Rent
3,400
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Rates
940
Insurance
822
Advertising
346
Heating & Lighting
1,825
Sundry expenses
268
Motor expenses
1,348
Drawings
11,167
____ Balance 30 Nov. 2011
3,894
52,371
52,371
All the business takings have been paid into the bank account except for the following:
Shs
Wages
7,140
Drawings
1,385
The following additional information is also available:
2010
2011
Stock
340
410
Debtors
72
48
Creditor
210
346
Rent owing
-
600
Rates prepaid
74
86
Fixtures at valuation 600
540
Van at valuation
8,000
6,000
Cash in hand
117
211
Required
a) Belinda’s income statement for year end 30 November 2011 and a statement of financial
position as at that date.
[16mark]
b) What are the advantages of maintaining complete record: Use the above case of Belinda.
[4marks
[Total 20 marks]
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