Get premium membership and access revision papers, questions with answers as well as video lessons.
Got a question or eager to learn? Discover limitless learning on WhatsApp now -
Start Now!
Caa 304: Specialized Accounting Techniques Question Paper
Caa 304: Specialized Accounting Techniques
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
1
UNIVERSITY EXAMINATIONS: 2008/2009
THIRD YEAR STAGE II EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 304: SPECIALIZED ACCOUNTING TECHNIQUES
DATE: AUGUST 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer All Questions
QUESTION ONE (25 MARKS)
a) Define royalty and explain the accounts required in the royalty accounts (10 Marks)
b) ABC Ltd holds the patent rights for a new type of electric heater. On 1st January 2005, ABC
Ltd. Granted to RST Ltd. a license to manufacture and sell heaters. The agreement provided
that RST Ltd. was to pay a royalty of Sh. 20 per heater sold subject to a minimum annual
payment of Sh. 20,000 to be paid annually on 31st December. Any short workings could be set
off against royalties in excess of the minimum in the next year, but not afterwards.
The number of heaters sold was as follows:
2005 800
2006 1,200
2007 900
2008 1,300
You are required to show the entries in relevant accounts for the year 2005 to 2008 in the books of
RST Ltd. (15 Marks)
2
QUESTION TWO (25 MARKS)
a) Define consignment and explain the main features of consignment accounts. (10 Marks)
b) On 1st September 2008 James of Nairobi consigned to David of London, 50 bales of
merchandise. The merchandise costs James Sh. 30,000; carriage to port paid by him, was Sh.
3,000. David paid freight at Sh. 20 per bale, dock dues and landing charges sh.500 and marine
insurance Sh. 700 Brokerage was 2% and commission 2 ½%.
On 31st December 2008, David completed sales of the whole of this merchandise realizing Sh.
40,000. He settled the net proceeds by a bill at three months which was duly met on maturity.
Required
i.) Write the ledger accounts in the books of James to record the above
transactions (10 Marks)
ii.) Make out David’s Account Sales (5 Marks)
QUESTION THREE (25 MARKS)
a) Distinguish in the light of International Accounting Standard Number II (IASII) or in your
comparable words, the two accounting methods of accounting for long term contracts. (10
Marks)
b) Starwars Ltd has been in business as road contractors for a number of years The following
detail relate to three uncompleted contracts in the company’s books for the year ended 30
September 2008.
Contract number 41 42 43
Shs. Shs. Shs.
000 000 000
Cost of work 30 Sept. 2008
All certified 2,995 2,728 1,464
Value of work to 30 Sep, 2008
As certified by contractee’s
Architects 3,850 2,150 1,530
Progress Payments invoiced by
3
30 September 2008 3,300 1,770 1,200
Estimate of:
- Final cost including costs of
Rectification and guarantee
of work 3,350 3,860 6,700
- Final contract price 4,280 3,080 8,900
Note:
The cost of work to 30 September 2008 had been determined after crediting unused materials and
written down value of plant in use.
Required
Prepare a statement for the managing Director showing your calculations for each contract of the work
in progress at 30 September 2008 and the profit or loss included their and also show how an extract of
the information which should appear in the balance sheet for work in progress at 30 September 2008.
(15 Marks)
QUESTION FOUR (25 MARKS)
a)
i.) State the main reasons for the companies’ motives of investing in shares of other
companies. (6 Marks)
ii.) Briefly describe the concept of average clause (4 Marks)
b) The warehouse and part of the office block of Sunshine Ltd were destroyed by fire on June
2008. The goods in stock were insured to the value of £72,000. The amount of the claim for
stock lost in the fire will have to be calculated from what information is available since most
of the stock records were also destroyed.
For the financial year ended 31st December 2007, the following figures were used in the profit
calculation:
£
Sales 492,000
Sales returns 4,000
Purchases 358,000
Stock 1st January 2007 90,000
Stock 31st December 2007 110,000
4
Additional Information:
i) The stock at 1st January 2007 included £8,000 representing goods which had been reduced
in value at the stock-taking and were all sold during 2007 for the same reduced amount.
ii) The stock at 31st December 2007 included £10,000 representing goods which were reduced
to half cost at the stock-taking. Of these £8,000 were sold at the reduced amount during the
first-quarter of 2007 and the balance was scrapped without any value.
iii) The salvage value of stock of 12th June 2008 was £46,000 but the rest of the stock was
completely destroyed.
iv) Purchases from 1st January to 12th June 2008 amounted to £128,000 and there were returns
to the suppliers of £2,000.
v) Sales for the same period totaled £201,000 and the returns from customers were £4,000.
vi) The mix of products sold up to 12th June 2008 remained essentially the same as in 2007.
There have been no alterations to normal selling prices and the writing down of stock
values takes place once at annual stock-taking.
Required
Calculate the amount the company should claim for the loss of stocks. (15 Marks)
More Question Papers
Popular Exams
Return to Question Papers