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Bac:101 Fundamentals Of Accounting Two Question Paper
Bac:101 Fundamentals Of Accounting Two
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2014
INSTRUCTIONS:
Answer ALL the questions
QUESTION ONE (30 MARKS)
Maggie, Nelius and Patto are in a partnership sharing profits and losses in the ratio 4:3:2 respectively after crediting themselves with a 5% interest on capital and a salary of she 30000, sh.50000 and sh.70000 per month respectively. Their trial balance for the year ended 30th September 2013 is as follows:
ACCOUNT TITTLE AMOUNT DR (sh’000) AMOUNT CR (sh’000)
Capital accounts: Maggie
Nelius
Patto 10,000
6,000
4,000
Current accounts: Maggie
Nelius
Patto 1,000
800
200
Plant and machinery at cost 12,000
Motor vehicle at cost 10,000
Furniture and fittings at cost 6,000
Provision for depreciation: Plant and machinery
Motor vehicle
Furniture and fittings 4,000
2,000
2,000
Debtors and Creditors 8,000 6,000
Drawings : Maggie
Nelius
Patto 2,000
1,000
400
Additional information:
a) The net profit for the year before appropriation is sh. 7,500,000
b) Stocks at 30th September was sh. 2,500,000
c) Salaries and wages in arrears amount to sh. 640,000 while rent and rates paid in advance is 300,000
d) General expenses paid in advance amount to sh. 440,000 while electricity and water in arrears is sh. 200,000
e) Depreciation is to be provided as follows:
i. Plant and machinery 15% on cost
ii. Motor vehicles 25% on cost
iii. Furniture and fittings 10% on cost
f) Provision for bad and doubtful debts is to be maintained at 15% of debtors
g) Interest on drawings is to be charged at 10%
h) Patto retired on 30th September 2013 and the following was agreed:
i. Maggie and Nelius are to continue in partnership
ii. Assets valuation:
Plant and machinery sh. 7,200,000
Motor vehicles sh. 6,200,000
Furniture and fittings sh. 4,800,000
Stock sh. 2,000,000
Goodwill sh. 4,000,000
i) Patto was to be paid cash of sh. 1,000,000 and take a motor vehicle valued at sh. 1,200,000. The balance of the amount due is to be treated as a loan to the partnership at an interest of 15% p.a.
j) The new profit sharing ratio for Maggie and Nelius is to be 3:2 respectively
k) Goodwill is to be written off in the new partnership.
Required: As at 30th September 2013, prepare;
i. Partner’s appropriation account ( 7 marks)
ii. The partner’s current and capital accounts ( 12 marks)
iii. The partner’s statement of financial position after retirement (11 marks)
QUESTION TWO ( 15 marks )
Elson ltd issued 4,000,000 shares of sh. 10 each payable as follows:
March 2011: Application 5
April 2011: Allotment 3
Aug 2011: Call 2
Applications were received for 4,400,000 shares. The applications were allotted on a pro-rata basis.
All monies were received except:
i. A shareholder with 20,000 shares paid call money together with allotment
ii. A shareholder with 10,000 shares failed to pay the calls. Shares with arrears were forfeited but re-issued at a discount of 30%
Required: To record the above transactions draw the following ledger accounts:
a) The bank account ( 3 marks )
b) Application and allotment account ( 2 marks)
c) Share capital account ( 2 marks)
d) Call account (2 marks)
e) Call in advance account (1 mark)
f) Call in arrears account ( 1 mark)
g) Forfeited shares account (1 mark)
h) Forfeited shares re-issued account (2 marks)
i) Share premium account (1 mark)
QUESTION THREE (15 marks)
The following balances have been extracted from the books of Naivasha Dealers, a small scale manufacturing enterprise as at 31.12.2013
ACCOUNT TITTLE AMOUNT SH.”000”
Stocks as at 1st January: Raw materials
Work in progress
Finished goods 7,000
5,000
6,900
Purchases of raw materials 38,000
Factory overheads : variable
Fixed 16,000
9,000
Direct labor 28,000
Administrative expenses: rent and rates
Lighting
Stationery and postage
Staff salaries 19,000
6,000
2,000
19,380
Sales 192,000
Plant and machinery at cost 30,000
Motor vehicles at cost 16,000
Provision for depreciation: plant and machinery
Motor vehicles 12,000
4,000
Creditors 5,500
Debtors 28,000
Drawings 11,500
Balance at bank 16,600
Capital as at 1st January 2013 48,000
Provision for unrealized profit as at 1st January 2013 1,380
Motor vehicle running costs 4,500
Additional information:
i. The stocks as at 31.12.2013 were
SHS.”000”
Raw materials 9,000
Work in progress 8,000
Finished goods 10,350
ii. The factory output is transferred to the trading account at factory cost plus 25% as factory profit
iii. Depreciation is provided at the rate shown below on the original cost of a fixed asset held at the end of each financial year:
Plant and machinery 10%
Motor vehicle 25%
4) Amounts accrued at 31.12.2013 for direct labor amounted to sh.3,000,000 and rent and rates prepaid at 31.12.2013 amounted to sh.2,000,000
REQUIRED:
a) Manufacturing and income statement for the year ended 31.12.2013 and the financial position as that date (15 marks)
QUESTION FOUR (10 MARKS)
a) State five limitations of using ratios to evaluate a business enterprise performance (5 marks)
b) Explain the importance of cash flow statement to a business enterprise (5 marks)
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