Get premium membership and access revision papers, questions with answers as well as video lessons.
Intermediate Accounting Ii Question Paper
Intermediate Accounting Ii
Course:Diploma In Business Management
Institution: Kca University question papers
Exam Year:2010
1
UNIVERSITY EXAMINATIONS: 2009/2010
STAGE V EXAMINATION FOR DIPLOMA IN BUSINESS MANAGEMENT
DAA 200: INTERMEDIATE ACCOUNTING II
DATE: APRIL 2010 TIME: 1½ HOURS
INSTRUCTIONS: Answer any THREE questions
Question One
a) Discuss the advantages and disadvantages of leasing as a mode of asset acquisition (8 Marks)
b) Differentiate between an operating lease and a finance lease (5 Marks)
c) Mathoiya construction co. ltd leases a bulldozer from prime movers ltd for two years beginning
March 1 2008. Mathioya agrees to pay prime movers Sh 480,000 a year , payable in advance on
march 1 each year. This bulldozer was acquired at sh 3000,000 and has a useful life of 10 years.
Given that the accounting periods for the two firms end on 31 Dec and the lease is an operating lease,
(i) Pass the relevant entries for prime movers to record the initial receipt of lease payments ,
and end of year entries to recognize revenue earned and depreciation (4 Marks)
ii) Pass the relevant entries for Mathioya to record the lease rental payments and rent expense
at the end of the first year. (4 Marks)
Question Two
a) What is a bond? (2 Marks)
b) Discuss the main classifications of bonds (8 Marks)
c) On 1 Jan 2009 Hard rock company issues Sh 10 million of 7% debentures dated 1 January 2009,
which pay interest each December 31. The debenture matures on 31 dec 2014,
2
(i) Pass the relevant entries to record the issue of the debenture and payment of interest at
the end of the year. ( assume Hard rock is a calendar year firm) (5 Marks)
(ii) A sh 40 million bond that pays interest of 6% semi annually (3%) is sold to yield the
market rate of 8% (4%).
The life of the bond is 3 years. Prepare an amortization schedule (7 Marks)
Question Three
a) State the defining features of liabilities and explain clearly the distinction between current and
noncurrent liabilities (6 Marks)
b) What is a contingency (2 Marks)
c) What are the three characteristics of a contingency (6 Marks)
d) Describe the four characteristics of a corporate form of entity that affect accounting for stock
holders equity (6 Marks)
Question Four
a) Assume that 100,000 is borrowed on a Sh100,000, 10% one year note payable that is interest
bearing and that another sh 100,000 cash is borrowed on a sh110,000 one year note that is
noninterest-bearing. For each note give the following
(i) Face amount of the note.
(ii) Principal amount
(iii)Maturity amount
(iv)Total interest paid (4 Marks)
b) On January 2009 Akinyi purchased a laptop that had listed price of 46500. She made a down
payment of Sh 6500 and accepted a one year non-interest bearing note for the difference. A
realistic level of interest for this level of risk was 12%. The accounting period ends Dec 31.
Required
Give all entries for purchase, interest and repayment of the note. (8 Marks)
3
c) Riakanau corporation was incorporated on January 1, 2008 it is authorised to issue 10,000 shares
of 8%, shs 100 par value preferred stock, and 500,000 shares of non par common stock with a
stated value of Shs 1 per share. The following stock transactions were completed during the first
year.
(i) Jan 10 Issued 80, 000 shares of common stock for cash at shs 5 per share.
(ii) Mar. 1 Issued 5,000 shares of preferred stock at Shs 108 per share
(iii)May 1 Issued 80,000 shares of common stock at Shs 7 per share
(iv)Sept 1 issued 10,000 shares of common stock for cash at shs 9 per share
(v) Nov 1 issued 1,000 shares of preffered stock for cash at Shs 112 per share
Required
Prepare the journal entries to record the above transactions (8 Marks)
Question Five
a) The following items are listed as liabilities on the balance sheet of Shelmith company on
December 31 2008.
Sh.000’
Accounts payable 420
Notes payable 750
Bonds payable 2,250
The accounts payable represent obligations to suppliers that were due to suppliers in January 2009.
The notes payable mature on various dates during 2009. The bonds payable mature on July 1 200
Required:
(i) Explain the general rule for determining whether a liability is classified as current or noncurrent?
(6 Marks)
(ii) Under what conditions may any of the liabilities be classified as noncurrent? Explain (4 Marks)
b) Quinton a sales director of Wyco limited, has a bonus arrangement with the company under
which he receives 15% of the net income (after deducting taxes and bonuses). In the current year
the income of the company before deducting either the provision for income taxes and the bonus
was $299750. The bonus is deductible for tax purposes and the effective rate of interest is 40%
4
Required
(i) Determine the amount of Quinton’s bonus (6 Marks)
(ii) Prepare the Dec 31 journal entry to record the bonus (which is yet to be paid) (4 Marks)
More Question Papers
Popular Exams
Return to Question Papers