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Financial Accounting Question Paper

Financial Accounting

Course:Master Of Business Administration In Finance

Institution: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING
EXAMINATION FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATION
BAC 500 – FINANCIAL ACCOUNTING

INSTRUCTIONS
Answer ALL the Questions.

1. Young Traders Ltd has an authorized share capital of shs 6 000 000 divided into
200,000 ordinary shares of shs 20 each and 100,000 preference shares of shs 20 each.
The preference shares have a dividend of 10 per cent. In the year just ended the
ordinary shares have received a dividend of sh 8 each and it is the normal trend that
dividends over the years have been growing at a steady rate of 10 percent. The
company's cost of capital is 16 percent.
You have been approached by Nyakua Ltd who have an interest in acquiring Young
Traders Ltd and they want you to advise on the value to be offered for Young Traders
Ltd. (10 marks)

2. The authorized share capital of Complex Machining Ltd is shs 5 000 000 divided into
60,000 5 percent preference shs of shs 20 each and 190, 000 ordinary share of shs 20
each: 40, 000 preference shares and 60,000 ordinary shares have been issued and
fully paid.
The balances from the ledge accounts as at December 31st 2009 before the
appropriation of the balance on the profit and loss are shown below:
Dr (shs) Cr (shs)
Preference share capital 800,000
Ordinary share capital 1,200,000
Freehold land & Building 801,000
Machinery and plant 2,243,520
Furniture, Fixtures & Fittings 96,640
Premium on shares 280,000
General Reserve 520,000
Profit prior to incorporation 207,120
5% debentures (repayable 2011) 1,200,000
Quoted Investments 195,680
Accounts Receivable &
Payments
571,020
Accounts payable & Accruals 224,060
Inventory 925,180
Bank 227,580
Marketable securities 100,000
Allowance for doubtful debts 55,720
Debentures Redemption Reserve 80,000
Profit & Loss Account 593,720
5,160,620 5,160,620
The balances shown for freehold land and buildings, Machinery and plant and furniture
fixtures and fittings are the net amounts after providing for depreciation on the diminishing
value up to 31st December 2009. From the accounts of these items it is ascertained that the
cost of the assets was : freehold land and buildings shs 956,800; machinery and plant shs
4,659,600; Furniture, fixtures and Fittings shs 211400. No disposal of any of these assets has
been made during the year.
The market value of the stock on hand and the marketable securities is in excess of cost. The
market value of the marketable securities is shs 216,000.
Out of the retained earnings, the Directors have decided that:
i) Provide for a future tax reserve of sh 160,000.
ii) Increase the debenture redemption reserve shs 100,000.
iii) Set aside shs 100,000 against a possible increase in the cost of raw materials.
iv) Pay a half years dividend on the preference shares and propose a dividend of
12 percent on the ordinary (both dividends to attract a dividend of 30
percent).
Required
a) The appropriation account
b) The Balance Sheet as at 31st December 2010 in vertical format.
3. The accounting staff of Yatta handicrafts Ltd has assembled the following
information for the year ended 31st December 31, 2009.
Shs
Required: A Statement of cash flows showing the operating, investing, investing and
financing activities. (20 marks)

4. a) Discus the need for accounting information. (5 marks)
b) Identify the major qualities of accounting information. (5 marks

Financial Accounting Question Paper

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