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Bac 100: Fundamentals Of Accounting I Question Paper
Bac 100: Fundamentals Of Accounting I
Course: Bachelor Of Arts In Economics
Institution: Pwani University question papers
Exam Year:2011
Page 1 of 5
A Constituent College of Kenyatta University
UNIVERSITY EXAMINATIONS 2011/2012 ACADEMIC YEAR
INSTITUTIONAL BASED PROGRAMME
1
ST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
COURSE CODE/TITLE: BAC 100: FUNDAMENTALS OF
ACCOUNTING I
END OF SESSION: I DURATION: 3 HOURS
DAY/TIME: FRIDAY 12.00PM – 3.00PM DATE: 19.04.2012-TF4
INSTRUCTIONS
Answer question ONE and any other TWO.
Question One
The partnership of Jones and Smith operates a manufacturing business and their trial
balance as at 30 Sept. 2011 was:
£ £
Bank 5,000
Plant and machinery 90,000
Delivery vehicle at cost 24,000
Free hold land 25,000
Provision for depreciation
Plant and machinery 42,000
Delivery Vehicle 11,000
Sales 956,000
Rent 8,500Page 2 of 5
Factory expenses 100,000
Purchases of raw materials 348,000
Factory wages 119,000
Return Inwards 6,000
Carriage Inwards 7,000
Return outwards 2,000
Stock of raw materials 12,000
Stock of finished goods (10,000 miss) 27,000
Selling and distribution expenses 78,000
Administration expenses 202,000
Drawings: Jones 38,000
Smith 34,000
Capital Accounts: Jones 60,000
Smith 40,000
Current Accounts: Jones 7,500
Smith 5,000
1123500 1123500
The following information is also available
1. Wages of £6,000 and administration expenses of £11,000 were accrued at 30
Sept 2011.
2. The rent account included a payment of £2000 for the six months from 1 July to
31 Dec.2011. Rent is to be apportioned between the factory and administration
in the ratio of 4:1.
3. Plant and Machinery is to be depreciated at 10% P.a. on cost and delivery
vehicles are to be depreciated at 25% per annum on cost.
4. The factory manufactures a standard product which has a selling price of £5 per
unit. During the year the factory 195000 units it is the policy of the firm to value
the closing stock of finished goods on the basis of absorption (full price) costing.
5. The stock of raw materials at 30 Sept. 2011 was valued at £ 20,000
6. The Partnership agreement provides for interest to be paid on partner’s fixed
capital at rate of 10% P.a. and for a salary of £4000 per annum to be credit to
Smith.Page 3 of 5
REQUIRED
a) The manufacturing, trading and Profit and loss account for the Year ended 30
September 2012 of Jones and Smith. (23 marks)
b) The balance sheet of Jones and Smith as at 30 September 2012. (7 marks)
Question Two
From the following Trial Balance, of Bamburi, you are required to draw up an Income
statement for the Year ending 30 June 2011 and a balance sheet as at that date.
(20 marks)
Trial balance as at 30 June 2011
£
Sales 265900
Purchases 154,870
Rent 4,200
Lighting and heating expenses 530
Insurance 2,100
Buildings 85,000
Fixtures 1,100
Accounts Receivables 31,300
Sundry expenses 412
Accounts Payable 15,910
Cash at bank 14,390
Drawings 30,000
Vans 16,400
Motor running expenses 4,110
Capital 114,202
396,012 396,012
Inventory at 30 June 2011 was £ 16,280.
Question Three
From the following trial Balance of Kilifi Plantation extracted after the Years trading,
prepare an Income statement for the Year ending 31 Dec. 2011 and a balance sheet as
at that date. (20 marks)
£
Sales 190,576
Purchases 119,832
Salaries 56,527Page 4 of 5
Motor expenses 2,416
Rent 1,894
Insurance 372
General Expenses 85
Premises 95,420
Motor Vehicles 16,594
Accounts receivables 26,740
Accounts payable 16,524
Cash at Bank 16,519
Cash in hand 342
Drawings 8,425
Capital ____ 138,066
345,166 345,166
Inventory at 31 Dec. 2011 was £12,408
Question four
a) The directors of Blue Triangle Cement Co. Ltd are concerned that the company’s
draft, final accounts for the year ended Dec. 2011, show significant loss as
compared with the consistent profit record over the past decade.
A careful search has been conducted of ways of presenting these accounts for
the year under review.
i) Discontinue depreciating free hold property because of improved property
valuation.
ii) Reduce the annual rates of depreciation of other fixed assets)
iii) Pay dividends out of the share premium account thus avoiding an
increase in the bank overdraft and avoiding reduction in retained earning.
iv) Transfer to the next financial Year the cost of research and development
work on an abortive project.
b) During the Year in review, the following unrelated accounting
problems were encountered by the company.
i) The closing stock figure of £95,000 was valued on the FIFO (First In First
Out) basis of stock valuation. It is proposed to revalue the stock at
£70,000 by changing the basis of valuation to LIFO – Last in First Out.
ii) Two months before the end of the Year the Company negotiated and
received a loan at a fixed rate of interest repayable over three years. The
terms of the loan are that it is repayable quarterly in arrears. It is
proposed to exclude the interest from this Year’s profit calculations.Page 5 of 5
iii) The Company owns a specialist machine purchased several years ago,
which has a present value of £2,000. The factory Manager has recently
heard that a similar machine was sold for £12,000 two months ago and
has proposed that the company machine be revalued in the accounting
accordingly.
Required
a) Write a report to the directors advising them on each of the suggested
ways of adjusting the company’s loss for the Year ended 31 Dec. 2011
in a above (10 ½ marks)
b) Discuss the extent to which each proposal outlined in b above fails to
comply with generally accepted accounting concepts and /or
conventions. (9 ½ marks)
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