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Intermediate Accounting I Question Paper
Intermediate Accounting I
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
FIRST YEAR STAGE III EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 102: INTERMEDIATE ACCOUNTING I
DATE: APRIL 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE
A. Explain the purpose of depreciation and the factors which need to be taken into account in
assessing the amount of depreciation required each year. (5 Marks)
B. Kyulungu is a trading company making its accounts regularly to 31st December each year. At 1st January 2008 the following balances existed in the records of Kyulungu.
Ksh
“000”
Land at cost 10,000
Buildings at cost 5,000
Accumulated depreciation on buildings as at 31/12/2008 2,100
Office equipment at cost 400
Accumulated depreciation on office equipment as at 31/12/2008 240
The company’s depreciation policies are as follows:
Land no depreciation
Buildings 2% per annum on cost at straight line basis
Office equipment 12.5% per annum on the straight line basis
2
Full year depreciation is provided in the year of acquisition of all assets and none in the year of
disposal.
During the two years ending 31st December 2009
1) Year ended 31st December 2008
a) 10th June: office equipment purchased for Ksh 160,000. This equipment was to replace
some sold items which were given in part exchange. Their agreed part exchange value
was Ksh 40,000. They had originally cost Ksh 80,000 and their book value was Ksh
10,000. The company paid the balance of Ksh 120,000 in cash.
b) 8th October: an extension was made to the building at a cost of Ksh 500,000.
2) Year ended 31st December 2009
a) 1st March: office equipment which had cost Ksh 80,000 and written down value of Ksh
20,000 was sold for Ksh 30,000
In preparing the financial statements at 31st December 2009, it was decided to revalue the land upward
by Ksh 2,000,000 to reflect a recent professional survey and valuation.
Required:
Write up the necessary ledger accounts to record these transactions for the two years ended 31st
December 2008 and 2009. (15 Marks)
QUESTION TWO
J Mburu’s cash book showed a debit balance of Ksh 117,009.70 0n 31st march 2009. His bank
statement showed a credit balance of Ksh 38,257.30 on the same date. A careful examination of the
two records revealed that the difference was due to the following:
1. Bank charges amounting to Ksh 1,711.50
2. The bank had paid Ksh 5,339.50 to Mburu’s insurance company as per standing order.
3. David Ndung’u who was Mburu’s tenant had paid rent Ksh 14,500 direct into Mburu’s bank
account.
4. Cheques for Ksh 43,275 deposited by Mburu on 29th March was returned unpaid but no entry
had been made in the cash book to record the return.
5. Cheques totaling Ksh 149,088.40 deposited by Mburu on 30th March were credited by the bank on 2nd April.
6. Cheques totaling Ksh 134,402 issued by Mburu to his creditors did not appear on the bank
statement. One of these Cheques for Ksh6,420 was dated 3rd September 2008.
7. A cheque for Ksh 8,240 issued by Mbalo, another customer at the bank was wrongly debited by
the bank in Mburu’s bank account.
8. The cashier, in totaling the cash book pages, overstated the debit balance of the cash book by
Ksh 20,000
Required:
a) Adjusted cash book balance (9 Marks)
b) A bank reconciliation statement as at 31st March 2009. (7 Marks)
c) State the actions, if any, Mburu would take on the reconciling items. (4 Marks)
QUESTION THREE
A. One of the key attribute of information provided via the financial statements is that it must be
reliable. Discuss reliability and explain the main attributes of reliability. (7 Marks)
B. Revenue should be recognized at the point of sale because at this point the conditions for
revenue recognition will have been met. However, there are some exemptions to the point of
sale revenue recognition. Discuss such exemptions and identify the industry which will use
such exemptions. (8 Marks)
QUESTION FOUR
A. State and explain the principles of accounting on which each of the treatments
described below are based.
i. Calibre or quality of management is not directly disclosed on the balance sheet.
(2 Marks)
ii. Debentures are marked at the same amount in shillings which the company borrowed
though the purchasing power of money may have substantially changed. (2 Marks)
iii. Advance received from a customer is not taken as income or sales. (2 Marks)
iv. Rent paid for that portion of the premises utilized by the owner of the business for his personal use is reduction of owner’s equity. (2 Marks)
v. Costs of advertising campaign are charged as expense in the period in which the
company’s are made. (2 Marks)
B. Explain how the following intangible assets are valued in the financial statements
releases to the external users:
v. Marketing-related Intangible Assets
vi. Customer-related Intangible Assets
vii. Artistic-related Intangible Assets
viii. Contract-related Intangible Assets
ix. Internally-created Intangibles (5 Marks)
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