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Caa 302 : Advanced Accounting Ii Question Paper
Caa 302 : Advanced Accounting Ii
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
1
UNIVERSITY EXAMINATIONS: 2008/2009
THIRD YEAR STAGE I EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 302 : ADVANCED ACCOUNTING II
DATE: AUGUST 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer All Questions
QUESTION ONE
(a) What are non-cash charges or expense? (5 Marks)
(b) The following are the income statement and balance sheet for Belfast Ltd as at 31.12.08.
Belfast Ltd
Income Statement
For The Period Ended 31.12.08
Shs. Shs.
Net sales 1,464,200
Cost of sales 871,150
Gross margin 593,050
Operating expenses
Salaries 215,000
Depreciation – Building 3,250
- Equipment 31,050 34,300
Supplies 7,320
Advertising 90,000
Taxes, payroll and others 26,000
General administrative expenses 123,780
Total operating expenses 496,400
Net income from operations 96,650
Other revenues
Interest income 1,950
Gain on sale of long term investment 1,700 3,650
100,300
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Other expenses
Interest expense 3,800
Loss on sale of equipment 900 4,700
Net income before taxation 95,600
Taxation 45,250
Net income 50,350
Retained earnings January 1, 2008 84,100
134,450
Dividends declared and paid 18,000
Retained earnings as at December 31.12.2008 116,450
Belfast Ltd
Balance Sheets
As At 31.12.07 & 31.12.08
2007 2008
Assets
Current Assets
Cash 46,300 40,900
Accounts Receivables 112,160 101,000
Inventories 130,600 115,300
Prepaid expenses 3,100 4,700
Total current assets 292,160 261,900
Investments 17,000 25,000
Property, Plant & Equipment
Land 100,000 80,000
Buildings 175,000 130,000
Accumulated depreciation – Equipment (29,750) (26,500)
Equipment 198,000 175,000
Total Property, Plant & Equipment 385,600 315,400
Total Assets 694,760 602,300
Liabilities & Stockholders Equity
Current Liabilities
Accounts payable 91,000 86,870
Accrued liabilities 9,890 12,230
Estimated tax liability 12,000 14,100
Total current liabilities 113,310 113,200
Long term liabilities
Mortgage notes payable 10% (land & buildings) 35,000 0
Bonds payable , 8% due 2011 40,000 40,000
Total liabilities 188,310 153,200
Stockholders’ Equity
Common stocks, kshs. 50 par value 390,000 365,000
Retained Earnings 116,450 84,100
Total Liabilities and Equity 694,760 602,300
3
Additional Information
1. There were no purchases of investment during the year. Investments with Kshs. 8,000 cost
were sold for Kshs. 9,700.
2. Land and buildings with a cost of Kshs. 65,000 (Kshs. 45,000 for buildings and Kshs. 20,000
for land) were acquired, subject to a mortgage note of Kshs. 35,000.
3. During the year, the Corporation disposed of equipment that had an original cost of Kshs.
20,000 and accumulated depreciation of Kshs. 16,500. The equipment was sold for Kshs.
2,600.
4. The common stock was sold for cash.
Required:
Prepare a cash flow statement as at 31.12.08 using the direct method (20 Marks)
QUESTION TWO
(a) Explain five advantages of Current Cost Accounting (CCA) system (5 Marks)
(b) ABC Company Ltd was formed on January 1, 1999 with a fully subscribed share capital of
Kshs. 500,000 and on the same date a loan of Kshs. 250,000 raised. On March 31, 1999,
storage facilities with a 20 year life at no residual value were purchased for kshs. 375,000. On
the same date purchases of Kshs. 250,000 were made. On June 30, 1999 sale for Kshs.
225,000 were made. Expenses of Kshs. 25,000 were paid on June 30, 1999. All transactions
were for cash and the company provided full-year depreciation on the year of acquisition of
assets. The closing stock amounted to Kshs. 100,000. The general price index movement was
as follows:
January 1, 1999 660
March 31, 1999 715
June 30, 1999 780
December 31, 1999 858
NB: Assume a straight line depreciation method.
Required:
i.) Prepare Historical Cost Accounts (HCA) for the year ended December 31, 1999. (10 Marks).
ii.) Prepare Current Purchasing Power accounts (CPP) for the year December 31, 1999. (10 Marks).
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QUESTION THREE
Write brief notes on the following;
(a) Perpetual Inventory system. (5 Marks)
(b) Periodic Inventory system. (5 Marks)
(c) Monetary Working Capital Adjustment (5 Marks)
(d) Cost of Sales Adjustment. (5 Marks)
(e) Capital Reorganization. (5 Marks)
QUESTION FOUR
a) Explain how the exchange differences arising from translation of financial statements are
treated under Temporal and Closing Rate methods. (5 marks)
b) Give five determinants of classification of Foreign Operation and Foreign Entity. (5 Marks)
c) The summarized trading and profit and loss account of Mfangano Ltd (for internal circulation)
for year ended September 30, 2008 was:
Mfangano Ltd
Trading, Profit and Loss Account
For Year Ended September 30, 2008
Shs. ‘000’ Shs. ‘000’
Sales 3,027
Less: Cost of sales 2,051
Gross profit 976
Less:
Wages and Salaries 260
Interest paid 18
Depreciation 97
Other expenses 55 170
Profit before tax 546
Corporate tax 119
Profit after tax 427
Less: Dividends paid and proposed 62
Profit for the year retained 365
Required:
Prepare a value added statement for the year, treating depreciation as an appropriation of value added.
(15 marks)
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