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Caa 200: Intermediate Accounting Ii Question Paper

Caa 200: Intermediate Accounting Ii

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

1
UNIVERSITY EXAMINATIONS: 2008/2009
SECOND YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 200: INTERMEDIATE ACCOUNTING II (DAY CLASS)
DATE: APRIL 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer all questions
QUESTION ONE
a) State three characteristics that are common to all liabilities and state clearly the distinction
between current and long term liabilities. (6 Marks)
b) Identify and describe the three levels of likelihood of the occurrence of the future event related
to accounting for loss contingencies. (6 Marks)
c) Distinguish between the interest rate implicit in a lease and the lessee’s incremental borrowing
rate and specify which is the rate used in calculating the minimum lease payment. (5 Marks)
d) Describe the four characteristics of the corporate form of organization that affect accounting
for stockholders equity. (8 Marks)
QUESTION TWO
Explain the accounting process for cash dividends, property dividends, liquidating dividends and
stock dividends (10 Marks)
2
QUESTION THREE
At the beginning of 2004 Lessor Bank Limited entered into a non cancelable lease agreement with
Lessee Telecommunications Company in which the Bank purchased and transferred computer
equipment to Lessee Telecommunication. The equipment had a fair value of £2486 useful life of
three years and no residual value at the end f the third year. The term of the lease covered three years.
Lessee Telecommunication has an excellent credit risk and agreed to assume all ownership risks
associated with the equipment such as maintenance, rates and insurance.
Required:
a) What type of a lease is described above both to the lessee and the leaser? (2 Marks)
b) Determine the annual lease payment if the bank desired a 10% rate of return on its investment
(5 Marks)
c) Using effective interest method account for the Lesser’s receivable and the Lessee’s payable to
recognize the interest expense/revenue and the receipt of lease payment at the end of each accounting
period. (13 Marks)
QUESTION FOUR
Distinguish between the following types of debt instruments.
a) Coupon bonds and Zero coupon notes (2 Marks)
b) Serial notes and term notes (2 Marks)
c) A Corporation issued £40,000 serial bond at the beginning of 2006. The stated rate on the
bond issue was 10% payable annually. The bonds mature at the rate of £20,000 per year
begging December 31 2007. Assume that each serial was sold to yield 12%.
Required:
i) Calculate the issue price of each series and the total bond issue. (3 Marks)
ii) Prepare a schedule of interest and book value. (4 Marks)
iii) Prepare the journal entries to record the interest and revenue for the first year (4 Marks)

Caa 200: Intermediate Accounting Ii Question Paper

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