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Caa 202: Advanced Accounting One Question Paper
Caa 202: Advanced Accounting One
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
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UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE III EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 202: ADVANCED ACCOUNTING ONE
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE: (25 MARKS)
a) Explain:
The meaning of goodwill from an accounting view point and the circumstances under which goodwill
may brought into account. (10 Marks)
b) A, B and C are in partnership sharing profits equally. A dies on 31st March 2009 and the
partnership deed provides as under:-
1. The share of the deceased partner’s capital account shall be taken at the balance on his capital
account as at the end of the last financial year, less the withdrawals, if any, made to the date of
death.
2. That his share of profit to the date of death be calculated on the basis of the average of the three
preceding years.
3. That the goodwill of the firm shall be taken at one year’s purchase of the average profits of the
preceding five years.
4. That the firm’s freehold property shall be taken at an independent valuation.
The Balance Sheet of A, B and C as on 31st December 2008 was as under:-
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Balance Sheet
Capital Accounts: Sh. Sh.
Sh. Freehold property 300,000
A 200,000 Goodwill 50,000
B 150,000 Stock 140,000
C 150,000 500,000 Debtors 120,000
Creditors 150,000 Cash and bank balance 40,000
650,000 650,000
Freehold property was valued at sh.450,000. The profit for the five years ended 31st December 2007
were:
Sh.
2003 60,000
2004 70,000
2005 80,000
2006 100,000
2007 90,000
Required:
(i) Journal entries to make the necessary adjustments.
(ii) Capital accounts of the partners.
(iii) Balance Sheet of B and C as at 31st March 2008. (15 Marks)
QUESTION TWO (25 MARKS)
The following trial balances were extracted from the books of the head office and branch of Mapa
Limited on 30 June 2009
Trial balance from the books of head office Trial balance from the books of the branch
Dr Cr Dr Cr
Sh. Sh. Sh. Sh.
Share capital (R1
Ordinary shares) 10,000 Head office a/c 2,805
Accumulated profits- Land & Buildings 2,000
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30 June 2008 400 Furniture & fittings 1,200
Creditors’ control 4,000 Accumulated dep. 1,000
Land and buildings 7,000 Debtors’ control 476
Furniture and fittings 1,500 Inventory: Balance
Accumulated depreciation 1,000 at 30 June 2008 1,050
Debtors’ control 3,500 Goods from H/Office 5,780
Bank overdraft 760 Bank 225
Branch account 3,545 Sales 8,000
Inventory: Balance at Purchases 150
30 June 2008 2,000 Wages & Salaries 400
Purchases 15,000 Sundry operating
Sales 12,000 expenses 200
Goods to branch 6,300 Income tax expense 324
Wages and salaries 700
Sundry operating
expenses 600
Income tax expense 615
34,460 34,460 11,805 11,805
Additional Information
(a) Goods in transit on 30 June 2009
?? Consignment of Sh. 420 from head office to branch
?? Returns of Sh.100 from branch to head office.
(b) Cash in transit on 30 June 2009 from branch to head office, Sh.220
(c) Goods are invoices to branch by head office at cost.
(d) Head office raises an annual administrative charge of Sh.300 against the branch. The charge
was not entered in the books when the above trial balance was prepared.
(e) Provision for depreciation on furniture and fittings at 10% per annum on the diminished
balance must still be made.
(f) Inventory on hand at 30 June 2009
?? At head office Sh.1,800
?? At branch Sh. 980
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Required
(a) Combined income statement for the year ended 30 June 2009 (15 Marks)
(b) Combined Balance sheet as at 30th June 2009 (10 Marks)
QUESTION THREE (25 MARKS)
a) Describe the duties and powers of trustee (10 Marks)
b) The summarized balance sheets of A Ltd and B Ltd as at 31st December 2005 are given as
under:-
A Ltd B Ltd
(Sh 000) (Sh 000)
Fixed Assets 8,150 4,500
Current assets 4,250 4,900
Current Liabilities (2,550) (3,500)
9,850 5,900
Long tern Loans:
18% Debentures (750) (900)
9,100 5,000
Capital and Reserves:
Called up share capital
Sh.20 each 5,500 2,000
Share premium 1,500 -
Revaluation reserve - 800
Profit & Loss account 2,100 2,200
9,100 5,000
A Ltd acquired 90% shares in B Ltd as at that date. The shares in B Ltd were acquired as a result of
one offer which had been accepted by 90% of the shareholders of B Ltd, On the date of acceptance, the
shares of A Ltd were selling at Sh.60 per share of Sh.20 at Nairobi Stock Exchange.
The following three alternatives of the purchase consideration were considered:-
(a) 75,000, Sh.20 ordinary shares in A Ltd and Sh.600,000 in cash.
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(b) 85,000, Sh.20 ordinary shares in A Ltd.
(c) 80,000, Sh.20 ordinary share in A Ltd and Sh.300,000 in cash.
Required:-
For each of the above purchase considerations, prepare Consolidated Balance Sheet immediately after
acquisition. (15 Marks)
QUESTION FOUR (25 MARKS)
a) Explain the meaning of bankruptcy and describe the main provisions of Bankruptcy Act (cap
53) of Kenya. (10 Marks)
b) Kariuki a businessman filled his own petition in bankruptcy. The trial balance Sheet of his
business as on 31st March 2008, the date of the Receiving Order, showed:
Net
Book Realisable
Value Value
Sh Sh Sh
Capital Account
As on 1st April 2007 300,000 Assets:
Freehold shop
Building 600,000 700,000
Add: Profit for the
Year to 31st March 2008 100,000
400,000 25000 shares of
Sh.20 each in ABC
Ltd 500,000 10,000
Deduct: Drawings
during the year 90,000
310,000 Stock in trade 200,000 150,000
Trade creditors
(including Sh.25,000
Preferential in bankruptcy 840,000 Debtors 200,000 175,000
Loan secured on
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Free-hold shop building 400,000 Balance at bank 50,000 50,000
1,550,000 1,550,000
Kariuki’s personal assets, not including above, comprised of a motor car valued at Sh.100,000, current
account with a bank Sh.20,000 and a gold watch valued at Sh.5,000. His only personal liabilities
outside the business were Sh.3,000 due to his tailor and Sh.5,000 for unsuccessful football forecast due
to his bookmaker. The value of personal assets and liabilities had remained unchanged since 1st April
2007.
12 years ago, Kariuki had made a voluntary settlement of Sh.250,000 in favour of his disabled sister
Lucy.
Required:
Prepare as on 31st March 2008
(a) A Statement of Affairs.
(b) A Deficiency Account. (15 Marks)
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