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: 2009/2010
THIRD YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 302: ADVANCED ACCOUNTING II (EVENING CLASS)
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Attempt ALL Questions
QUESTION ONE
a) Distinguish the main differences between the direct method and indirect method of calculating
the amount of cash generated from an entity’s operations (4 Marks)
b) The balance sheet of Sonia limited as at December 31, 2008 (with comparatives for December
31, 2007) is as follows
Sonia Limited
Balance sheet, December 31, 2008
2008 2007
Ksh Ksh Ksh Ksh
‘000’ ‘000’ ‘000’ ‘000’
Assets
Non –current assets
Property, plant and equipment (cost) 2,470 1,790
Less: Accumulated depreciation 850 1,620 630 1,160
Investment at cost 50 100
1,670 1,260
2
Current assets
Inventories 740 510
Trade receivables 1,010 640
Short term investments - 150
Bank balance - 1,750 180 1,480
3,420 2,740
Equity
Share capital 500 400
Share premium account 140 100
Revaluation reserve account 550 300
Retained earnings 480 800
1,670 1,600
Liabilities
Non-current liabilities
Long-term loans 900 900
Current liabilities
Trade payables 660 530
Current tax payable - 110
Bank overdraft 190 850 - 640
3,420 2,740
The following additional information is also available
i) Freehold property which was valued at Ksh. 500,000 on December 31, 2007 was
revalued at Ksh. 750,000 on December 31, 2008.
ii) Plant and equipment with an original cost of Ksh. 120,000 and accumulated
depreciation of Ksh. 80,000 was sold in March 2008 for Ksh. 30,000.
iii) One half of the investments assets were sold for Ksh. 70,000 in July 2008.
iv) Interest paid and payable in the year totaled Ksh. 70,000
v) There is no tax liability for the year to December 31, 2008. However, the tax liability
for the year to December 31, 2007 was underestimated by Ksh. 20,000
vi) No dividends were paid or proposed in either year
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vii) The short term investments were sold for Ksh. 150,000 in July 2008. These investments
ranked as cash equivalents as defined by IAS 7.
Required:
A cash flow statement for Sonia Ltd for the year to December 31, 2008, in accordance with the
requirements of IAS 7 using the indirect Method
(Show all your workings) (16 Marks)
QUESTION TWO
a) Canterbury Company has the following after-tax profit for it’s two most recent accounting periods:
i. Ksh
ii. “000”
Year to October 31, 2008 330
Year to October 31, 2007 341
On November 1, 2006, the company’s issued share capital consisted of 500,000 ordinary
shares. On August 1, 2007, the company made a 1 for 10 bonus issue.
Required:
i) Calculate basic EPS for the year to October 31, 2008
ii) Calculate restated basic EPS for the year to October 31, 2007 and explain why
this restatement is necessary. (10 Marks)
b) Discuss the two major segment classifications as defined by IAS 14 “Segment Reporting,” clearly
outlining the factors to consider in determining the basis of segmentation
(10 Marks)
QUESTION THREE
a) The following balances were extracted from the books on Hanny Ltd for the year ended
September 30, 2009.
KSH
‘000’
Purchase of equipment 7,500
Purchase of raw materials 19,655
4
Depreciation expense 675
Interest expense 310
Investment income 3,400
Minority interest in the profit of the subsidiary 200
Ordinary dividends 340
Value added tax –included in turnover 8,000
Wages, salaries and pension 5,000
Current tax (corporate tax) 770
Turnover 32,135
Required:
Value added Statement for Hanny Ltd for the year as at September 30, 2009.
(10 Marks)
b) As the “Global Village Syndrome” infiltrates into the business arena, the need to be socially
responsible has never been more important if any business worth its name is to remain
competitive. Identify and discuss areas in which a business could fulfil its corporate social
objectives (5 Marks)
QUESTION FOUR
a) How do the needs of employees for financial information compare with those of investors?
(5 Marks)
b) Long-term environmental strategies at national and international level were proposed by the
World Commission on Environment and Development in 1987 (the Brundtland report). The
centerpiece of the report was sustainable development that ‘meets the needs of the present
without compromising the ability of the future meets its own needs’. The concept of
‘stakeholders’ is thus extended to include future generations.
Discuss the challenges facing accountants in the ‘Greening of accounting’.
(10 Marks)

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