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Caa 304A Specialized Accounting Techniques (Day) Question Paper
Caa 304A Specialized Accounting Techniques (Day)
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
1
UNIVERSITY EXAMINATIONS: 2010/2011
FIRST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 304A SPECIALIZED ACCOUNTING TECHNIQUES (DAY)
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any Other Two Questions
QUESTION ONE
Betty traders Ltd. sells its goods in returnable containers. The following information is relevant:
1. The containers are purchased at Sh. 600 each. Customers pay a deposit of Sh. 700
per container issued to them and a refund of Sh. 650 is made for each container
returned within two weeks.
2. On 1 January 2003, there were 15,000 containers in the company’s warehouse and
10,000 containers in customers’ hands the return period of which has not expired.
3. In the year ended 31 December 2003, the Company purchased 30,000 containers.
During the same period, the company issued 95,000 containers to customers. As at
31 December 2003, the customers still held 15,000 containers. The return period of
5,000 of the containers still held by customers as at 31 December 2003 had expired.
4. The company scrapped 5,000 containers and sold them at Sh.250 each. Apart from
the containers scrapped, 1,500 containers could not be accounted for and were
written off.
5. In order to maintain the containers in proper condition, each container returned by a
customer is polished at a cost of Sh.4 each.
6. At the end of the year, the company values containers in the warehouse and in
customers’ hands at Sh.300 each for stock taking purposes.
2
Required:
a) Containers stock account for the year ended 31 December 2003 (8 Marks)
b) Containers suspense account for the year ended 31 December 2003 (6 Marks)
c) Containers profit and loss account for the year ended 31 December 2003 (6 Marks)
QUESTION TWO
a) Define “hire purchase” and Substance over form concept with regard to Hire
Purchase (6 Marks)
b) Pamat Limited bought Motor Vehicle on hire purchase terms. The transactions involved
the following:
i) The cash price Sh.800,000
ii) Hire purchase interest 25%
iii) Deposit 20% of cash price
iv) 5 annual equal installments.
The purchase was effected on 1st January 2011.All payments were made. Depreciation is at a rate
of 10% per annum on straight line.
Required:
Assets, Hire purchase company, and Hire purchase interest accounts. (9 Marks)
QUESTION THREE
a) State the nature and purpose of the following in an insurance contract covering consequential loss:
i) Special circumstances clause. (3 Marks)
ii) Average provision clause. (3 Marks)
b) Ruti Traders is a wholesale business and it takes insurance cover against consequential loss with an
insurance company. The sum insured is sh.457,600 and the period of indemnity is four months.
On 1 July 2002, a fire occurred in the premises of the business and disrupted the trading activities
up to 30 September 2002 when normal operations resumed.
1. The financial year of the business ends on 31 December.
2. Net profit for the financial year ended 31 December 2001 was Sh.210,000
3. Insured standing charges sh.240,000
4. Uninsured standing charges Sh.10,000
5. Reduction in turnover avoided through increase in cost of working Sh.125,000
6. Increased cost of working sh.57,500
7. Savings in insured standing charges sh.5,000.
8. Turnover of the business for three month periods for the two financial years ended 31
December are as follows:
3
2001
Sh.
2002
Sh.
1 January to 31 March
1 April to 30 June
1 July to 30 September
1 October to 31 December
450,000
600,000
750,000
700,000
500,000
650,000
225,000
800,000
9. With the insurer’s permission, the special circumstances clause provided for:
?? Increase in standard and annual turnover by 10%
?? Increase in rate of gross profit of 2%
Required:
The value of claim from the insurance company for the loss of gross profit from 1st July 2002 to 30th
September 2002. (14 Marks)
QUESTION FOUR
Miners Ltd acquired the rights to extract minerals from minerals Ltd.
Terms of contract were:
1. Royalty to be Sh.10 per kg extracted
2. Minimum Royalty Sh.500,000
3. Shortworkings to be recouped within 3 years. Miners Ltd sub-leased the rights to extractors Ltd at the
following terms.
?? Royalty to be Sh.15 per kg extracted
?? Minimum royalty to be Sh.350,000
?? Shortworking to be recouped within 2 years.
The following results were reported.
YEAR MINERAL EXTRACTED IN KILOGRAM BY
MINERS LTD EXTRACTS LTD
1 30,000 10,000
2 40,000 20,000
3 50,000 25,000
4 60,000 40,000
Required
a) Royalties payable/receivable account
b) Minerals Ltd account
c) Extracts Ltd Account
d) Shortworkings account as they would appear every year end in the book of miners Ltd.
(20 Marks)
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