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Advanced Accounting I Question Paper
Advanced Accounting I
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 202-A: ADVANCED ACCOUNTING I
DATE: AUGUST 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL questions
QUESTION ONE
a) What do you understand by trust? (2 Marks)
b) Explain the circumstances under which goodwill may be brought into account. (6 Marks)
c) Explain the main purpose of branch accounts. (5 Marks)
d) Explain the concept of accounting for business combinations. (2 Marks)
e) Explain the procedure of preparation of statement of affairs. (5 Marks)
f) X, Y, and Z have been in partnership for several years, sharing profits and losses in the ratio
3:2:1. Their last balance sheet as at 31 October 2009 is as follows:
Balance sheet of X, Y, and Z at 31 October 2009
Costs (£) Depr(£) NBV (£)
Capital £ Fixed Assets 20,000 6,000 14,000
X 4000 Current Assets
Y 4000 Stock 5000
Z 2000 Debtors 21000
26000
Current liabilities
Banks 13000
_____ Creditors 17000 30,000 (4000)
10000 10000
2
Despite making good profits during recent years, they had become increasingly dependent on one
credit customer, Smithson, and in order to retain his custom they had gradually increased his credit
limit until he owed the partnership £18000. It has now been discovered that Smithson is insolvent
and that he is unlikely to repay any of the money owed by him to the partnership. Reluctantly, X,
Y, and Z have agreed to dissolve the partnership in the following terms:
i. The stock is to be sold to Nelson Ltd for £4000.
ii. The fixed assets will be sold for £8000 except certain items with book value of £5000
which will be taken over by X at an agreed value of £7000.
iii. The debtors, except for Smithson, are expected to pay their accounts in full.
iv. The cost of dissolution will be £800 and discount received from creditors will be £500. Z is
unable to meet his liability to the partnership out of his personal funds.
Required
a) The realization account.
b) The capital accounts to the partners regarding the dissolution of the
partnership (10 Marks)
(Total 30 Marks)
QUESTION TWO
Describe the main features of the following accounts:
i.) Branch stock account.
ii.) Branch adjustment account
iii.) Branch current account.
iv.) Head office current account.
(20 Marks)
QUESTION THREE
Chetembe Ltd experienced serious problems with its export Market and decided to go into voluntary
liquidation on 31 December 2009. The following particulars were disclosed.
Book Value Estimated
To produce
(£’000) (£’000)
Cash in hand 10 10
Debtors 40 36
Land and Buildings 600 480
Furniture and Fixtures 200 200
Unsecured creditors 200
3
Debentures
- Secured on land and building £ 420,000
- Secured by floating charge £ 100,000
Preferential creditors 60,000.
Share capital (3200 shares of £ 100 each) £ 320,000.
Estimated liability for bills discounted was £60,000 estimated to rank at £60,000.
Other contingent liabilities were £120,000 estimated to rank £120,000.
The company was formed on 1st January 2004 and had made losses of £250,000
Required
Prepare a statement of affairs and deficiency accounts (20 Marks)
QUESTION FOUR
Companies, A Ltd and B Ltd decided to amalgamate on 30 September 2009 by means of an exchange
of voting ordinary shares . A Ltd issued 700,000 £1 ordinary shares whose market value was £1.75 per
share in exchange for all the shares of B Ltd. The fair value of the fixed assets of B Ltd is estimated at
£750,000. The balance sheet of the two companies before combination were as follows:-
A Ltd B Ltd
(£’000) (£’000)
Fixed Assets 820 560
Net current Assets 330 270
1150 830
Ordinary shares Capital 800 600
Profit and Loss Account 350 230
1150 830
Required
Summarized balance sheet as at 30 September 2009 for A Ltd separately and the group using
i.) Acquisition accounting method
ii.) Merger accounting method
iii.) Consolidated balance sheet
(20 Marks)
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