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Advanced Accounting Ii Question Paper

Advanced Accounting Ii

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2010

UNIVERSITY EXAMINATIONS: 2009/2010
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 302-A: ADVANCED ACCOUNTING II
DATE: AUGUST 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
a) Explain why cash flows generated (used) in operating activities may differs from operating
profit (4 Marks)
b) The following income statement and statement of financial position relate to Cardbury Ltd. for
the years ended 31st March 2009 and 2010:
Income statement for the year ended 31st March 2010 Sh. ’Million’
Sales
Cost of sales
Gross profit
Operating expenses
Operating profit
Interest income
Interest expense
Profit before tax
Income tax expense
Profit after tax
Dividend paid
Retained profit for the year
355
(180)
175
(55)
120
3
(7)
116
(32)
84
(20)
64
Statement of financial position as at 31st March 2010 2009
Sh. ’million’ Sh. ’million’
2
Non current assets:
Tangible
Intangible
Current assets:
Inventories
Trade receivable
Interest receivable
Cash
Total Assets
367
3
370
140
132
1
4
647
196
4
200
155
110
2
21
488
Additional information:
1. During the year ended 31 March 2010, the company issued 1 million Sh.10 ordinary shares at a
premium of 100%, incurring issue costs of Sh.1 million. Subsequent to this, a bonus issue of 1
for every 10 shares held was made from the retained earnings.
2. Tangible non current assets include certain assets which were revalued during the year ended
31 March 2010 giving a surplus of Sh.7 million. Assets capitalised under finance lease
agreements amounted to Sh.28 million. Disposals of assets having a net book value of Sh.19
Ordinary shares of Sh.10 par value
Share premium
Revaluation reserve
Retained profits
Non current liabilities
6% Debentures
Finance leases
Current liabilities:
Trade payable
Tax payable
Interest payable
Finance leases
Bank overdraft
Total equity and liabilities
130
44
7
135
20
50
216
29
3
5
8
647
110
35
-
81
40
42
135
20
2
3
20
488
3
million realised Sh.21 million. Depreciation charged for the year ended 31 March 2010 was
Sh.37 million.
3. Interest on finance leases of Sh.3 million is included in the interest expense charged to the
income statement for the year ended 31 March 2010. Debentures were redeemed at per.
Required:
Cash flow statement for the year ended 31 March 2010, in conformity with the requirements of IAS-7
– Statements Cash Flow using Direct Method. (16 Marks)
QUESTION TWO
a) Explain the following terms
i) Exchange differences (2 Marks)
ii) Functional currency (2 Marks)
b) D Ltd, a company incorporated in Kenya, operates a selling point in Zambia, whose functional
currency is US $. On 31 March 2010, the trial balance of the sale outlet was as follows;
Additional information
1. Inventory on hand as at 31 March 2010 was US $ 21,775 purchased when the exchange rate
ruling was Ksh 70.5 per US $. While opening inventories were purchased when exchange rate
were Ksh 68 per US $
2. Sales include bulk sales to the government that ware made on 1st July 2009 amounting to US $
250 000. The purchases, administrative expenses, distribution expenses and the balance of
sales accrued evenly through out the year.
3. Fixtures and fittings are to be depreciated on a straight line over five years
US $ US $
Fixtures and fittings
Inventories
Receivables
Payables
Bank and cash balances
Sales
Purchases
Administration expenses
Distribution expenses
94,500
35,100
27,084
8,598
205,307
28,515
19,815
418,919
12,336
406,583
_________
418,919
4
4. Rates of exchange at other dates were;
Ksh US $.
1st July 2009
31 March 2010
Average for the year
Date of purchase of fixtures and fittings
67
70
71
61.5
to
to
to
to
1
1
1
1
Required
(a) Computation of exchange difference. (8 Marks)
(b) Income statement for the year ended 31st March 2010 (8 Marks)
QUESTION THREE
a) Clean energy and Green goal are some of the terminologies used to describe an entity corporate
social responsibility as part of strategic direction. Identify and discuss areas in which a
business could fulfill its corporate social objectives and indicate the disclosure requirements
(8 Marks)
b) The following represent the income statement of Medal Ltd for year ended 30th April, 2010:
Income statement
For year ended 30th April 2010 Ksh “000”
Sales 3,027
Cost of sales 2,051
Gross profit 976
Selling and distribution cost 260
Administration cost 152
Operating profit 564
Interest paid 18
Profit before tax 546
Income tax expense 119
Profit after tax 427
5
Additional information
The following expenses are included in various functional expenses ‘000’
Wages and Salaries (80% factory wages) 860
Depreciation (included in cost of sales, to be treated as an appropriation) 197
Dividends paid 62
The difference in various functional expenses represents purchased materials and services such as
water, electricity, rent and legal services.
Required:
A value added statement. (7 Marks)
QUESTION FOUR
a) Define the term operating segment in accordance with IFRS 8 (4 Marks)
b) Explain the information that must be disclosed in respect of each reportable segment (4 Marks)
c) The following information has been extracted from the financial statements of Sunrise Ltd. for
the year ended 31st July 2010.
Sh.
‘million’
Sales revenue
Cost of sales
Distribution cost
Central administration
Amortisation and impairment of intangible assets
Finance costs
Dividends
Intangible assets
Tangible non-current assets
Current assets
Current liabilities
Non current interest bearing borrowings
900
634
87
37
20
22
50
60
520
160
90
320
Additional information:
6
1. The activities of Sunrise Ltd. relate to three operating segments: Cosmetics, Chemical and
Detergents. Information relating to each of the segments consistent to internal reporting is
as follows:
Cosmetics
Sh ‘M’
Chemical
Sh ‘M’
Detergents
Sh ‘M’
Total Sales revenue
Direct Marketing
Internet and email sales
Intersegment sales
Tangible non-current assets
Intangible assets
Current assets
Current liabilities
Non current liabilities
280
120
20
240
-
70
40
60%
300
-
40
180
30%
60
20
40%
50
150
-
100
70%
30
30
-
2. Inter segment sales comprises of Sh 20 million and Sh 40 Million by Cosmetics and
Chemical segments respectively to Detergents. Unrealised profit in respect to intersegment
sales amount to Sh 2.5 million.
3. Cost of sales and distribution expenses are allocated to each segment in proportion to sales
to external customers while administrative cost is allocated based on proportion of tangible
non-current assets.
Required:
Segment report for Sunrise Ltd. for the year ended 31st July 2010 in accordance with the
requirements of IFRS 8 (Operating Segment). (7 Marks)

Advanced Accounting Ii Question Paper

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