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Acct 421: Advanced Accounting Ii Question Paper

Acct 421: Advanced Accounting Ii

Course:Bachelor Of Commerce

Institution: Kabarak University question papers

Exam Year:2011

KABARAK UNIVERSITY
UNIVERSITY EXAMINATIONS
2010/2011 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF COMMERCE
COURSE CODE: ACCT 421
COURSE TITLE: ADVANCED ACCOUNTING II
STREAM: Y4S1
DAY: WEDNESDAY
TIME: 9.00 ± 11.00 A.M.
DATE: 17/03/2011
INSTRUCTIONS:
1.This paper comprise of four questions
2. Question one is compulsory
3 You are required to answer any other two questions
4. Marks for each question are indicated at the end of every question.

QUESTION ONE
The balance sheets of three companies are given below. The balance sheets were prepared after the
year end.
Balance sheets as at 31st December
2009
Nyakua ltd
Nyakuliwa
ltd subiri ltd
shs."000" shs. "000" shs. "000"
land 20,000 10,000 5,000
Factory buildings 5,000 2,000 500
Fabrications, furniture and
fittings 3,000 100 50
machineries 200 20 10
28,200 12,120 5,560
investments in Nyakuliwa 14,120
Investments in Subiri ltd 2,000 3,000
w.i.p finished goods and
raw material stocks 1,300 650 250
debtors 500 350 200
bank balance 250 150 120
cash balances 80 60 20
46,450 16,330 6,150
capital 25,000 12,000 3,500
share premium 5,500 2,200 1,500
preference shares 4,950 1,130
debentures 5,000 160
profits b/f 4,000 470 500
profit for the year 2,000 530 490
46,450 16,330 6,150
1. Nyakua ltd acquired its shares on first January of the same year which amounted to 80% and
20% of the ordinary shares of Nyakuliwa ltd and Subiri ltd respectively
2. Nyakuliwa bought Subiri ltd''s shares on 1st Jan i.e. beginning of the year which was 80%
3. In the course of the year, Nyakua ltd sold land to Nyakuliwa ltd at shs 60,000 and
buildings at shs. 250,000. The buildings were to be depreciated at a flat rate over forty
years. Profit 20% of cost.
4. Nyakuliwa ltd is owed shs. 20,000 for services it offered to Subiri ltd which is included
in the debtors by Nyakuliwa Ltd and is cash in transit.
5. Nyakua ltd sold goods to Nyakuliwa ltd and Subbiri ltd which cost shs 100,000 and shs. 80,000
respectively at a mark up of 20%. Half of the goods are still in stock.
Required
(a) Prepare a consolidated balance sheet as at 31s December 2009
NB Show all the workings and calculations. (25marks)
(b) International financial reporting standard 27 provides circumstances under which a parent
company need not prepare consolidated financial reports. Clearly identify the circumstances under
which such a company may avoid preparing consolidated report. (5 marks)
QUESTION TWO.
The balance sheet of Katonyi, Kutunyi and Kitonyi partners is as given below. The partners
share profits equally.
Katonyi, Kutunyi and Kitonyi partners
Balance sheet as at 31st Dec 2007
Shs.
(000)
Shs.
(000)
Fixed assets
Buildings 330000
furniture and fittings 220000
Motor vehicles 215000
computers and related equipments 21400
786400
Current assets
Stocks 4000
Debtors 10000
investments in Nairobi stock exchange 3200
Bank 3000
cash 5000
25200
Current liabilities
Creditors -7000
Net current assets 18200
Total assets 804600
Financed by
Capital
Katonyi 229700
Kutunyi 106400
Kitonyi 220100
long term loan 241400
797600
Current accounts
Katonyi 2385
Kutunyi 1230
Kitonyi 3385 7000
804600
The partners agreed to form a limited company to take over the partnerships assets except bank.
The company is to issue 200,000 shares to the partners in the ratio 1:2:1resp and the rest pay by
cash which it will raise by issuing shares worth 800m which will be used as follows:
200m to be used to start up the company. Shs. 5m to meet issuing costs and the balance used to:
retire the long term loan; pay off creditors and the balance to pay off the partners. The shares are
worth 1,000 shillings each.
Required:
Close off the books of the partnership and prepare an extract balance sheet for the
company immediately after take-over assuming that the take over is effected. (20 marks)
QUESTION THREE
The following are the balance sheets of three companies ,Gikuyu ltd Mumbi ltd and Anjiru ltd
G ltd
. M
Ltd A ltd
Buildings 18000 1000 2000
Machinery 5000 1500 2000
Stock 1000 500 1000
Debtors 3000 1000 4000
Bank 2000 1000 3000
29000 5000 12000
Share capital (5sh
shares) 20000 4000 9000
Profit and loss 5000 500 2000
Current liabilities 4000 500 1000
29000 5000 12000
l. Gikuyu ltd took over the assets of Mumbi ltd by exchanging with the shareholders of Mumbi
ltd 3 shares of Gikuyu ltd for one share of Mumbi ltd at a premium of 20%.
Gikuyu ltd took over Anjiru ltd by buying all the assets of Anjiru ltd at a consideration of
15000 worth of shares at a premium of 20% and Gikuyu will pay off Anjirus creditors.
Gikuyu ltd revalued the asset of Anjiru ltd at; Buildings shs. 3000, Machinery shs. 1000,
Stock shs. , 500, Debtors shs. 3000, and bank shs. 3000.
Required
Prepare the balance sheet of Gikiyu ltd
Immediately after taking over the other companies. (20 marks)
QUESTION FOUR
Explain the following terms as used in IFRS
a)
i) Materiality
ii) Accrual basis of accounting
iii) going concern
iv) Neutrality
v) prudence
vi) True and fair. (1 mark each)
b)
I) Explain the concept of accounting as a social science (5 marks)
ii) What are the advantages of a company buying it''s own shares and
what is the risk? (5 marks)
iii) Explain how the following issues are dealt with in accounting
1. Pre-incorporation profits (2 marks)
2. Share issue under writing expenses (2 marks)

Acct 421: Advanced Accounting Ii Question Paper

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