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Intermediate Accounting I Question Paper
Intermediate Accounting I
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2011
INSTRUCTIONS
1) This paper contains four questions
2) Answer question ONE and any other TWO questions
3) Marks allocated are shown at the end of each question.
QUESTION ONE (compulsory 20 marks)
a) What is an ³accounting policy´? (2marks)
b) Briefly explain three circumstances where there is a conflict between the key qualitative
characteristics (9 marks)
c) The following categories of people are recognized as users of the information contained
in financial statements: (9 marks)
i. Owners
ii. Financial analysts
iii. Lenders
For each of the above users of financial statement, identify the kind of information they may
require, why they require ti and the decisions they make form that information. (9 marks)
(Total: 20 marks)
QUESTION TWO
a) Distinguish between the terms Revenue and capital subsequent expenditures as used in
accounting for property plant and equipments (6 marks)
b) Dentinice Limited makes its accounts on 30th June every year. On 1 July 2001, the
company¶s balance sheet included the following figures for non-current assets:
Cost Accumulated
Depreciation
Sh. Sh.
µ000¶ µ000¶
Land 40,000 Nil
Buildings 22,000 8,000
Plant and machinery 16,000 6,000
Motor vehicles 6,000 2,000
The company¶s policy is to charge depreciation at the following rates:
Rate
Land Nil
Buildings 2% on cost
Plant and machinery 15% on cost
Motor vehicles 20% on cost
A proportionate charge is made in the year of purchase, sale or revaluation of an asset.
During the year ended 30th June 2002, the following transactions took place:
1. On 1st January 2002 the company decided to adopt a policy of revaluing its buildings. A
professional valuer engaged for this purpose revalued the buildings at sh. 34 million.
2. On 1 January a plant that had cost Sh. 3 million was sold for Sh. 500,000. Accumulated
depreciation on this plant on 30 June 2001 amounted to Sh. 4 million.
3. On 1 April 2002 a new motor vehicle was purchased for Sh. 300,000 part of the purchase
price was settled by exchanging another motor vehicle at an agreed value of sh.120, 000
the balance of Sh. 180,000 was paid in cash. The vehicle which was given in part
exchange had cost Sh.200, 000 and had a net book value of Sh. 100,000 as at 30 June
2001
Required:
a) The following ledge accounts to record the above transactions:
i. Buildings account.
ii. Provision for depreciation: buildings.
iii. Plant and machinery account.
iv. Provision for depreciation: plant and Machinery.
v. Motor vehicles account.
vi. Provision for depreciation: Motor vehicle. (13 marks)
b) Property, plant and equipment movement schedule for the year ended 30 June 2002.
(6 marks)
(Total:25 marks)
QUESTION THREE
a) On 31st October 2003, a company reported the following transaction in stock that
occurred during the month of October.
Date (October) Units received (receipts) Cost £
10th Oct
20th Oct
25th Oct
450
600
300
120
140
150
Sales were as follows
14th Oct
21st Oct
28th Oct
460
500
350
At the beginning of the month of October, there were 300 units values at £ 120 each
Required:
Value the closing stock using the LIFO method and determine the profit for the month of
October if all sales were at a price of 180. (10 marks)
b) The following relates to Fig Tree Trading Company in the year 2007
i. Sold shs 1,000, 000 worth of goods on terms 2/10n/30
ii. Goods worth shs 10,000 were returned by customers due to defects. The company
accepted the goods and immediately issued the customers with a credit note.
iii. Received payment for invoices for sales of shs 700,000 within discount period
and $200,000 after discount period.
iv. It is estimated that at the end of the year 2007, 20% of the outstanding accounts
receivable will not be paid within the discount period.
Required:
Pass journal entries to Record the transactions and draw ledger accounts dully balanced at
the end of the year using the net sales method. (10 marks)
c) Clearly explain the difference between assignment of debtors and factoring of debtors.
(5 marks)
(Total: 25 marks)
QUESTION FOUR
From the financial statements of Shabnum Limited given below: prepare a cash flow statement
for the year ended 31st December 20 x 2
(25 marks)
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