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International Accounting Question Paper
International Accounting
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2008
INSTRUCTIONS:
Answer ALL questions in Section A and any two questions in section B.
Give precise and concise answers
Marks are shown at the end of the question.
SECTION A
QUESTION ONE
a) Explain the meaning of the following terms as used in foreign transactions:
i) Non-Monetary items (2 marks)
ii) Foreign Exchange (2 marks)
iii) Reporting currency (2 marks)
b) The following is the trial balance of Mineli Ltd.’s Cape Town Branch, South Africa
as at 31/12/07:
Dr. Cr.
Rand Rand
Fixed assets (at cost) 282,000
Accumulated depreciation 53,400
Debtors 165,000
Opening stock 140,000
Creditors 130,600
Goods from H/O 470,000
Sales 720,000
Expenses 66,000
Bank 90,000
H/O Current Account _______ 309,000
Total 1,213,000 1,213,000
Stock at 31-12-2007 Rand 50,000
Fixed assets were acquired thus:
Cost Accumulated Exchange rate
Rand Depreciation
84,000 84,000 Rand 1= Kshs. 20
198,000 45,000 Rand 1 = Kshs. 22
Total per Trial Balance 282,000 53,000
Exchange rates were
Rand 1 = Kshs.
01-01-2007 20
31-12-2007 16
Average for 2007 18
In the head of office ledger, balances at 31-12-2007 included:
Goods to branch Kshs. 80,000
Cape Town Branch Account Kshs. 62,500
Required
Translate the Cape Town Branch Trial Balance at 31-12-2007 into Kenyan shillings using
the temporal method and prepare the final accounts in Kenya shillings. (14 marks)
QUESTION TWO
Industrial Diamonds Inc. Based in Los Angeles has two divisions.
1. Philippine Mining Division operates a mine containing a rich body of raw
diamonds.
2. U.S. processing Division processes the raw diamonds into polished diamonds used
in industrial applications.
The cost of the Philippine Mining Division are
· Variable costs, 2,000 pesos per Ib. of raw industrial diamonds
· Fixed costs, 4,000 pesos per Ib. raw industrial diamonds.
Industrial Diamonds Inc. has a corporate policy of further processing in Los Angeles all
raw diamonds in the Philippines. Several diamond-polishing companies in the Philippines
buy raw diamonds from other local mining companies at 8,000 pesos per pound. Assume
that the current foreign exchange rate is 20 pesos = 1 US $ (1 US dollar). The cost of U.S.
processing division are :-
· Variable cost US$ 1,000 per Ib. of polished industrial diamonds.
· Fixed cost, US $ 600 per Ib. of polished industrial diamond.
Assume that it takes two pounds of raw industrial diamonds to yield one pound of polished
industrial diamonds. Polished diamonds sell for $ 4,000 per pound.
Required:
i) Compute the transfer price ( in $ U.S) for one pound of raw industrial diamonds
transferred from Philippine Mining Division to the U.S. Processing Division under
two methods
a) 200% of full cost (4 marks)
b) Market price (4 marks)
ii) Assume a world of no income taxes. One thousand pounds of raw industrial
diamonds are mined by the Philippine division and then processed and sold by the
U.S. processing Division. Compute the operating income (in $ U.S) for each
division of Industrial Diamonds Inc. under each transfer-pricing method in
requirement (i) above. (8 marks)
iii) Assume the corporate income tax rate is 20% in the Philippines and 35% in the
United States. Compute the after-tax operating income (in $U.S.) for each division
under each transfer pricing method in requirement (i) above. (Income taxes are not
included in the computation of the cost based transfer price. Industrial diamond
does not pay U.S., taxes on income already taxed in the Philippines).
(4 marks)
SECTION B
QUESTION 3
a) Describe any four approaches that multinational corporations take to accommodate
their foreign readers who share language and indicate the suitability of each
(10 marks)
b) Discuss problems experienced by multinational corporations in planning and
controlling their operations in the global environment. (5 marks)
QUESTION 4
a) State the problems hindering harmonization of accounting standards.
(5 marks)
b) Briefly explain the benefits of using international accounting standards in Kenya.
(10 marks)
QUESTION 5
Discuss any five methods of performance evaluation followed by multinational
corporations. (15 marks)
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