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Bust 0125: Intermediate Financial Accounting Question Paper
Bust 0125: Intermediate Financial Accounting
Course:Diploma In Education
Institution: Chuka University question papers
Exam Year:2013
CHUKA
UNIVERSITY
UNIVERSITY EXAMINATIONS
FIRST YEAR EXAMINATION FOR THE AWARD OF
DIPLOMA IN EDUCATION
BUST 0125: INTERMEDIATE FINANCIAL ACCOUNTING
STREAMS: DIP (EDUC) Y1S2 TIME: 2 HOURS
DAY/DATE: THURSDAY 25/4/2013 2.30 PM – 4.30 PM
INSTRUCTIONS:
Answer Question ONE and any other TWO
SECTION A (30 MARKS)
QUESTION ONE
(i) Explain the following terms as used in short term investment
(a) Certificate of deposits
(b) Commercial papers
(c) Held-to maturity securities
(d) Marketable securities
(e) U.S Treasury obligations [10 Marks]
(ii) When accounting for uncollectible accounts a company can use two methods, explain the two methods. [4 Marks]
(iii) Companies with direct sales must attempt to estimate bad debts expense to both manage their receivables and set credit policies. Which are the methods commonly used. Discuss them using elaborate examples [10Marks]
(iv) When shares are being issued, there are four things that happen. State and explain each of
them. [6 Marks]
SECTION B (40 MARKS)
QUESTION2
(i) Why is cash – flows statement important as a company’s financial statement.
[2 Marks]
(ii) What are the questions answered by a statement of cash flow. [3 Marks]
(iii) The following information was found in the books of account of Uchumi Ltd.
Item Ksh
Balance Dec 31, 2011 12,000
Receipts from customers 570,000
Receipts from asset sales 12,000
Receipts from stock issuance 15,000
Payments for merchandise 319,000
Payments for wages & other expenses 218,000
Payments for interest 8,000
Payments for taxes 5,000
Payments for assets 10,000
Payments for bond retirement 18,000
Payment for divided 14,000
Balance Dec.31,2012 17,000
Required:
Prepare the statement of cashflows for Uchumi Ltd. [10 Marks]
(iv) Explain the reasons why the concept of financial reporting is relatively new.
[5 Marks]
QUESTION 3
(a) Using the concept of bond trading explain the following terms.
(i) Secured and unsecured bonds. [2 Marks]
(ii) Term and serial bonds
(iii) Registered bonds and Bearers bonds
(iv) Convertible and callable bonds. [2 Marks]
(b) A bond is issued at par value of sh.100, 000 cash, at the end of the bonds’ five year life. Semi-annual interest payments at the rate of 4%. Indicate the cashflow patterns for the five years period. [5 Marks]
(c) Name the two cash flows paid by a bond [2 Marks]
(d) Five year, 6% bonds with a Sh. 100,000 par value are issued at a price of sh 91,893 interest is semiannual, and the bonds market rate is 8% on the issue date
This bond is issued at a discount or at premium. Explain your answer and give
other ways of bond trading. [5 Marks]
QUESTION 4
(a) The following information was found on the books of account of Murango stores. They relate to inventory records.
January 1: Beginning inventory consists of two units of Chandaria each costing sh. 700
March 20: Purchased five units of Chandaria costing sh. 800
June 9: Purchased one unit of Chandaria costing sh. 1000
September 10: Sold five units of Chandaria for sh 1,200 each.
(a) To determine the cost of goods sold and the goods remaining that is ending inventory) there are four generally accepted inventory costing methods.
(i) Specific identification
(ii) FIFO
(iii) LIFO
(iv) Weighted average
Use each of the four methods to calculate the cost of goods sold and the ending inventory if on September 10th, five units were sold. [15 Marks]
(b) Explain with workable examples three different accounting entries through which shares may be issued. [5 Marks]
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