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Accounting For Assets Question Paper
Accounting For Assets
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2009
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
BAC 200: ACCOUNTING FOR ASSETS
DATE: Tuesday 22nd December, 2009
TIME: 8.00 a.m. – 10.00 a.m.
INSTRUCTIONS
Answer question one and any other TWO.
Question 1
(a)
Differentiate between the periodic and perpetual inventory systems giving items
used
in
each
system.
[5
marks]
(b)
Briefly explain the basic purposes of Bank reconciliation.
[4 marks]
(c)
Forester company as a matter of policy deposited all cash receipts and makes all
payment by cheque. The following were taken from the companies records as at
31st August, 2004.
Forester company Bank Statement
- August
balance 64,000
-
Deposit recorded in August
154,600
-
Cheques cleared in August
142,480
-
Note collected (including shs.200 interest) 2,200
-
NSF cheque J. Fox
600
-
August Service Charges
400
-
August balance
77,320
Page 1 of 4
Forester Cash Book
August
Balance
60,000
August
deposits 150,600
August
disbursements
140,840
August
Balance
67,760
Additional
information
1.
End of July deposit in transist sh.10,000 and cheques outstanding
sh.16,000. These two amounts were taken from the July bank
reconciliation.
2.
End of August cash in hand (undeposited is shs 1980 and it will be
deposited in September).
3.
A cheque with Forester in the amount of shs 480 for a repair bill in August
is included in the cleared cheques. Forester recorded the cheques for
shs.840, the correct amount debting repair expense. The payee will bill
forester for the remaining shs.360 due.
Required
(a)
Compile deposit in transists and cheques outstanding at 31st August, 2004.
[5 marks]
(b)
Prepare the correcting bank reconciliation statement for August.
[10 marks]
(c)
Give all formal entries that should be made based on August bank
reconciliation.
[6
marks]
Question 2
Highrise Company Limited that buys and sell computers has the following information
on 1st July, 2007.
Unsold computers in stock each valued at ksh.2,500.
During the month of July the company received deliveries as follows:
Page 2 of 4
Date
No. of Computers received Unit
cost
9th 100
3000
18th 250
3200
22nd 150
3400
Also in the same month the sale of computers were as follows:
13th
200
4,500
19th
300
5,000
27th
100
1,700
Required
(a)
Calculate the value of closing stock and gross profit
(i)
FIFO
[6 marks]
(ii)
LIFO
[5 marks]
(iii)
Weighted
Average
Method
[5
marks]
(b)
Describe how LIFO and FIFO affect the net profit:-
(i)
When purchase price are rising.
(ii)
When purchase price are falling.
[4 marks]
Q3.
(a)
Boresha Ltd. Purchase a Motorran on January 2008 whose details are
shown below:
Price
2,145,000
Credit
terms
2/20,
n/30
Freight costs
30,390
Testing costs
11,400
Fuel cost during the year
210,000
The motorran has a useful life of 10 years after which it can be sold for
kshs.172,000. The invoice for the motorran was paid on 7th January, 2008.
Required
Compute depreciation expense for the year 2008 using the following
methods:
Page 3 of 4
(i)
Straightline method
(ii)
Sum of years digit
(iii)
Double
decline
method.
[10
marks]
(b)
Capital Hill Ltd lost most of its inventory in fire in December 2007 just
before the physical stocktaking was done.
Company records discloses the following:
Inventory
(1st Jan 2007)
-
180,000
Purchases
- 680,000
Returns Inwards
-
30,000
Sales
- 920,000
Returns outwards
-
21,000
Gross profit percentage based on selling price is 30%.
Merchandise with a selling price of Kshs.130,000 remained undamaged
after the fire, and damaged merchandise had a salvage value of 70,150.
Required
Compute the estimated loss of inventory.
[10 marks]
Question 4
(a)
Accounting principles are not like physical laws, they do not exist in nature
awaiting, discovery by man. Discuss the validity of this statement.
[5 marks]
(b)
Accounting standards are useful to the discipline of accounting. Clearly explain
the following:
(i)
Advantages
of
accounting
standards.
[5
marks]
(ii)
Disadvantages of accounting,
standards.
[5
marks]
(c) Explain
the
following
accounting principles:
(i)
Consistency
[2 marks]
(ii)
Matching principle
[3 marks]
…………………….
Page 4 of 4
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