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Bac 200 Accounting For Assets Question Paper
Bac 200 Accounting For Assets
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2012
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
BAC 200: ACCOUNTING FOR ASSETS
DATE: WEDNESDAY, 28TH MARCH 2012 TIME: 8.00 A.M. – 10.00 A.M.
INSTRUCTIONS: Answer all questions.
QUESTION ONE
a)
Briefly explain the concept “substance over form” with respect to:
(i)
Motor vehicle acquired on hire purchase.
(2 marks)
(ii)
Leasehold land
(2 marks)
b)
Using suitable examples, explain the meaning of the following terms:
(i)
Accounting standards
(2 marks)
(ii)
Accounting policies
(2 marks)
(iii)
Accounting bases
(2 marks)
c)
On Dec. 31st 2000, Brooke Ltd rendered architectural service and accepted in exchange
a long-term promissory note with a face value of $550,000, a date of Dec. 31st 2005
and the stated interest rate of 2% received at the end of the year.
The market rate of interest is 8%.
Required
1.
Prepare journal entries
(4 marks)
2.
Prepare an amortization schedule
(3 marks)
Page 1 of 4
d)
Assume an old truck had been acquired for shs.80,000. Its estimated useful life is 5
years with no residue value after four years it is traded in for a new truck at list price of
Ksh.100,000. A trade-in allowance of Ksh.24,000 is granted.
Determine the cost of the new truck.
(3 marks)
Total 20 marks
QUESTION TWO
a)
While research and development costs of a project may meet the definition of an asset, the cost
may not meet the criteria used in recognizing an asset.
Define the term “asset” and explain the criteria used in recognizing an asset.
(3 marks)
b)
The following information relates to Kweri Company Ltd on 31st Dec 2009.
Balance as per bank is KSh2,202,000. Balance as per cash book KSh809,100.
An examination of the cash book and the bank statement reviewed the following:
i.
There were bank charges of KSh.6000 for the month of December.
ii.
Interest of KShs2,000 on treasury bonds held by bank in December for Kweri
Company was collected by the bank but not yet recorded in Kweri Company.
iii.
A deposit of KShs36,000 was mailed on 31st Dec but does not appear on the bank
statement.
iv.
A cheque outstanding on 31st Dec totaled 400,000.
v.
A cheque issued by Kweri Company in the amount of KSh17,000 accompanied the
bank statement and was incorrectly charged to Kweri Company.
vi.
A cheque of Kshs40,000 issued by Kweri company had been erroneously recorded
in the bank as KSh4,000.
vii.
A receipt of KSh11,000 from a debtor was entered as 1100 in the cash book.
viii.
A cheque of Ksh190,000 to a creditor was recorded as 180,000 in the cash book
ix.
A cheque of KShs20,000 from Ikua a debtor accompanied the bank statement and was
marked NSF, return to drawer.
Required
1)
Prepare bank reconciliation statement as at 31st Dec 2009
(9 marks)
2)
Prepare journal entries to update the cash book.
(3 marks)
Total 15 marks
Page 2 of 4
QUESTION THREE
a)
Write short notes on the following:
(1)
Raw materials
(2 marks)
(2)
Work in progress
(2 marks)
(3)
Finished goods
(2 marks)
(4)
Merchandise inventories
(2 marks)
b)
Assume the following data for the month February 2000
Data
Particulars
No of item
Unit cost
Total cost
1.2.200
Bal
1000
3.00
3,000
19.2.2000
Purchases
2000
3.20
6,000
22.2.2000
Purchases
3000
3.50
10,500
24.2.2000
Sales
2000
5.00
10,000
25.2.200
Purchases
3000
4.50
13,500
26.2.2000
Purchases
4500
3.80
17,100
27.2.2000
Sales
2000
6.50
13,000
28.2.2000
Purchases
2500
4.20
10,500
29.2.2000
Sales
1000
6.50
6,500
Required
Calculate the cost of goods and the closing inventory using the periodic inventory,
perpetual LIFO and the perpetual FIFO inventory system.
(12 marks)
Total 20 marks
QUESTION FOUR
a)
“Qualitative characteristics are the attributes that make information provided in financial
statements useful to users.”
Briefly explain the four main qualitative characteristics of financial statements with
reference to shareholders of a company.
(6 marks)
Page 3 of 4
b)
The following information is made available to Kengo’s Business
Purchase Price
KSh1,600,000
Useful Life
5 years
Residue Value
Ksh134,000
Rate of interest
10%
The company wishes to raise money to replace the machine after expiry of useful life.
Required
i.
Compute the sinking fund deposit
(2 marks)
ii.
Amortize the interest rate payment
(4 marks)
iii.
Make journey entry for two years
(3 marks)
Total 15 marks
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Page 4 of 4
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