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Intermediate Accounting Ii--December Question Paper

Intermediate Accounting Ii--December

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

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UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE I EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
INTERMEDIATE ACCOUNTING II
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE (15 MARKS)
a)
i. Distinguish between a current liability and a long term debt (2 Marks)
ii. How are current liabilities related by definition to current assets? How are current
liabilities related to a company’s operating cycle (3 Marks)
iii. Kahawa Sukari corporation borrowed shs 50,000 on November 1, 2008 by signing a kshs
51,125, 3 Month zero interest-bearing note. Prepare Kawasaki’s November 1 2008, entry;
the December 31, 2008, annual adjusting entry and the February 1, 2009 entry.
(6 Marks)
b)
i. What are compensated absences (2 Marks)
ii. Tale spin inc. provides paid vacations to its employees. At December 31,2008, 30
employees have each earned 2 weeks of vacation time. The employees’ average salary is
shs 600 per week. Prepare tale spin’s December 31 2008, adjusting entry. (2 Marks)
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QUESTION TWO (20 MARKS)
a. Describe the accounting criteria and procedures for capitalizing leases by the lease
(5 Marks)
b. Upendo Corporation provides its officers with bonuses based on income. For 2008, the bonuses
total shs 450,000 and are paid on February 15, 2009. Prepare Upendo December 31, 2008
adjusting entry and the February 15,2009, entry. (4 Marks)
c.
i. How do the terms “Probable” “reasonably possible” and “remote” related to contingent
liabilities. ( 3 Marks)
ii. Justice league Inc is provided in a lawsuit at December 31 2008 prepare the December 31
entry assuming it is probable that justice league will be liable for shs 700,000 as a result
of this suit. ( 2 Marks)
Prepare the December 31 entry, if any assuming it is not probable that justice league will
be liable for any payment as a result of this suit. (2 Marks)
iii. Assume that a sales account balance of 150,000 includes sales tax of 4%
Required
i. The journal entry to record the above (2 Marks)
ii. Assume that the amount is not inclusive of the sales tax. What would be the journal entry
(2 Marks)
QUESTION THREE (20 MARKS)
a) Write brief notes on the following types of bonds
i. Secured and unsecured bonds (2 Marks)
ii. Term, serial bonds and callable bonds (3 Marks)
iii. Commodity backed bonds (2 marks)
b) Presented below are two independent situations
1. On January 1, 2008, Paul Simon Company issue shs 200,000, of 9%, 10 year bonds at par.
Interest is payable quarterly on April 1, July 1, October 1, and January 1.
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2. On June 1, 2008, Graceland company issued shs 100,000 of 12%, 10 year bonds dated
January 1 at par plus accrued interest. Interested is payable semiannually on July 1 and
January 1.
Required
For each of these two independent situations, present journal entries to recode.
i. The issuance of the bonds ( 4 Marks)
ii. The payment of interest on July 1. ( 4 Marks)
iii. The accrual of interest on December 31. (5 Marks)
QUESTION FOUR (15 MARKS)
a) Celine Dion Company issued shs 600,000 of 10%, 20 year bonds on January 1, 2009, at
102.interest is payable semiannually on July 1 and January 1. Dion Company uses the
straight-line method of amortization for bond premium or discount.
Required
Prepare the journal entries to record
i. The issuance of the bonds ( 2 Marks)
ii. The payment of interest and the related amortization on July 1, 2009. (2 Marks)
iii. The accrual of interest and the related amortization on December 31,2009 (2 Marks)
b) Assume that Seaboard Company, which closes its books each year on December
31, receives its property tax bill in May each. The fiscal year for the city council.
In which seaboard company is located begins on May 1 and ends of the following
April 30 property taxes of shs 30,000 are assessed.Against seaboard company
property and are payable in equal installments on July 1 and Sept 1.
Required
Journal entry to record entry on may 1 2008 (2 Marks)
Journal entry to record entry on May 31 and June 31, 2008 (2 Marks)
Journal entry to record entry first tax payment on July 1 2008 (2 Marks)
Journal entry to record entry on second tax payment on September 1 2008 (2 Marks)
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Intermediate Accounting Ii--December Question Paper

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