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Intermidiate Accounting Question Paper
Intermidiate Accounting
Course:Bachelor Of Business Administration
Institution: Kenya Methodist University question papers
Exam Year:2012
DEPARTMENT OF BUSINESS ADMINISTRATION
ACCT 331: INTERMEDIATE ACCOUNTING II
Due Date: November 2, 2012
Lecturer: J. Gatauwa Email: jmgatauwa@yahoo.com
QUESTION ONE
a) Use the following information to prepare a multi-step income statement for Amiv Ltd for the
year ended 2010 including EPS results for each category of income. The weighted average
number of outstanding shares is 227,500. (20 marks)
Cumulative effect of a change in depreciation method (net of tax benefit) (136,500)
Expenses related to continuing operations (2,072,500)
Extraordinary gain on debt retirement (net of tax) 182,000
Gain on disposal of discontinued segment’s assets (net of tax) 29,000
Gain on sale of stock investment 400,000
Loss from operating discontinued segment (net of tax benefit) (120,000)
Income taxes on income from continuing operations (225,000)
Prior period adjustment for error (net of tax benefit) (75,000)
Sales 4,140,000
Infrequent loss (650,000)
QUESTION TWO
Bold Ltd made an issue of 5,000 equity shares of sh. 100 each at a premium of sh. 12.50 per
share payable as follows;
Sh. 12.50 on application
Sh. 25 on allotment including premium
Sh. 50 on first call
Sh. 15 on second call
Sh. 10 on final call
The application and allotment money was duly received and in addition holders of 2,500 shares
paid in full on allotment. The holders of 100 shares failed to pay the first call and after due notice
their shares were forfeited. The amounts payable on the second call (made after forfeiture) were
paid in full except that a holder of 50 shares failed to pay. 75 of the 100 shares forfeited were
reissued and credited with sh. 90 paid for sh. 70 per share. The new holder paid for these shares
in full. The balance of sh. 10 per share was treated as Call in Advance. The final call was met in
full including the arrears of the second call. Show the necessary journal entries in the books of
Bold Ltd. (20 marks)
QUESTION THREE
a) On January 1, 2010 Cooper Ltd issued sh. 700,000 of 12% bonds dated January 1. Interest of
sh. 42,000 is payable semi-annually on June 30 and December 31. The bonds mature in three
years. The market yield for bonds of similar risk and maturity is 10%. The entire bond issue was
purchased by MCL Finance Inc.
Required:
i) Calculate the price of the bonds.
ii) Draw an amortization schedule to show interest computation for the bond.
iii) Journal entries for year 2010 and 2011.
(10 marks)
b) The following transactions relate to the year end. The present value of the obligation and the
market value of the plan assets were both sh. 1,000,000 at 1 January 2009.
2009 2010 2011
Discount rate at the start of the year 10% 9% 8%
Expected rate of return on plan assets at the start of the year 12% 11% 10%
‘000’ ‘000’ ‘000’
Current service cost 130 140 150
Benefits paid 150 180 190
Contributions paid 90 100 110
Present value of obligations at 31 December 1,100 1,380 1,408
Market value of plan assets at 31 December 1,190 1,372 1,188
Required:
Account for the above pension scheme for the years 2009, 2010 and 2011 by showing the
income statement extracts (inclusive of the actuarial gain/loss for each year if assuming that the
actuarial gain/loss arising in a year is recognized immediately).
(10 marks)
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