KENYATTA UNIVERSITY

UNIVERSITY EXAMINATIONS 2009/2010 INSTITUTIONAL SCHOOL BASED PROGRAMME (IBP) EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

BAC 101: FUNDAMENTALS OF ACCOUNTING II DATE: Wednesday 28th April 2010

TIME: 8.00 a.m 10.00 a.m

INSTRUCTIONS: Answer ALL questions. Answers should be logical as complete as possible Marks allocated to each Question are indicated at the end of every Question.

Question 1

(i)

Write short-notes on (a) (b) (c) (d) Authorized share capital Issued share capital Paid-up share capital Forfeited shares [2 marks each]

(ii)

Differentiate between a) b) c) d) Debt financing and equity financing Ordinary and preferential shares Capital Reserves and retained earnings Memorandum of association and articles of association [3 marks] [3 marks] [1 marks] [3 marks] [2 marks]

iii)

Discuss the importance of prospectus in the equity financing

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Question 2 Star, Stripe and Kooka agree to wind up their business on 30 April 2007. The partners share profits in proportion to their fixed capital. Their ledger contained the following balances. $ Capital: Star Stripe Kooka Current Star Stripe Kooka Mortgage Accounts payable Bills payable Inventory Accounts receivable Bills receivable Bank (debit) Land and building s Plants Accumulated depreciation plant Profit and loss-profit to 30 April 2007 The assets realized the following amounts $ Inventory Accounts receivable Bills receivable Land and building (net after repayments of mortgage) Plant 12,000 24,000 6,000 70,000 12,000 20,000 20,000 40,000 10,000 5,000 5,000 30,000 20,000 5,000 15,000 25,000 6,000 5,000 90,000 30,000 12,000 4,000

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The remaining liabilities were paid out at book values except that some creditors allowed discounts amounting to $ 500. The expenses of the realization were $ 1,500. Required: Prepare (a) (b) (c) Partners capital accounts Realisation account and Bank account to record the dissolution (6mrks) (5marks) (4marks)

Question 3 The following is the receipts and payments account of the Yatch Darts club for the year ended 30th September 2007. Receipts Sh. 000 Opening balance Cash in hand Cash at bank 150 8,230 10,710 2,400 4,270 230 7,450 Honoraria, salaries and wages Rate and taxes Printing and stationery Transport and miscellaneous expense Ground mans wages Expenditure on fetes Bar purchases Repairs New bus (less sale proceeds of old bus, sh. 3 million) Closing balance at bank 33,440 33,440 12,600 3,460 Payments Sh. 000 4,800 1,260 470 1,530 840 2,390 5,770 320

Subscriptions Receipts from fetes Net proceeds of entertainment Bank interest Bar takings

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The following additional information is provided: (1) Balance 1-10-2006 Sh. 000 Subscription due Owing on printing Bar stock Owing for bar purchases (2) 1,200 90 710 590 30-9-2007 sh. 000 980 30 870 430

Club premises and the old bus were acquired three years ago at a cost of sh. 29 million and sh. 12,190,000 respectively. The provision for depreciation accounts on 30-9-2007 showed balance of 18.8 million premises and Sh. 10,290,000 for the bus

(3)

Depreciation is to be provided at 5% per annum as the written down value of the club premises and at 15% per annum on the bus for the whole year.

Required (a) Incomes and expenditure account of the club for the year ended 30th September 2007 Balance sheet as at 30th September 2007 [8mks]

(b)

[7mks]

Questions 4 (a) State and explain the advantage of issuing cash flow statement by users of accounting information (5marks)

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Question 4(b) Chinkororo and Co. provide the following information in regard to their operations for the year ended 30 June 2007 Statement of financial performance (Revenue statement) For the year ended 30 June 2007 Sh. Sh. Sales Cash Credit Less Cost of goods sold Opening inventory Purchases Cash Credit Closing inventory Gross Profit Discount received Commission income 47,000 234,000 37,000 16,000 165,000

281,000 185,000

181,000 218,000 33,000 96,000 6,000 18,000 24,000 120,000

Add

Less Total operating expenses Salary and wages 63,000 Discount allowed 5,000 Other operating expenses 29,000 Net profit Comparative Balances 30 June 2006 Sh. Capital 219,000 Mortgage 27,000 Accounts payable 23,000 Bank 284,000 Land and building 190,000 Office furniture and equipment 10,000 Inventory Accounts receivable Bank 37,000 47,000 ___ 284,000

97,000 23,000 30 June 2007 Sh. 317,000 18,000 37,000 372,000 190,000 29,000 33,000 44,000 76,000 372,000

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Additional information 1. 2. 3. Cash introduced as additional capital totaled sh. 75,000 A cash payment of 9,000 was made to reduce the mortgage A cash paid for additional office furniture and equipments 19,000

Required: A statement of cash flows for the year ended 30 June 2007

[15marks]

End

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