Advanced Accounting 2D

UNIVERSITY EXAMINATIONS:2021/2022
SCHOOL OF BUSINESS
ORDINARY EXAMINATION FOR BACHEOR OF COMMERCE
ACC3207: ADVANCED ACCOUNTING II
PART TIME WEEKEND
DATE: DECEMBER 2021 TIME: 2 HOURS
INSTRUCTIONS: ANSWER ALL THE QUESTIONS
QUESTION ONE (20 MARKS)

(a) The following financial data is provided by Cherry Company limited on 1st January 2020
Ksh.’000’
Authorized share capital
5,000,000 ordinary shares of sh. 100 500,000
2,000,000 10% preference shares of sh. 100 each 200,000
Authorized issued and fully paid share capital
3000,000 ordinary shares of sh. 100 each 300,000
1,000,000 10% preference shares of sh. 100 each 100,000
Share premium 150,000
General reserves 20,000
Retained profits b/forward 60,000
12% debentures 50,000
Net profit for the year before tax of 30% 30,000
Additional information
1.On 30th June, the company issued a further 1,000,000 ordinary shares of sh. 100 at sh. 120
2. The debentures have a nominal value of sh. 1000 each and are convertible to ordinary share on
a ratio of 15 ordinary share of sh. 100 each for every one sh. 1,000 debentures
Required
(i) Compute the basic Earnings per share (3 Marks)
th
(ii) Consider the shares on 30 June were issued as bonus shares by utilizing the share
premium. Compute the basic Earnings per share (3 Marks)
(iii) Compute the diluted earnings per share (3 Marks)
1
(b) Items recorded in the financial statements are categorized into monetary and non-monetary items.
i. Explain these terminologies and give examples for each categories in the context
of accounting for foreign exchange. (4 Marks)
ii. How do the classifications above apply in the context of accounting for price level
changes (4 Marks)
(c) While preparing Value added statements, state the main headings. (3 Marks)
QUESTION TWO (20 MARKS)

a) Explain any two social accounting and disclosure methods (2Marks)
b) Differentiate between employee report and employment report. (2 Marks)
c) The following group accounts relate to Belly Limited and its subsidiary Delta company and
its Associate Shelter Ltd
Consolidated statement of financial performance for the year ended 30th September 2021.
Ksh.’000’
Group profit before tax 32,850
Group taxation 6,750
Group profit after tax 26,100
Less minority interest 8,100
Extra ordinary items 18,000
Less dividends 900
Retained earnings 17,100
Extra-ordinary items(gains) 450
Less ordinary shares dividends 17,550
Retained profit for the year
Less ordinary dividends 14,950
Retained profits 3,600
2
Statement of financial position as at 30th September
2020 2019
Ksh.’000’ Ksh.’000’
Goodwill 123,750 123,750
Non-current assets 152,550 136,800
Associate ( net assets) 17,550 16200
Investments 67,050 112,050
360,900 388,800
Current Assets
Inventory 149,850 118,350
Trade receivables 89,550 80,100
Bank 3,600 2,700
243,000 201,150
Current liabilities
Creditors 99,000 94,950
Net assets 504,900 495,000
Financed by:
Issued ordinary share capital 79,200 76,500
Reserves 193,050 220,050
Dividends 13,950 12,600
Minority interest 4,500 3,600
Loan capital 115,650 137,250
Short term borrowings 75,150 27,450
Taxation: Deferred tax account 19,800 11,700
Income tax liability 3,600 5,850
504,900 495,000
3
The following are additional information:
1. Depreciation for the year amount to sh. 10,800,000
2. Retained profits by; parent sh. 1,800,000
Subsidiary sh. 450,000
Associate sh. 1,350,000
Sh. 3,600,000
3. Additional non-current assets during the year was sh. 34,650,000
4. Disposal of non-current assets during the year was sh. 8,100,000
5. Reserves;
Share Investment Undistributed Totals
premium revaluation profits
Sh.’000’ Sh.’000’ Sh.’000’ Sh.’000’
1.10.2020 Balance b/d - 88,650 131,400 220,050
Investment revaluation - (35,100) - (35,100)
Surplus - 2,700 - 2,700
Retained profits for the year - - 3,600 3,600
Premium received 1,800 - - 1,800
Totals 1,800 56,250 135,000 193,050
Required
Prepare a consolidated statement of cash flows (in conformity with IAS 7) for the year ending
30th September, 2021 (16 Marks)
4
QUESTION THREE (10 MARKS)
(a) Companies group assets in different categories. Explain the condition for non-current
assets to be grouped as disposal group or held for sale (2 Marks)
(b) Business that are multinational that produce and sell a wide range of products and services
may choose to report on business segments or geographical segments. What factors should
the business consider in determining whether to report on each form? (4 Marks)
(c) Abiba Company limited has not been doing well in terms of profitability and the liquidity
position has been very poor. The owners do not want to liquidate the firm but want to
continue in business with the hope of improving their profitability and liquidity. State and
explain the options available for Abiba Company to meet their business desires. (4 Marks)

Advanced Accounting 2D

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UNIVERSITY EXAMINATIONS:2021/2022

DATE: DECEMBER 2021 TIME: 2 HOURS

INSTRUCTIONS: ANSWER ALL THE QUESTIONS

QUESTION ONE (20 MARKS)

QUESTION TWO (20 MARKS)

Net assets 504,900 495,000

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