MOI UNIVERSITY

DEPARTMENT OF ACCOUNTING AND FINANCE

BBM 404: ADVANCED ACCOUNTING

CAT

JULY 2021

QUESTION ONE

a) Define a related party and clearly explain any five circumstances under which an entity may be classified as a related party according to IAS 24 (10 Mrks)

b) Eldoret ltd has the following assets and liabilities at 31 December, 2010. The historical balance sheet is as follows:

Assets Sh. Sh.

Non-current assets (at cost) 60,000

Less depreciation (40,000)

20,000

Current Assets:

Stocks 7,900

Debtors 8,000

Cash 2,000 17,900

Total assets 37,900

Equity & Liabilities:

Equity

Shares capital 16,900

Loan Capital 15,000

31,900

Current Liabilities:

Creditors 6,000

37,900

Additional Information

1. All non-current assets were purchased on 1 January 2007 at a cost of Sh. 60,000, and they had an estimated life of 6 years. Straight-line depreciation method is used.
2. Closing stock have historical cost value of sh. 7,900. They were bought in the period of November December 2010.
3. Debtors amounted to sh. 8,000, cash sh. 2,000 and short term creditors sh. 6,000.
4. There are non-current liabilities of sh. 15,000
5. The general price index includes the following information:

Year Date Price index

2007 1 January 100

2010 30 November 158

2010 31 December 160

2011 31 December 180

Required

1. CPP balance sheet as at 31 December 2010 (10 mrks)
2. What was the depreciation charge against CPP profits in 2010. (5 mrks)
3. What must be the value of equity at 31 December 2011 if Eldoret Ltd is to break even and make neither a profit nor a loss in 2011? (5 mrks)