UNIVERSITY OF DAR ES SALAAM

BUSINESS SCHOOL
Department of Accounting
AC 304 ADVANCED ACCOUNTING
UNIVERSITY FIRST SEMESTER TEST 2014/2015

GENERAL INSTRUCTIONS
1. This question paper contain TWO QUESTIONS attempt ALL.
2. Marks are shown at the end of each question (in total 100%) to enable you budget wisely
your time.
3. Show all your workings where relevant they will be rewarded.
4. Time allocated for this examination is 1 Hours

QUESTION ONE
(a) Define the following concepts as used in financial reporting practices:
i.
Headline earnings,
ii.
Theoretical ex-rights value,
iii.
Right issue,
iv.
Share splits,
v.
Bonus issues.
(b)

(c)

(Marks, 20)
The Chief Accountant of Superstar Brands Ltd [SBL] has computed several performance
indicators for the business from the companys financial statements to include its
comparatives views for the year ended 31st December, 2013. You are interested with three
important performance indicators namely the after tax profit, earning per share [EPS] as
well as diluted earnings per share, which are provided below:
(i) Increase in profit after taxation 75%,
(ii) Increase in (basic) earnings per share 4.5%,
(iii) Increase in diluted earnings per share 1.8%
Required:
Explain why the three measures of earnings (profit) growth for the same company over the
same period can give apparently differing impressions.
(Marks, 12)
Assume a different scenario; Superstar Brands Ltd [SBL] reported after tax profit of TZS
150,000,000/= for the year ending 31st December, 2013. Furthermore, at 1st January, 2013
the company had in issue 36 million equity shares and a TZS 100,000,000/= 8%
convertible loan note with maturity date 2014. This financial instrument is set to be
redeemed at par or converted to equity shares on the basis of 25 shares for each TZS
1,000/= of loan note, at the loannote holders option. On 1st April, 2013 SBL made a fully
subscribed rights issue of one new share for every four shares held at a price of TZS 280/=
1

each. The market price of the equity shares of SBL immediately before the issue was TZS
380/=. On the other hand the Earnings Per Share (EPS) reported for the year ending 31st
December, 2012 was TZS 3.5/= while the income tax rate is known to be 30%.
Required:
(i)
Determine the theoretical ex-rights values of shares under SBL,
(ii)
Compute the Basic Earnings Per Share (BEPS) and diluted EPS to be disclosed by
SBL for the year ending 31st December, 2013.
(Marks, 18)
(Total Marks, 50)
QUESTION TWO
(a)
IKAKASI Ltd has a branch at Mabibo. All accounting records are kept at the head office.
The head office transfers goods at cost to the branch. You are required to prepare journal
entries in the accounting records of the home office to record each of the following
transactions or events (omit explanations):
i. A branch debtor returns goods worth TZS 5,000,000 directly to head office
ii. Goods returned by branch customers to branch

TZS 500,000

iii. Goods stolen (accounted for as abnormal loss)

TZS 1,000,000

iv. Goods returned by branch to head office

TZS 16,000,000

v. Branch expenses met by head office

TZS 200,000
(Marks 12.5)

(b)

The trial balance of MAWI Company Limited and its branch in Morogoro as at 31
December 2014 showed the following:

Ordinary share capital

Preference share capital
Sales
Purchases
Goods sent/received
Provision for unrealized
profit
Retained earnings
Stock
Debtors/Creditors
Cash in hand & at bank
Motor vehicles at cost
Provision for depreciation

HEAD OFFICE
Dr
Cr
TZS "000"
TZS "000"
280,000
70,000
791,000
857,500
301,000

BRANCH
Dr
TZS "000"

420,000
9,800
278,600

4,760
13,440
154,000
126,000
42,000
156,800

51,800

79,800
2

Cr
TZS "000"

23,800
28,000
16,800

Branch/Head office Current

Account
Carriage outwards
Salaries
Stationery
Advertising
Rent
Share premium

114,100
30,800
95,200
15,400
11,200
16,800

4,200
4,200
51,800

11,200
28,000
1,619,800

1,619,800

424,200

424,200

The following additional information is available:

i] As at 31 December 2014,stock in hand at invoice price was
Head office
TZS 162,400,000
Branch
TZS 55,260,000
ii] Goods were invoiced to the branch at cost plus 25%
iii] The amount of TZS 4,200,000 which had been remitted by a branch debtor directly to
head office had been credited to the branch current account in head office books but had
not been reflected at all in branch books
iv] TZS 30,800,000 recorded as carriage outwards at the head office was incurred in
transporting goods to branch
v] As at 31 December 2014,rent accrued was TZS 2,800,00
vi] The branch manager is entitled to a commission of 20% of the branchs net profit. This
calculation is based on net profit after charging such commission.
vii] The salaries(at branch) of TZS 51,800,000 includes a commission of TZS 7,000,000
which has been drawn by the branch manager as commission
Required:
i.
Trading Profit and loss account in columnar form for the year ended 31 December 2014,
for the head office, the branch and the combined business.
(Marks, 30)
ii.
Current accounts for the branch and head office.
(Marks, 7.5)
(Total Marks, 50)

End of Question Paper