KENYATTA UNIVERSITY

REG NO : E35/2017/2019

NAME : WANJIRU MARY

SCHOOL : EDUCATION

DEPARTMENT : ACCOUNTING AND FINANCE

UNIT NAME : ACCOUNTING FOR LIABILITIES

UNIT CODE : BAC 201

LECTURER : DR. NATHAN MUTWIRI

 Question one
a) ABC Ltd had the following information as at 1st January 2021: issued and fully paid
capital 400, 000, 10% preference shares of Kshs 20 each, 10 million ordinary shares of
Kshs. 20 each. On 1st July 2021, the company decided for rights issue of 1 for every 10
shares held at Kshs 30 each. The market price of shares on the last day of quotation on
cum right basis was Kshs. 50 per share. The profit after tax of the company was Kshs
4,600,000
Required
i) Compute the basic earnings per share for 2019 (3 Marks)
ii) Calculate the adjusted EPS and show the journal entries (3 Mark

Question Two

a) Mwengo Ltd sells manufactures food suppliments. You are provided with the following
information

Year Profit before tax Capital allowance Depreciation

2017 14,500 4,000 2000
2018 13,000 2000 800
2019 12,000 200 900
2020 10,000 1,400 400
Assume tax rate of 25% and that there was no balance carried forward of deferred tax in
the year 2014.
Required
Income statement and balance sheet extract for the four years using the cost flow method (9
Marks)