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John and Joel were partners in a business sharing profits and losses in the ratio of 2:1. Interest on fixed capital was allowed at the rate...

      

John and Joel were partners in a business sharing profits and losses in the ratio of 2:1. Interest on
fixed capital was allowed at the rate of 10% per annum. No interest was charged on current accounts.
On 30 September 2011 Joy was admitted as a partner and from that date profits and losses were to be
shared in the ratio of 2:2:1 for John, Joel and Joy respectively. Goodwill was not to be retained in the
books with adjusting entries being made in the current accounts.
The following trial balance was extracted from the partnership's books of account as at 31 March
2012:
fig7216520191229.png

Additional information:
1. No entries have been made to record the admission of Joy. Goodwill was agreed at Sh.10.5
million. Sh.6 million of the cash introduced by Joy was the fixed capital.
2. Salaries include the following partners' drawings:
Sh ‘000’
John 2,580
Joel 2,040
Joy 680
3. Depreciation is to be provided as follows:
Asset Rate per annum
Motor vehicles 20% on cost
Furniture and fittings 10% on cost
4. The sales during the six month period from 1 October 2011 to 31 March 2012 were 50% more
than the sales during the six month period from 1 April 2011 to 30 September 2011. The selling
and distribution expenses varied with the sales.
All other expenses accrued evenly.
5. Inventory as at 31 March 2012 was valued at Sh.11 million.
6. Allowance for doubtful debts was Sh.229,000 as at 30 September 2011 and Sh.309,000 as at 31
March 2012.
7. The leasehold premises is to be amortised over 30 years from 31 March 2011
Required:
a) Income statement for the year ended 31 March 2012.
b) Statement of financial position as at 3 I March 2012.
c) Partners' current accounts.

  

Answers


Kavungya
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Kavungya answered the question on May 16, 2019 at 09:35


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    fig6916520191222.png

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    fig3716520191046.png
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    fig3816520191050.png
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    fig3416520191039.png

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    fig3116520191033.png

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    fig2516520191010.png

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    fig201652019954.png

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    Sh.500,000. This amount was erroneously debited to office premises account. It is policy of
    Bakari Brothers Enterprises to provide for depreciation on the closing balances of non-current
    assets and this has already been done. The annual rate of depreciation on office premises is
    2% calculated on the straight-line basis.
    6. In December 2005 2005, Bakari Brothers Enterprises had bought goods on credit from CB
    Ltd. for Sh. 452,100 and has also sold goods on credit to the same company for Sh.163,040.
    These amounts were correctly posted to their respective accounts. However, these accounts
    are to be offset as at 31 December 2005 and the remaining balance settled by cheque in
    January 2006.
    7. The provision for discounts allowed to debtors, which at present has a balance of Sh.229,530
    needs to be reduced to Sh. 157,400.
    8. Debts totaling Sh.64,800 are irrecoverable and should be written off. However, amount of
    Sh.21,440 written off as a bad debt in the previous year has now been recovered in full but the
    cheque in settlement has not been banked or posted in the accounts.
    Required:
    Journal entries, including narrations, necessary to record the above transactions in the books of Bakari
    Bothers Enterprises.

    Date posted: May 16, 2019.  Answers (1)

  • The trial balance extracted from the books of Benard Masita as at 30 September 2010 failed to agree. The debit difference of Sh. 442,000 was posted...(Solved)

    The trial balance extracted from the books of Benard Masita as at 30 September 2010 failed to
    agree. The debit difference of Sh. 442,000 was posted to a suspense account. An income
    statement was prepared which showed a gross profit and a net profit of Sh. 1,985,000 and
    Sh.1,229,000 respectively. Upon investigations, the following errors were discovered:
    1. A purchase of Sh 150,000 on credit was correctly posted to the suppliers account but was
    completely omitted from the purchases day book.
    2. Sales amounting to Sh. 250,000 to Samuel Njuguna were erroneously credited to his account.
    The sales account had been correctly posted.
    3. Salaries paid for the month of September 2010 amounting to Sh. 230,000 were recorded in
    the salaries account as Sh 320,000.
    4. Purchases of office stationery for Sh. 125,000 were erroneously debited to purchases account.
    5. A payment of Sh.45,000 to Daniel Olunya, a creditor, was erroneously debited to the account of
    Alois Olunya, another creditor.
    6. An entry of Sh.21,000 for returns outwards was made in error in the sales day book instead of
    in the purchases return day book.
    7. A bad debt of Sh 22,500 is yet to be written off.
    8. Goods valued at Sh220,000 were taken for personal use but no entry had been made in the
    books.
    9. A discount received of Sh.59,000 was correctly entered in the cashbook but posted to the
    discounts allowed account.
    Required:
    i) A fully balanced suspense account.
    ii) Statement of corrected gross profit.
    iii) Statement of corrected net profit.

    Date posted: May 16, 2019.  Answers (1)

  • Distinguish between "allowance for bad and doubtful debts" and "bad debts"(Solved)

    Distinguish between "allowance for bad and doubtful debts" and "bad debts"

    Date posted: May 16, 2019.  Answers (1)

  • Pata Transport Limited (PTL) was incorporated on 1 June 2006 and on the same day bought its first lorry; KB099S for Sh. 9,000,000. On 1 April 2007,...(Solved)

    Pata Transport Limited (PTL) was incorporated on 1 June 2006 and on the same day bought its first
    lorry; KB099S for Sh. 9,000,000.
    On 1 April 2007, the company bought its second lorry KB 120T FOR Sh 12,000,000.
    On 1 June 2008, the company bought a third lorry KB 340X for Sh. 6,000,000.
    On 1 October 2008, lorry KB 099S was involved in an accident and was written off. The
    insurance compensation paid to PTL by the insurers was Sh. 2,600,000.
    On 31 December 2009,lorry KB 340X broke down and was traded in with a new lorry registration KB
    419Y valued at Sh. 8,000,000.PTL; paid cash amounting to Sh. 5,400,000 for the lorry.
    On 1 Apri12010, a van KB 890B was purchased for Sh 4,800,000.
    Depreciation on motor vehicles is to be provided at the rate of 10% per annum on a straight line basis.
    The policy of the company is to provide depreciation on a pro rata basis.
    On 1 January 2009, the company decided to change its depreciation rate from 10% to 15% per annum.
    The change was effected on motor vehicles that were in use retrospectively; that is from the year of
    purchase. An adjusting entry was to be made in the accounts for the year ended 31 December 2009.
    All lorries were comprehensively insured.
    Assume the year end for PTL IS 31 December.
    Required:
    i) Motor vehicles account for the five years ended 31 December 2006,2007,2008,2009 and 2010.
    ii) Provision for depreciation account for the same years stated in (b) (i) above
    iii) Disposal of motor vehicles account

    Date posted: May 16, 2019.  Answers (1)

  • Jabali Ltd. started its operations on 1 January 2008. The company acquired several items of plant for its use. The amounts for the plant acquisitions, disposals...(Solved)

    Jabali Ltd. started its operations on 1 January 2008. The company acquired several items of plant
    for its use. The amounts for the plant acquisitions, disposals and depreciation far the years 2008, 2009
    and 2010 are shown below.
    The amounts for the year 2011 have not yet been computed.
    Plant movement extracts for the years ended:
    fig111652019933.png

    Additional information:
    1. Disposals took place at the beginning of the financial years as follows:
    Date of disposal for the year ended Plant cost Sales
    31 December proceeds
    Sh'000' Sh'000'
    Disposal of plant A 2010 15,000 8,000
    Disposal of plant B 2011 30,000 21,000
    2. Plant A and plant B were sold and replaced on the same date when plant C and plant D
    were acquired. Plant D cost Sh.50 million while the value of plant C is to be derived.
    3. Depreciation is charged at 20% on reducing balance.
    Required:
    (i) Extract of the plant movement schedule for the years ended 200S. 2009, 2010 and 2011
    (ii) Profit or loss arising on disposal of plant A and plant B.

    Date posted: May 16, 2019.  Answers (1)