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  • The importance of stock control levels cannot be overemphasized as it could be expensive to a company to carry too much or too little stock. i) Highlight...(Solved)

    The importance of stock control levels cannot be overemphasized as it could be expensive to a company to carry too much or too little stock. i) Highlight four costs associated with overstocking. ii) Outline four costs associated with under stocking.

    Date posted: February 15, 2019.  Answers (1)

  • Highlight five benefits of using telex services. (Solved)

    Highlight five benefits of using telex services.

    Date posted: February 5, 2019.  Answers (1)

  • What is a balance sheet?(Solved)

    What is a balance sheet?

    Date posted: January 28, 2019.  Answers (1)

  • The trial balance of S. Juma, a sole trader, did not balance on 30 April 1995. The difference was put in the suspense account. The final...(Solved)

    The trial balance of S. Juma, a sole trader, did not balance on 30 April 1995. The difference was put in the suspense account. The final accounts, which were then prepared, showed a net profit of Sh.64, 000. During audit, the following errors were noted: (1) A loan from ABD Bank of Sh. 10,000 was entered correctly in cashbook but was not posted to the ledger. (2) A cheque of Sh.4,000 for rent received was not entered in the books. (3) Closing stock was overvalued by Sh.1, 500. (4) Discount allowed of Sh.500 was entered in the discount received account. (5) The opening stock was understated by Sh.3,200. (6) Prepaid insurance of Sh.220 had been included in the profit and loss account. (7) Goods destroyed by fire amounting to Sh. 12,000 were written off in the profit and loss account. However the insurance company has agreed to compensate the full amount. Required: (a) Journal entries to correct the errors. (b) Statement of corrected profit. (c) Suspense account.

    Date posted: November 26, 2018.  Answers (1)

  • The draft final account for the year ended 30 June 1994 of central limited, car dealers, show a gross profit of Sh 90,000 and a net...(Solved)

    The draft final account for the year ended 30 June 1994 of central limited, car dealers, show a gross profit of Sh 90,000 and a net profit of Sh 2,250,000. After subsequent investigations the following discoveries were made: 1. A debt of Sh. 75,000 due from J. Mema to the company was written off as irrecoverable in the company‟s books in January 1994. Since preparing the draft accounts, J.Mema has settled the debt in full. 2. The company‟s main warehouse was burgled in February 1994, when goods costing Sh. 5,000,000 were stolen. This amount has been shown in the draft account as an overhead item “Loss due to burglary”. Although the insurance company denied liability originally, in the past days or two that decision it has changed and central limited have advised that Sh. 3,500,000 will be paid in settlement. 3. Discounts received in March 1994 of Sh. 52,500 have been credited, in error, to purchases. 4. On 2 January 1994, a car, which had cost the company Sh. 450,000, was taken from the showroom for the use of one of the company‟s sale representatives whilst on company business. In the showroom, the is car had a Sh. 600,000 price label. Effect has not been given to this transfer in the books of the company, although the car was not included in the trading stock valuation at 30 June 1994.the company provides for depreciation on motor vehicles at the rate of 25% of the cost of vehicles held at the end of each financial year. 5. Goods bought and received from P.Nene on 29 June 1994 at a cost of Sh 300,000 were not recorded in the company‟s books of account until early July 1994. Although they were unsold on 30june 1994, the goods in question were not included in the stock valuation at that date. 6. The company is hoping to market a new car accessory product in January 1995. The venture is to be launched with an advertising campaign commencing in July 1994. The cost of this campaign is Sh. 1,250,000 and this has been debited in the company‟s profit and loss account for the year ended 30 June 1994, and is included in current liabilities as a provision, notwithstanding the confident expectations that the new product will be a success. 7. On June 30 1994, the company paid an insurance premium of Sh. 150,000, the renewal being for the year commencing 1 July 994. This premium was included n the insurances of Sh. 275,000 debited in the draft profit and loss account. Required: (a) The journal entries necessary to effect corrections of all the above errors. (b) A computations of the corrected gross profit and net profit for the year ended 30 June 1994

    Date posted: November 26, 2018.  Answers (1)

  • Jackson Ndambuki, a businessman in Kangundo, does not maintain a double entry bookkeeping system. On 1 July 1994 his capital was Sh. 172,500. An analysis of his...(Solved)

    Jackson Ndambuki, a businessman in Kangundo, does not maintain a double entry bookkeeping system. On 1 July 1994 his capital was Sh. 172,500. An analysis of his cashbook for the year to 30 June 1995 gives the following particulars: jacksonndambuki26925.png Discounts allowed and received amounted to Sh. 15,000 and Sh.7,500 respectively. Interest of 5 per cent per annum is to be provided on capital at the beginning of the year. (Ignore payments in and drawings) Depreciate plant and machinery at 10 per cent and furniture at 5 per cent on the book value. A provision for doubtful debts of 5 per cent is to be made on sundry debtors. Required: (a) Trading, Profit and Loss Account for the year ended 30 June 1995. (b) Balance Sheet as at that date.

    Date posted: November 26, 2018.  Answers (1)

  • Indicate, giving reasons, the correct treatment of each of the following transactions in the books of a company: i) Closing stock for the current year has a...(Solved)

    Indicate, giving reasons, the correct treatment of each of the following transactions in the books of a company: i) Closing stock for the current year has a cost of Sh.890,000 and a replacement cost of Sh.850,000. The stock has not been reduced to its replacement cost because the company's accountant believes that the purchase price of similar stock items would probably rise during next year. ii) A new machine was purchased at an auction for cash at Sh.1. 6 million: Since the cash price of the machine would have been Sh.1. 9 million if it was purchased from the normal supplier, the machinery account been debited with Sh.1. 9 million as shown below: correct26920.png

    Date posted: November 26, 2018.  Answers (1)

  • Indicate and give reasons the amount of revenue that should be recognized in the year ended 31 May 1996 in each of the following independent cases: i)...(Solved)

    Indicate and give reasons the amount of revenue that should be recognized in the year ended 31 May 1996 in each of the following independent cases: i) Net credit sales for 1995 amounted to Sh.l.5 million, three-fourths of which were collected in 1995. Past experience indicates that about 97% of all credit sales are eventually collected. ii) Cash of Sh.350,000 is received from a customer during 1996 in payment for equipment that is to be manufactured and shipped to the customer during 1997.

    Date posted: November 26, 2018.  Answers (1)

  • Explain the meaning and significance of the revenue realization principle.(Solved)

    Explain the meaning and significance of the revenue realization principle.

    Date posted: November 26, 2018.  Answers (1)

  • Define the term accounting standard and give four reasons why a professional accounting body issues accounting standards.(Solved)

    Define the term accounting standard and give four reasons why a professional accounting body issues accounting standards.

    Date posted: November 26, 2018.  Answers (1)

  • List the principal distinctions between partnerships and limited companies(Solved)

    List the principal distinctions between partnerships and limited companies

    Date posted: November 26, 2018.  Answers (1)

  • The trial balance of Bidii Retailers, which was extracted on 30 September 1996, included the following items: Sh. Sales ledger control account 550,885 Purchases ledger control account 391,330 Suspense account...(Solved)

    The trial balance of Bidii Retailers, which was extracted on 30 September 1996, included the following items: Sh. Sales ledger control account 550,885 Purchases ledger control account 391,330 Suspense account in trial balance (debit balance) 11,550 The following additional information is available: 1. The balances from sales ledger were: Debit balances Sh.555, 555 Credit balances Sh.6, 170 2. The balances from purchases ledger were: Credit balances Sh.388.88: Debit balances Sh.5, 555. 3. The sales ledger includes a debit balance of Sh.3, 500 for Moco Fishing Ltd., and the purchase ledger includes a credit balance of Sh.4, 000 relating to the same firm. The debit balance will be offset against the credit balance and the difference will be settled in cash. 4 . Included in the credit balance on the sales ledger is a balance of Sh.3, 000 in the name of John Oloo. This arose because a sales invoice of Sh.3, 000 had earlier been posted in error from the sales daybook to the debit of the account of Peter Oloo in the purchases ledger. 5. An allowance of Sh.1,500 against some damaged goods had been omitted from the appropriate account in the sales ledger. This allowance had been included in the control account. 6. An invoice for Sh.2.280 had been entered in the purchase daybook as Sh.3,270. 7. A cash receipt from a credit customer for Sh.1,725 had been entered in the cash book as Sh.1,225. 8. The purchase day book had been overcast by Sh.5,000. 9. The bank balance of Sh.6,000 had been included in the trial balance, in error, as an overdraft. 10. The book-keeper had been instructed to write off Sh.2,500 from c ustomer XYZ's account as a bad debt, and to reduce the provision for bad and doubtful debts by Sh.3,500. He however wrote off Sh.3,500 from the customers' account. He then increased the provision for bad and doubtful debts by Sh.2,500. 11. The debit balance on the insurance account in the nominal ledger of Sh. 17,050 had been included in the Trial balance as Sh.17,500. Required: (a) Corrected sales ledger control, purchase ledger control, and suspense accounts balances. (b)Reconcile the sales ledger balances with the corrected sales ledger control account balance, and also the purchases Ledger balances with the corrected purchase ledger control balance.

    Date posted: November 26, 2018.  Answers (1)

  • Sabuni Ltd manufactures and sells soaps and Lotions. The two products pass through two manufacturing departments 1 and 2. You are supplied with the following...(Solved)

    Sabuni Ltd manufactures and sells soaps and Lotions. The two products pass through two manufacturing departments 1 and 2. You are supplied with the following trial balance as at 30 June 2002. sabuniltd26839.png c) Depreciation is to be provided on Non current assets at the rate of 10 per cent per annum on cost. additional non current assets were purchased on 1 January 2002 at a cost of Sh.80,000.The annual depreciation charge is to be divided among manufacturing ,administration and distribution in the ratio of 8:1:1. d) Prepaid and accrued administration amount to Shs.1,800 and Shs.3,000 respectively. e) Bad debts of Sh.3,200 are to be written off and a provision for doubtful debts to be increased to Sh.16,000.This should be taken as a distribution cost. f) The following allocations are to be made. - Manufacturing expenses (between dept 1 and dept 2) in proportion to manufacturing wages - Administration expenses (between soaps and Lotions) in proportion to number of units sold - Distribution expenses (between soaps and Lotions) in the proportion of sales value. - Cost of goods manufactured in dept 1 (between soaps and Lotions) in the ration of 5:4. - Cost of goods manufactured in dept 2 (between soaps and Lotions) in the ration of 1:5 g) Corporation tax payable for the year is Sh.160,000. h) The directors propose a final dividend of sh.100,000. Required: a) i) A manufacturing account showing the results of department 1 and 2 , ii) Trading, Profit and Loss account showing the results of soaps and Lotions, for the year ending 30 June 2002. b) A balance sheet as at 30 June 2002.

    Date posted: November 26, 2018.  Answers (1)

  • Rono Ltd. manufactures electric toys called Densta on small scale basis. On 1 January 1997, 6000 units of Densta were in stock. During 1997, the...(Solved)

    Rono Ltd. manufactures electric toys called Densta on small scale basis. On 1 January 1997, 6000 units of Densta were in stock. During 1997, the company manufactured 200,000 units and sold 190,000 units at a price of Sh.6 each. The following balances were extracted from the books of account on 31 December 1997. densta26826.png The following additional information was available: 1. Stocks of work-in-progress on 1 January and 31 December 1997 were of insignificant value and are to be ignored. 2. Plant and machinery are to be depreciated using reducing balance method at 10 %. 3. Finished units of Densta are valued at factory cost. 4. Factory cost per unit of Densta was the same in 1996 and 1997. Required: (i) The manufacturing account for the year ended 31 December 1997, showing clearly the prime cost and factory costs of producing Densta. (ii) The trading account for the year ended 31 December 1997.

    Date posted: November 26, 2018.  Answers (1)

  • The following trial balance was extracted from the books of Mapema Traders Ltd. as at 31 March 1998:(Solved)

    The following trial balance was extracted from the books of Mapema Traders Ltd. as at 31 March 1998: mapematraders26808.png Additional information: 1. The debtors balance includes Sh.600,000 due from Otieno who has now been declared bankrupt and it has been decided to write-off this debt as a bad debt. 2. The provision for doubtful debts is to be adjusted to 5 % of trade debtors at 31 March 1998. 3. Establishment expenses prepaid at 31 March 1998 amount to Sh. 120,000. The difference is to be written off during the year. 4. Administration expenses accrued due at 31 March 1998 amounted to Sh.210,000. 5. The company paid the interest on the loan stock for the year ended 31 March 1998 on 28 May 1998. 6. Gross profit is at the rate of 20% of sales. 7. Depreciation is provided annually on the cost of fixed assets held at the end of the year at the following rates: Freehold buildings 2 % Fixtures and fittings 10% 8. The company's directors propose that the preference share dividend be paid, a dividend of 10% on the ordinary shares to be paid and to transfer an amount of Sh.7,500,000 to General Reserve. Required: The trading and profit and loss account for the year ended 31 March 1998 of Mapema Traders Ltd. and a balance sheet as at that date.

    Date posted: November 26, 2018.  Answers (1)

  • Write explanatory notes on the following accounting concepts: (a) Materiality; (b) Prudence; (c) Consistency.(Solved)

    Write explanatory notes on the following accounting concepts: (a) Materiality; (b) Prudence; (c) Consistency.

    Date posted: November 26, 2018.  Answers (1)

  • Wananchi Transporters Company Ltd. was incorporated on 1 June 1994 and on the same day bought its first lorry, registration number KA 620, for Sh.4, 536,000. On...(Solved)

    Wananchi Transporters Company Ltd. was incorporated on 1 June 1994 and on the same day bought its first lorry, registration number KA 620, for Sh.4, 536,000. On 3 April 1995, the company bought its second lorry, KA 735 for Sh.2, 740,000. On 3 June 1997, the first lorry, KA 620 was involved in an accident and was completely written off. The insurance company paid the transport company Sh.1, 350,000 for the loss. On 5 January 1998, the company bought its third lorry, KB 327 for Sh.3, 780,000. Depreciation on the lorries was provided at 10 per cent on straight -line basis. The policy of the company is to provide depreciation for the full year for all acquisitions made at any time during the year and to ignore depreciation on any lorry sold or disposed of during the year. All the lorries are insured. The company makes its accounts annually to 31 December. In 1998, the company decided to change its depreciation rate from 10 to 15 per cent on straight line basis for all its lorries still in use retroactively, that is from year of purchase. An adjusting entry will be made in the accounts for the year 1998. Required: 1. The motor lorries account for years 1994 to 1998. 2. A schedule of additional depreciation arising from change of depreciation rate, for years 1994 to 1997. 3. Provision for depreciation account for the same period. 4. Disposal of motor lorries account.

    Date posted: November 26, 2018.  Answers (1)

  • The cashbook column of Tatua Traders Company Ltd. had an overdraft of Sh.532, 400 as at 31 October 1998, which did not agree with balance as...(Solved)

    The cashbook column of Tatua Traders Company Ltd. had an overdraft of Sh.532, 400 as at 31 October 1998, which did not agree with balance as per bank statement of the same date. On checking through the relevant records and documents, some details were established as shown below: 1. Bank charges and interest on overdraft as per the bank statement amounted to Sh. 12,450 and Sh. 135,480 respectively. 2. A debtor deposited Sh.254, 500 to the bank direct. 3. Insurance premium of the mortgaged property amounting to Sh.35, 485 was paid direct by the bank. 4. Standing orders of Sh. 138,000 have been effected by the bank. 5. Cheques for Sh.354, 890 which were banked on 29 October 1998 were credited by the bank on 5 November 1998. 6. Cheques drawn by the company amounting to Sh.745, 964 had not been presented for payment as at 31 October 1998. 7. A cheque for Sh.74, 500 was debited by the bank as Sh.47, 500. 8. The payments side of the cashbook was undercast by Sh.32, 000. 9. The bank had debited the account with another customer's cheque of Sh.27, 500 but had not yet corrected the mistake on 31 October 1998. Required: (a) Make adjustments in the cash book and show the adjusted cash book balance. (b) A bank reconciliation statement as at 31 October 1998.

    Date posted: November 26, 2018.  Answers (1)

  • XML Ltd. maintains control accounts in its business records. The balances and transactions relating to the company's control accounts for the month of December 1994...(Solved)

    XML Ltd. maintains control accounts in its business records. The balances and transactions relating to the company's control accounts for the month of December 1994 are listed below: xmlltd26746.pngxmlltd26746.png Required: Post the sales ledger and the purchases ledger control accounts for the month of December 1994 and derive the respective debit and credit closing balances on 31 December 1994.

    Date posted: November 26, 2018.  Answers (1)

  • Explain the purposes for which control accounts are prepared in a business organisation(Solved)

    Explain the purposes for which control accounts are prepared in a business organisation.

    Date posted: November 26, 2018.  Answers (1)

  • Jim Mukora commenced business as the proprietor of 'stop-shop' on 1 April 1993, paying Sh.480,000 into business bank account. The Sh.480,000 was made up of Sh.320,000...(Solved)

    Jim Mukora commenced business as the proprietor of 'stop-shop' on 1 April 1993, paying Sh.480,000 into business bank account. The Sh.480,000 was made up of Sh.320,000 from his own funds, and further Sh. 160,000 borrowed from his friend, Bob Meme, who was to be paid interest at 20% per annum on prorata basis. On 1 January 1994, Meme joined Mukora as a partner and it was agreed that: 1. Mukora and Meme should bring their cars into the partnership at values of Sh. 144,000 and Sh.96, 000 respectively. . 2. Meme's loan should be converted to capital on 1 January 1994 and he should introduce further capital of Sh.160, 000. 3. From 1 January 1994, Mukora should receive a salary of Sh.128, 000 per annum. 4. The balance of the profits and losses to be shared equally between the partners. The partnership did not keep full records, but the following information was obtainable: (i) The bank statement showed: jimmukora25552.png (ii) From various notes it was discovered that the following expenses were paid out of the takings from cash sales before they were banked: Sh. Wages of shop assistants 320,000 Motor expenses 9 months to 31 December 1993 52,000 3 months to 31 March 1994 22,400 Purchases 59,200 Sundry expenses 12,000 A cash float of Sh.2, 400 was retained at the end of each day. (iii) The cars are to be depreciated on the straight line basis at a rate of 25 % per annum. (iv) It was established that the following items were to be taken into account on 31 March 1994: Sh. Trade creditors 108,000 Unexpired sundry expenses 4,000 Trade debtors 824,000 (v) Stocks on 31 March 1994 were valued at 776,000 Required: (a) A Trading Account for the year ended 31 March 1994. (5 marks) (b) Profit and Loss and Appropriation Accounts for the nine months ended 31 December, 1993 and for the three months ended 31 March 1994 and the year to 31 March 1994. (Unless otherwise stated, you may assume that all expenses and sales accrued evenly over the year). (15 marks) (c) A balance Sheet at 31 March 1994.

    Date posted: November 25, 2018.  Answers (1)

  • Jaguar Traders Ltd. was incorporated on 4 May 1998 with a nominal capital of Sh. 1,000,000 divided into 50,000 ordinary shares of Sh.20 each. On 5 May...(Solved)

    Jaguar Traders Ltd. was incorporated on 4 May 1998 with a nominal capital of Sh. 1,000,000 divided into 50,000 ordinary shares of Sh.20 each. On 5 May 1998, the directors invited interested members of the public to apply for purchase of shares at par. The closing date for application was 15 May 1998. Applications were received for 60,000 ordinary shares and paid in full. The allotment was made on 20 May 1998 and the excess application money refunded. On 26 May 1998, the directors bought: furniture Sh. 150,000, equipment Sh.250,000 and goods Sh.500,000. All these were delivered and paid for on the same date. Required: (a) Journal entries, including bank to record the above transactions (b) Ledger accounts (c) Balance sheet as at 26 May 1998

    Date posted: November 25, 2018.  Answers (1)

  • The following is the bank statement of Kakamega Retail Traders for the month of October 1996:(Solved)

    The following is the bank statement of Kakamega Retail Traders for the month of October 1996: kakamegaretail25537.png kakamegaretail25537b.png Notes: 1. The bank reconciliation on 30 September 1996 showed that one deposit was in transit and two cheques had not yet been presented to the bank. 2. Deposits of Sh.62, 500 and Sh.36, 000 had been entered in the cash book as Sh.26,500 and Sh.36,000 and in the bank statement as Sh.62,500 and Sh.63,000, respectively. 3. A cheque from Mkulima for Sh.15,700 was deposited on 18 October 1996 but was dishonoured and the advice was received on 4 November 1996. 4. Counterfoils for cheques no. 76 and no. 88 showed they had been drawn for Sh.5,800 and Sh.35,500 respectively. Required: (a) A correct cashbook balance. (b) A bank reconciliation statement on 31 October 1996.

    Date posted: November 25, 2018.  Answers (1)

  • What is the purpose of preparing a bank reconciliation statement?(Solved)

    What is the purpose of preparing a bank reconciliation statement?

    Date posted: November 25, 2018.  Answers (1)

  • The treasurer of Kay Club and Ray Society has prepared the following receipts and payments account for the year ended 31 December 1994:(Solved)

    The treasurer of Kay Club and Ray Society has prepared the following receipts and payments account for the year ended 31 December 1994: kayltd25514.png Note. It is the policy of the Society NOT to take into account subscriptions in arrear until theyare paid. 1) The mobile hut which was sold during 1994 had been valued at Sh.400,000 on 31 December 1993, and was used for the society's activities until sold on 30 June 1994. 2) Immediately after the sale of the mobile hut, the Society rented a new hall at Sh.165,000 per annum. 3) The above receipts and payments account is a summary of the society's bank account for the year ended 31 December 1994; the opening and closing balances shown above were the balances shown in the bank statements on 31 December 1993 and 1994 respectively. 4) All cash is banked immediately and all payments are made by cheque. 5) A cheque for Sh.l00,000 drawn by the society on 28 December 1994 for stationery was not paid by the bank until 4 January 1995. 6) The Society's assets and liabilities at 31 December 1993 and 1994, in addition to those mentioned earlier, were as follows: kayltd25514b.png Required: a) The Society's Income and Expenditure Account for the year ended 31 December 1994, and balance sheet as at that date. (Comparative figures are not required). b) Outline the advantages of income and expenditure accounts as compared with receipts and payments accounts.

    Date posted: November 25, 2018.  Answers (1)

  • Manga Munene is the proprietor of a retail business, which has two main departments, which sell hardware and electrical goods, respectively. He had previously prepared his...(Solved)

    Manga Munene is the proprietor of a retail business, which has two main departments, which sell hardware and electrical goods, respectively. He had previously prepared his annual accounts in such a way that the relative profitability of the two departments was not ascertainable, but now he wishes to attempt to identify the profit attributable to each department in order that he may pay a bonus to the more successful of the departmental managers. At 30 September 1994, the balances in the books of the business were as follows: mangamunene25502.png mangamunene25502b.png The general administrative expenses are primarily incurred in relation to the processing of purchases and sales invoices. Required: (a) A schedule showing the basis on which you have apportioned the various expenses between the two departments. (b) The departmental and combined Trading and Profit and Loss Account for the year ended 30 September 1994. (c) Balance Sheet at 30 September 1994.

    Date posted: November 25, 2018.  Answers (1)

  • The following trial balance was extracted from the books of Hiza Ltd. as on 30 September 1995(Solved)

    The following trial balance was extracted from the books of Hiza Ltd. as on 30 September 1995: hiza25454.png You are given the following information: 1. Stock in trade, 30 September 1995 was Sh.28, 875,000. 2. The provisions for bad debts is to be increased to Sh.750,000. 3. Salaries and .wages outstanding at 30 September 1995 is Sh.500,000. 4. Rates and insurance paid in advance at 30 September 1995 is Sh. 155,000. 5. The item 'rent receivable Sh.625,000 includes Sh. 125,000 in respect of the period from 1 October 1995 to 31 December 1995. 6. Provision is to be W de for depreciation of motor vehicles at the rate of 20 per cent per annum on cost. 7. During the year to 30 September 1995, Ombima, one of the directors took goods (cost Sh.437,500) out of business stock for his own use. No entry for this transaction has been made in the books. Required: (a) Trading and Profit and Loss Account for the year to 30 September 1995. (b) Balance Sheet as at that date.

    Date posted: November 25, 2018.  Answers (1)

  • With reference to International Accounting Standards explain the following: (a) Fundamental accounting concepts (b) Accounting bases (c) Accounting policies(Solved)

    With reference to International Accounting Standards explain the following: (a) Fundamental accounting concepts (b) Accounting bases (c) Accounting policies

    Date posted: November 25, 2018.  Answers (1)

  • James Mbuvi started a taxi business in Nairobi in March 1990 under the firm name Mbuvi Taxis. The firm had two vehicles KA and KB which...(Solved)

    James Mbuvi started a taxi business in Nairobi in March 1990 under the firm name Mbuvi Taxis. The firm had two vehicles KA and KB which had been purchased for Sh.560,000 and Sh.720,000 respectively earlier in the year. In February 1992 vehicle KB was involved in an accident and was written off. The insurance company paid the firm Sh.160,000 for the vehicle. In the same year the firm purchased two vehicles, KC and KD for Sh.800,000 each. In November 1993' vehicle KC was sold for Sh.716,000. In January 1994 vehicle KE was purchased for Sh.840,000. In March 1994 another vehicle KF was purchased for Sh.960.000. The firm's policy is to depreciate vehicles at the rate of 25 per cent on cost on vehicles on hand at the end of the year irrespective of the date of purchase. Depreciation is not provided for vehicles disposed of during the year. The firm's year ends on 31 December. Required: (a) Calculate the amount of depreciation charged in the profit and loss account for each of the five years. (b) Prepare the motor vehicle account (at cost). (c) Calculate the profit or loss on disposal of each of the vehicles disposed of by the company.

    Date posted: November 25, 2018.  Answers (1)

  • According to the cash hook of Gaitani Ltd. the company has a credit balance at the hank of Sh.190.000 on 30 June 1994, but this is...(Solved)

    According to the cash hook of Gaitani Ltd. the company has a credit balance at the hank of Sh.190.000 on 30 June 1994, but this is NOT borne out by the Bank Statement of the same date. An investigation into the difference yields the following information. 1 A standing order for a charitable subscription of Sh.20, 000 had been paid by the hank on 29 June but no entry had been made in the cash hook. 2. A cheque paid for advertising on 10 little for Sh.89,500 had been entered into the cash hook as Sh.98,500. 3 Cheques for S11.5 18,500 sent to creditors on 30 June were not paid by the hank until 8 July. 4. Cheques received front customers amounting to sh.840.000 were paid into the bank on 30 June but were not credited by the hank until 5 July. 5. On 20 Julie a cheque for h.57, 000 was received from a customer in settlement of an invoice for Sh.60.000. An entry of Sh.60.000 had been made in the cash hook. Required: (a) Prepare a statement reconciling the cash hook balance with the hank statement. (b) Explain how a company may have reduced its hank balance during an accounting period but still have earned a profit fur that same period.

    Date posted: November 25, 2018.  Answers (1)


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