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P. Muli was recently appointed to the post of investment manager of Masada Ltd. a quoted company. The company has raised Sh.8,000,000 through a rights issue.
P. Muli has the task of evaluating two mutually exclusive projects with unequal economic lives. Project X has 7 years and Project Y has 4 years of economic life. Both projects are expected to have zero salvage value. Their expected cash flows are as follows:
The amount raised would be used to finance either of the projects. The company expects to pay a dividend
per share of Sh.6.50 in one year's time. The current market price per share is Sh.50.
Masada Ltd. expects the future earnings to grow by 7% per annum due to the undertaking of
either of the projects. Masada Ltd. has no debt capital in its capital structure.
Required:
(a) The cost of equity of the firm.
(b) The net present value of each project.
(c) The Internal Rate of return (IRR) of the projects. (Rediscount cash flows at 24% for project X and 25% for Project Y).
(d) Briefly comment on your results in (b) and (c) above.
(e) Identify and explain the circumstances under which the Net Present Value (NPV) and the Internal Rate of Return (IRR) methods could rank mutually exclusive projects in a conflicting way.
Date posted:
February 11, 2019
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Distinguish between “leasing” and “hire purchase” highlighting how each is accounted for.
Date posted:
February 11, 2019
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The management of Afro Quatro Ltd. want to establish the amount of financial needs for the next two years. The balance sheet of the firm as at 31 December 2001 is as follows:
For the year ended 31 December 2001, sales amounted to Sh.240,000,000. The firm projects
that the sales will increase by 15% in year 2002 and 20% in year 2003.
The after tax profit on sales has been 11% but the management is pessimistic about future
operating costs and intends to use an after-tax profit on sales rate of 8% per annum.
The firm intends to maintain its dividend pay out ratio of 80%. Assets are expected to vary
directly with sales while trade creditors and accrued expenses form the spontaneous sources of
financing. Any external financing will be effected through the use of commercial paper.
Required:
(a) Determine the amount of external financial requirements for the next two years.
(b) (i) A proforma balance sheet as at 31 December 2003.
(ii) State the fundamental assumption made in your computations in (a) and b(i) above.
Date posted:
February 11, 2019
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Maridadi company ltd,sells high resolution television sets on both cash basis and hire purchase terms each television costs sh 16,000 and is sold at sh20,000 on cash basis. If a television set is sold on hire purchase terms a deposit of sh5,000is paid followed by ten installments of sh2,000 each . The company recognizes gross profit on television sets sold on hire purchase terms based on cash collected in the period and excludes television sets n hire-purchase terms from its closing stock. The company has a policy of valuing television sets repossessed from hire-purchase customers who have defaulted on payment at 60% of the unpaid installments. Repossessed television sets are sold on cash basis at the same gross profit rate television sets sold on cash
basis. Provided below is the trial balance of the company as at 31` March 2007
Date posted:
February 11, 2019
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Date posted:
February 11, 2019
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Differentiate between defined benefit and defined contribution plans
Date posted:
February 11, 2019
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Explain the disclosure requirements for contracts in progress at the end of the reporting period in accordance with International Accounting Standard (IAS) 11, Construction Contracts.
Date posted:
February 11, 2019
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Explain two methods of accounting for construction contracts.
Date posted:
February 11, 2019
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A body weighs 32N in kerosene and 30N in water. If the body weighs 40N in air, find the relative density of kerosene.
Date posted:
February 11, 2019
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Three firms of accounts decided to amalgamate into a new firm Cheloti Gusera Kandie & Co. with effect from 1 April 1999. Until 31 March 1999 Apopo. Cheloti and Chuma were partners in Apopo Cheloti & Co. sharing capital and profits equally. Guserwa. Kurgat and
Ochieng were partners in Guserwa & Co. sharing capital and profits in the ratio 4:4:1. Kandie was a sole practitioner.
The balance sheets of the firms as at 31 March 1999 were as follows:
Date posted:
February 11, 2019
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Ali and Bali are in partnership trading as A and B Retailers. Similarly, Cheche and Dunga are in partnership trading as C and D Traders. It was mutually agreed that as at 1 January 2004, the partnership businesses be amalgamated into one firm, ABC and D Enterprises. The profit and loss sharing ratios of the partners both in the old and new partnership were as follows:
Date posted:
February 11, 2019
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Qualities of a well-groomed person
Date posted:
February 10, 2019
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Types of temporary stitches
Date posted:
February 10, 2019
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Explain the process of thorough cleaning a leather handbag with a polyester lining
Date posted:
February 10, 2019
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Ways in which a facing can be used to create a decorative effect are:
Date posted:
February 10, 2019
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Ways in which cosmetics can be misused
Date posted:
February 10, 2019
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Analyze any 8 reasons that would make an ECDE teacher use discussion method while teaching about 'parts of the body'
Date posted:
February 8, 2019
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Jembe and Panga were sole traders manufacturing farm implements. On 31 March 2004, they amalgamated and traded as partners sharing profits and losses in the ratio of 3:2. One year later on 31 March 2005, they converted the partnership into a limited liability company called Shamba Ltd.
No. adjustments have been made to record the amalgamation and conversion but the balance sheets for the sole traders as at 31 March 2004 and the partnership as at 31 March 2005 were as follows:
Date posted:
February 8, 2019
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Date posted:
February 8, 2019
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A and B Advocates and M and N Advocates were practicing firms of advocates. On 1 January 2006, they agreed to amalgamate the partnerships into one firm Able and Mine Advocates. The accounts of the separate partnerships have been prepared annually to 31
December.
The agreed profit and loss sharing ratios in the old and new firms were as follows
Date posted:
February 8, 2019
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List and briefly explain five attributes of reliable financial statements as promulgated in the IFRSs(International Financial Reporting Standards) framework.
Date posted:
February 8, 2019
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Ali, Baba and Cheche were in partnership sharing profits and losses in the ratio 2:2:1 respectively. Following serious disagreement, the partners decided to dissolve the partnership. The proceeds from sale of assets were to be paid to the individual partners after all expenses and liabilities had been paid.
The balance sheet as at 30 September 2007 when the partners made the decision to dissolve the partnership was as follows:
Required:
a) Briefly explain the rule in Garner Vs Murray.
b) A statement showing how cash realized would be distributed to the partners.
c) Realization account, cash at bank account and capital accounts to close off the books of the
partnership.
Date posted:
February 8, 2019
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Meme, Noni and Zenah are partners sharing profits and losses in the ratio 3:2:1 respectively, after allowing for interest on fixed capitals t the rate of 5% per annum. The partners prepare their partnership accounts annually to 30 September.
The balance sheet of the partnership as at 31 March 2008 was as follows:
Date posted:
February 8, 2019
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Highlight four advantages and disadvantages to a company of being listed on a stock
exchange.
Date posted:
February 8, 2019
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X and Y are partners with equal capital contributions in a wholesale business and sharing profits and losses among X,Y and Z in the ratio of 2:2:1respectively. The partners however disagreed after six months of operation and dissolved the partnership on 30th November 2009. No adjustment has been made to record the amalgamation. The following statements of financial position as at 31st May 2009 and 30th November 2009 are provided.
Date posted:
February 8, 2019
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Explain fully the effect of the use of debt capital on the weighted average cost of capital of a company.
Date posted:
February 8, 2019
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Rafiki Hardware Tools Company Limited sells plumbing fixtures on terms of 2/10 net 30. Its
financial statements for the last three years are as follows:
Required:
(a) For each of the three years, calculate the following ratios:
Acid test ratio, Average collection period, inventory turnover, Total debt/equity, Net
profit margin and return on assets.
(b) From the ratios calculated above, comment on the liquidity, profitability and gearing
positions of the company
Date posted:
February 8, 2019
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Michael and Stella were in partnership sharing profits and losses equally until 30 April 2011 when they decided to convert the partnership into a limited company, Michelle Ltd. The company was registered immediately
The following trial balance was extracted on 30 April 2012; one year after the conversion
Date posted:
February 8, 2019
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Able, Patient and Hastine were in partnership sharing profits and losses in the ratio of 5:3:2 respectively. Due to irreconcilable differences they agreed to dissolve the partnership. Any realisation of assets was distributed to the partners on realization after all expenses and liabilities were paid.
The following is the statement of financial position as at 31 August 2012 when the resolution to dissolve the partnership was effected
Required;-
(i) Statement of cash distribution to the partners.
(ii) Realization account,
(iii) Bank account.
(iv) Partners' capital accounts.
Date posted:
February 8, 2019
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Alice and Benard Advocates and Maneno and Neno Advocates were practicing firms of Advocates. On 1 July 2012, they agreed to amalgamate their partnership businesses into one firm and called it Abliman advocates. The accounts of the separate partnerships have been prepared annually to 30 June 2012.
The agreed profit and loss sharing ratios in the old and new firms are as follows:
Date posted:
February 8, 2019