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  • Atok, a limited liability company, compiles its financial statements to 30 June manually. At 30 June 1999, the company's list of account balances was as...(Solved)

    Atok, a limited liability company, compiles its financial statements to 30 June annually. At 30 June 1999, the company's list of account balances was as follows: atok11944.png The following matters remain to be adjusted for in preparing the financial statements for the year ended 30 June 1999: (1) Inventory at 30 June 1999 amounted to Shs 1,560,000 at cost. A review of inventory items revealed the need for some adjustments for two inventory lines: (i) Items which had cost Shs 80,000 and which would normally sell for Shs 120,000 were found to have deteriorated. Remedial work costing Shs 20,000 would be needed to enable the items to be sold for Shs 90,000. (ii) Some items sent to customers on sale or return terms had been omitted from inventory and included as sales in June 1999. The cost of these items was Shs 16,000 and they were included in sales at Shs 24,000. In July 1999, the items were returned in good condition by the customers. (2) Depreciation is to be provided as follows: Buildings: 2% per year on cost. Plant and equipment: 20% per year on cost. 80% of the depreciation is to be charged in cost of sales, and 10% each in distribution costs and administrative expenses. (3) The land is to be revalued to Shs 12,000,000. No change was required to the value of the buildings. (4) Accrued expenses and prepayments were: atok11944b.png (5) No dividends were paid during the year and no dividend is proposed for the year. Required: (a) Prepare the company's income statement for the year ended 30 June 1999 and balance sheet as at that date for publication, complying as far as possible with the provisions of IAS1 Presentation of Financial Statements and other relevant International Accounting Standards. (b) Prepare the statement of changes in equity as presented in IAS1. Notes to the financial statements are not required.

    Date posted: November 20, 2018.  

  • Agatha, a limited company made up its financial statements to 31 December 1997, when the company changed its accounting date by making up its next financial...(Solved)

    Agatha, a limited company made up its financial statements to 31 December 1997, when the company changed its accounting date by making up its next financial statements for the fifteen months to 31 March 1999. The company‟s depreciation policy is to charge proportionate depreciation in the periods of purchase and sale of its non-current assets, charging depreciation as from the first day of the month in which assets are acquired, and up to the last day of the month before the month of any disposal. Annual rates of depreciation taken are: Plant and machinery 15 per cent straight line Motor vehicles 25 per cent straight line At 1 January 1998 the following balances existed in the company's accounting records. Shs Plant and machinery: cost 819,000 Accumulated depreciation 360,000 Motor vehicles : Cost 148,000 Accumulated depreciation 60,000 During the fifteen months ended 31 March 1999 the following transactions took place: (1) 10 January 1998 An item of plant was purchased. The cost was made up as follows: agatha11913.png (2) 18 April 1998 A new motor vehicle was purchased for Shs 18,000. An existing vehicle which had cost Shs 12,000 and which had a book value at 1 January 1998 of Shs 6,000, was given in part exchange at an agreed value of Shs 5,000. The balance of Shs 13,000 was paid in cash. Required: (a) Prepare the ledger accounts to show the balances at 1 January 1998 and to record the non-current asset transactions as stated. (b) Prepare the schedule of figures detailing the movements in non-current assets and depreciation for the company‟s financial statements for publication for the period ended 31 March 1999 required by IAS 16 Property Plant and equipment. (Figures may be rounded to the nearest Shs 100 for part (b))

    Date posted: November 20, 2018.  

  • Anne, Charlotte and Emily have been in partnership for some years, sharing profits in the ratio 50.30.20 and preparing their financial statements to 31 December each...(Solved)

    Anne, Charlotte and Emily have been in partnership for some years, sharing profits in the ratio 50.30.20 and preparing their financial statements to 31 December each year. On 30 June 1998 Anne retired and Charlotte and Emily decided to continue the partnership sharing profits equally. The partnership list of account balances at 31 December 1998, before making any adjustments for Anne's retirement or for the asset revaluation was as follows. annecharlotteemily11903.png Notes (1) Profits are to be assumed to accrue equally in the periods before and after Anne's retirement (2) The balance due to Anne is to remain in the partnership from 1 July 1998 as a loan carrying no interest until 1 January (3) The value of the partnership goodwill at 30 June 1998 was agreed by all three partners at Shs 200,000. Goodwill is not to appear in the balance sheet after the adjustments necessary at 30 June 1998. (4) It was decided, as part of the process of valuing Anne's share of the partnership, to revalue the land at 30 June from Shs 120,000 to Shs 160,000. The increased value is to be included in the balance sheet. (5) The inventory at 31 December 1998 was Shs 90,000 (6) Accruals and prepayments at 31 December 1998 were: Rent paid in advance to 31 March 1999 Shs 5,000 General administrative expenses: Prepayments Shs 1,800 Accruals Shs 6,200 (7) The allowance for doubtful debts is to be increased to Shs 2,400 (8) Depreciation is to be provided as follows: Buildings 2 % per annum straight line Shop and office equipment 15 % per annum straight line Required: (a) Prepare the income statement and a statement showing the division of the profit for the year ended 31 December 1998 and balance sheet as at that date; (b) Show the partners' capital and current accounts for the year Anne‟s loan account

    Date posted: November 20, 2018.  

  • The information below relates to KC Investments Ltd, a company that sells computer accessories for the year ended 31 October 2005 and 31 October 2006....(Solved)

    The information below relates to KC Investments Ltd, a company that sells computer accessories for the year ended 31 October 2005 and 31 October 2006. The industry average has also been provided. KcInv11855.png Required: From the shareholders perspective, comment on the ratios for KC Investments Ltd in relation to the industry average ratios.

    Date posted: November 20, 2018.  

  • Define the following ratios: (i) Return on capital employed (ROCE) (ii) Return on owners' equity (ROOE) (iii) Leverage ratio (iv) Inventory turnover (v) Earnings per share (EPS)(Solved)

    Define the following ratios: (i) Return on capital employed (ROCE) (ii) Return on owners' equity (ROOE) (iii) Leverage ratio (iv) Inventory turnover (v) Earnings per share (EPS)

    Date posted: November 20, 2018.  

  • After preparation of the trial balance or Bakari Brothers Enterprises as at 31 September 2005, the firm's accountant has been provided with the following additional...(Solved)

    After preparation of the trial balance or Bakari Brothers Enterprises as at 31 September 2005, the firm's accountant has been provided with the following additional information for the purpose of preparation of the final accounts: 1 Due to an oversight, discount has been allowed to a credit customer on the gross ` invoiced amount of Sh.80,000 at the rate 10%. The firm should have used a rate if 6%. 2 Electricity accrued amounts to Sh.36,710 while insurance premiums of Sh. 22,450 have been prepaid. 3 In October 2005, the employees of the firm received a general salary increase, backdated to 1 July 2005. Amounts totaling Sh.126,550 in salary arrears are payable to former employees who left shortly before the salary award was announced and who have not yet been traced. It has been decided that the salary packets will be opened and the cash banked until the ex-employees are traced. 4 Wages due to casuals amounting to Sh. 464,120 for services rendered in the last week of December 2005 were paid in January 2006 together with the salaries for the month of December 2005 which amounted to Sh.301,700. 5 During the year, the exterior of the warehouse was repaired and repainted at a cost of 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: November 20, 2018.  

  • Outline the extent to which a trial balance is an indicator of correct book-keeping by an entity(Solved)

    Outline the extent to which a trial balance is an indicator of correct book-keeping by an entity.

    Date posted: November 20, 2018.  

  • Grace and Beatrice were operating a retail business sharing profits and losses in the ratio of 2:1 respectively up to 31 March 2006 when they admitted...(Solved)

    Grace and Beatrice were operating a retail business sharing profits and losses in the ratio of 2:1 respectively up to 31 March 2006 when they admitted Catherine to the partnership. The partners allowed payment of interest on partners' fixed capital accounts but did not allow for interest on partners' current accounts. The following balances were extracted from the partnership's book of account as at 30 September 2006: gracebeatrice11934.png Additional information: 1. On 31 March 2006 when Catherine was admitted as a partner, the profit sharing ratio changed to Grace 2/5, Beatrice 2/5 and Catherine 1/5. For the purpose of admission, goodwill was valued at Sh. 12,000,000 and was written off the books immediately. On 1 April 2006, Catherine paid Sh.5,000,000 which comprised her fixed capital of sh.1,500,000 and her current account contribution of sh.3,500,000." 2. The partners also agreed that any apportionment of gross profit was to be made on the basis of sales. The apportionment of expenses, unless otherwise indicated, were to be on time basis. 3. On 30 September 2006, stock was valued at Sh.5,100,000. 4. Provision was to be made for depreciation on motor vehicles and shop fittings at the rate of 20% and 5% per annum respectively, based on cost. 5 Salaries included the following partners drawings during the year: Grace - Sh.600,000 Beatrice - Sh.480,000 Catherine - "Sh.250,000" 6 At 30 September 2006, rates paid in advance amounted to sh.260,000 while electricity accrued amounted to sh.60,000. 7 A difference in the books of sh.120,000 that had been written off to general expenses as at 30 September 2006 was later found to have been due to the following errors: - Sales returns of sh.180,000 had been debited to sales but was omitted from the - customers account. - The purchase journal had been undercast by sh.200,000. 8 Doubtful debts (for which full provision was required) as at 31 March 2006 amounted to Sh.120,000 and sh.160,000 as at 30 September 2006. 9 Professional charges included sh.200,000 paid in respect to the acquisition of leasehold premises. These fees are to be capitalized as part of the lease, the total cost of which was to be depreciated in 25 equal annual installments. Other premises owned by Beatrice were leased to the partnership at Sh. 600,000 per annum but no rent had been paid or credited to her for the year to 30 September 2006. Required: (a) Income statement for the year ended 30 September 2006. (b) Balance sheet as at 30 September 2006. (c ) Partners' current accounts.

    Date posted: November 20, 2018.  

  • Auto Transmitters Ltd. is a medium-size factory in Nairobi Industrial Area which manufactures transmitters. The following trial balance was extracted from the books of the company...(Solved)

    Auto Transmitters Ltd. is a medium-size factory in Nairobi Industrial Area which manufactures transmitters. The following trial balance was extracted from the books of the company as at 31 December 2005. autotransmitters11921.png autotransmitters11921b.png Additional information: 1 Depreciation is to be provided as follows: - Plant and machinery at 15%on cost. - Office equipment at 10%on cost. - Motor vehicles at 25%on written down value. - Building (erected during the year) at 2%on straight-line basis. 2 Prepaid rates as at 31 December 2005 were sh.31,400. 3 An insurance premium for public liability cover in the sum of sh.33,520 was paid for a period of one year to 31 march 2006.The amount owing for electricity and rent as at 31 December 2005 was sh.12,140 and sh.23,210 respectively. 4 Rent, rates, electricity and insurance expenses are to be apportioned in the ratio, 5/6 to the factory and 1/6 to office expenses. 5 A provision for bad and doubtful debts at 1% of the debtors is to be made. 6 The share capital (authorized and fully paid) as at 31 December 2005 was as follows: - 800,000 ordinary shares of shares of sh.5. Each" - 200,000 10%preference'shares of sh.10 each" A provision for the final preference dividend and a dividend of sh.2.25 per ordinary shares is to be made. 7 Office salaries include Sh. 642,370 paid to salesmen while director's salaries include sh.200,000 paid to the production director. 8 Corporation tax of sh.1,000,000 is to be provided for. 9 1,500 transmitters were completed and transferred to the warehouse at a transfer price of Sh. 10,000 per transmitter. 10 The value of stocks as at 31 December 2005 were as follows: Sh. Raw materials at cost 562,000 Work -in-progress at cost 471,900 Finished goods at transfer price 1,000,000(100 transmitters) (Notes that owing to a change in accounting policy, the closing stock of finished goods were valued at transfer price during the year ended 31 December 2005) Required: Manufacturing, trading and profit and loss account for the year ended 31 December 2005"

    Date posted: November 20, 2018.  

  • Mr. Hassan Baraka retired from employment on 1 October 2005 and was paid terminal benefits of Sh. 3,000,000. He utilized Sh. 2,500,000 in purchasing business premises...(Solved)

    Mr. Hassan Baraka retired from employment on 1 October 2005 and was paid terminal benefits of Sh. 3,000,000 He utilized Sh. 2,500,000 in purchasing business premises and deposited the balance in a new business account at Faida Bank Ltd. Mr. Baraka did not maintain proper books of account. However, he kept files of statements from suppliers, cheque counter foils and unpaid invoices for purchases made. He also maintained a note book in which he recorded sales to customers who had credit accounts and settled their accounts by cheque. Cash collected from sales was banked at the end of each week after payment of certain expenses. Mr. Baraka also maintained some petty cash for office use. Mr. Baraka estimates to have paid the following business expenses from his personal bank account. Sh.'000' Rent and rates for additional apace 100 Lighting expenses 50 Stationery and postage expenses 26 An analysis of the bank statements for the year ended 30 September 2006 was as follows: hassanbaraka11834.png Additional information: 1. Baraka estimates that during the year ended 30 September 2006, he utilized cash collected from sales for the following purposes: Sh.’000’ Wages payment 400 Sundry expenses payment 50 Drawings 600 2 Cheques received from credit customers amounting to Sh.30, 000 had not been credited by the bank as at 30 September 2006. 3 Insurance paid for inventory during the year include Sh. 20,000 relating to premium for the year ending 30 September 2007. 4 Petty cash balance as at 30 September 2006 was Sh. 15,000 which included a post dated cheque of Sh. 5,000 drawn by Mr. Baraka's friend in exchange for cash advanced from petty cash. 5 Credit customers owed Sh. 172,000 as at 30 September 2006. 6 As at 30 September 2006, the following were due on accounts payable: Sh. „000‟ Suppliers 403 Wages 10 Sundry expenses 6 7 Depreciation is to provided on a straight-line basis at the following rates: Business premises 2% Fixtures and fittings 10% 8 The value of inventory as at 30 September 2006 was Sh. 360,000. Required: (a) Trading, profit and loss account for the year ended 30 September 2006. (b) Balance sheet as at 30 September 2006.

    Date posted: November 20, 2018.  

  • Dickson Kimula is an electronic equipment dealer. He has sought your advice on certain matters relating to his financial statements for the year ended 30 April...(Solved)

    Dickson Kimula is an electronic equipment dealer. He has sought your advice on certain matters relating to his financial statements for the year ended 30 April 2006. Citing the relevant accounting principle, advise Dickson Kimula how to deal with each of the following: (i) All his electrical equipment is sold with a one year warranty for repair and service, which on average costs Sh.480 per item. The value of equipment returned annually average 1% of the sales. The sales of the year ended 30 April 2006 were 200,000 units. (ii) Closing stock as at 30 April 2006 was valued at Sh.500,000. However, some items of stock whose initial cost was Sh. 200,000 can only realise Sh.150,000 after major repairs costing Sh.40,000 (iii) Sales for the year include deposits from customers amounting to Sh.2,000,000. The goods had not been delivered to the customers as at 30 April 2006 (iv) The firms' VAT returns for the month of April 2006 had not been filed with the Revenue Authority. The penalty for late filing of VAT returns is Sh.10,000.

    Date posted: November 20, 2018.  

  • State any two circumstances that may hinder a firm from improving on the usefulness of its financial statements(Solved)

    State any two circumstances that may hinder a firm from improving on the usefulness of its financial statements.

    Date posted: November 20, 2018.  

  • Briefly explain why the following parties may be interested in the financial statements of an organisation: (i) Employees (ii) Financial analysis (iii) The Government. (iv) The public.(Solved)

    Briefly explain why the following parties may be interested in the financial statements of an organisation: (i) Employees (ii) Financial analysis (iii) The Government. (iv) The public.

    Date posted: November 20, 2018.  

  • Akili, Busara and Chema are in partnership sharing profits sharing profits and losses equally after allowing for interest on capital at 5% per annum to...(Solved)

    Akili, Busara and Chema are in partnership sharing profits sharing profits and losses equally after allowing for interest on capital at 5% per annum to the partners and a salary to Busara of Sh.20,000 per month. The trial balance of the partnership as at 30 April 2006 was as follows: akilibusarachema11818.png Additional Information 1. Closing inventory as at 30 April was valued at sh.2,400,000. 2. Interest on loans had not been paid. 3. Sales include credit sales of Sh.600,000 in respect of two items sold on the basis of confirmation by the customers. The items had cost Sh.100,000 each. As at 30 April 2006, the customers had not confirmed whether they would buy the goods. 4. On 1 November 2005, the terms of th epartnership agreement were changed. The new terms provided for: - Profit sharing ratio of 5:3:2 for Askili, Busara and Chema respectively. - Interest on capital at 5% per annum. - Salaries of Sh.10,000 per month to Busara and Chema. For the purpose of the change, goodwill was valued at Sh.1,200,000 and was to be written off immediately while the land buildings were valued at Sh.2,000,000 and Sh.6,400,000 respectively. Required: a) Trading, Profit and loss and appropriation accounts for the year ended 30 April 2006 b) Partners' capital and current accounts c) Balance sheet as at 30 April 2006

    Date posted: November 20, 2018.  

  • Briefly explain why goodwill should be paid under the following circumstances: (i) By a partner on admission to a partnership. (ii) To a partner on...(Solved)

    Briefly explain why goodwill should be paid under the following circumstances: (i) By a partner on admission to a partnership. (ii) To a partner on retirement from a partnership

    Date posted: November 20, 2018.  

  • Ben Mogaka prepared the following draft balance sheet for BM Enterprises as at 31 December 2005(Solved)

    Ben Mogaka prepared the following draft balance sheet for BM Enterprises as at 31 December 2005: benmogaka11804.png Additional information: On further investigation, the suspense account was discovered to have resulted from the following errors: 1. The sales of goods on credit to Alex Otis amounting to Sh.19,000 had been recorded in the sales journal as sh.9,000. 2. A receipt of Sh.20,000 from sale of an item of equipment had been credited to sales account. The equipment was shown in the books of account at costs of account of Sh.90,000 and accumulated depreciation of Sh.72,000. 3. A credit note from a supplier, Simon Masound for Sh.15,000 had been omitted from the books. 4. A bank overdraft for Sh.7,000 reflected in the cash book as at 31 December 2005 was omitted In the trial balance. 5. A payment of Sh. 9,700 to Tom Wambugu, a creditor, was correctly entered in the cahs book but posted to his personal account as Sh.7,900. 6. The debit side of rent expense account had been undercast by Sh.1,000. 7. A provision of Sh.2,000 for sundry expenses outstanding as at 31 December 2004 and debited to sundry expenses at that dated had not been brought forward to the credit of the account in the following period. No credit entry had been made in any other account in respect to this account in respect to this item. 8. Discount received from the supplier of Sh.8,200 had been entered on the wrong side of purchases ledger control account. 9. On 31 December, goods valued at Sh.9,600 (selling price) were returned by Jane Kerubo (a debtor). No entry had been made in the books to reflect this transaction. These goods were not included in the closing stock. 10. Discounts allowed were overcast by Sh.1,200. Required: (a) Journal entries to correct the above errors (Narration not required) (b) Suspense account. (c) Statement of corrected net profit for the year ended 31 December 2005 (d) Corrected balance sheet as 31 December 2005.

    Date posted: November 20, 2018.  

  • Umoja Women's Welfare Society sells water tanks at subsidised prices to its members and the general public. The members' contributions are used to meet the cost...(Solved)

    Umoja Women's Welfare Society sells water tanks at subsidised prices to its members and the general public. The members' contributions are used to meet the cost of manufacturing the water tanks. The trial balance extracted from the books of account of the society as at 30 April 2006 was as follows: umojawomens111004.png umojawomens111004b.png umojawomens111004c.png 2 Annual subscriptions in arrears as at 30 April 2006 amounted to Sh.2,000,000 while subscriptions received in advance as at 30 April 2006 amounted to sh.1,500,000. 3 The membership fee is levied every ten years. The membership fees attributable to the year ended 30 April 2006 amounted to sh.800,000 4 Accrued society's office expenses as at 30 April 2006 amounted Sh.400,000. 5 The motor vehicle usage should be apportioned to the factory and society's offices at 80% and 20% respectively. Depreciation should be provided on cost at 5% per annum on machinery and 10% per annum on motor vehicles. Required: (a) Water tanks trading and profit and loss account for the year ended 30 April 2006 (b) Income and expenditure account for the year ended 30 April 2006 (c) Balance sheet as at 30 April 2006.

    Date posted: November 19, 2018.  

  • Panter limited is a medium-sized company engaged in the business of selling sports accessories. The business premises are rented for sh.8 million per annum. During the...(Solved)

    Panter limited is a medium-sized company engaged in the business of selling sports accessories. The business premises are rented for sh.8 million per annum. During the year ended 30 September 2005, the book keeper maintained incomplete records and some information was lost. However, the balances availed as at 30 September 2004 were as follows: panter11943.png An examination of panter's books of account for the year ended 30 September 2005 revealed the following: panter11943b.png panter11943c.png 5 Panter Ltd. Applies a uniform gross profit margin of 40% on all sales except for goods purchased from Kitale Sports Dealers, where a 15% gross profit margin is charged. During the year ,the cost of goods purchased from Kitale Sports Dealers was sh.37 million. 6 The loan from Len carried interest at the rate of 12% per annum. Panter Limited had paid sh.400,000 from the cash in hand as part of the interest payment. 7 The sale of old stock related to goods which had been included in the opening inventory. These goods were sold at 20% below the normal selling price and all the receipts were in cash. 8 During the year, all the motor vehicles were replaced with new ones. The new motor vehicles cost sh. 29 milion and were traded in with old motor vehicle at their book values. Depreciation on motor vehicles and fixtures and fittings is to be provided on reducing balance at the rate of 20 per cent per annum. Full year's charge is to be made in the year of purchase and none in the year of disposal. 9 Panter limited owed sh.710,000 for wages and sh.1,130,000 for motor vehicle expenses. 10 Tax of Sh.10 million should be provided for. Required: (a) Income statements for the year ended 30 September 2005 (b) Balance sheet

    Date posted: November 19, 2018.  

  • Give five purposes of control accounts(Solved)

    Give five purposes of control accounts.

    Date posted: November 19, 2018.  

  • While research and development costs of a project may meet the definition of an asset, the cost may not meet the criteria used in recognizing...(Solved)

    While research and development costs of a project may meet the definition of an asset, the cost may not meet the criteria used in recognizing an asset. Define the term “asset” and explain the criteria used in recognizing an asset.

    Date posted: November 19, 2018.  

  • "Qualitative characteristics are the attributes that make information provided in financial statements useful to users." Briefly explain the four main qualitative characteristics of financial statements with reference...(Solved)

    "Qualitative characteristics are the attributes that make information provided in financial statements useful to users." Briefly explain the four main qualitative characteristics of financial statements with reference to shareholders of a company.

    Date posted: November 19, 2018.  

  • Using suitable examples, explain the meaning of the following terms: (i) Accounting standards. (ii) Accounting policies. (iii) Accounting bases.(Solved)

    Using suitable examples, explain the meaning of the following terms: (i) Accounting standards. (ii) Accounting policies. (iii) Accounting bases.

    Date posted: November 19, 2018.  

  • Photomap Ltd. is a leading manufacturer of digital video disks (DVDs). As part of its modernization programme, the company decided to replace its old machinery...(Solved)

    Photomap Ltd. is a leading manufacturer of digital video disks (DVDs). As part of its modernization programme, the company decided to replace its old machinery with a state of the art machine imported from Denmark. The following expenses were incurred for the purpose in the year ended 30 September 2005: Shs. "000" Catalogue price less cash discount at 10% of the list price 30,000 Freight and insurance 7,000 Customs and excise duty 7,300 Value added tax 7,100 Installation costs 2,000 Pre-production testing 700 Training costs (machine attendant) 50 Insurance (annual) 700 Salary paid to machine attendant (annual) 100 Additional information: 1. The old machinery disposed of in the year ended 30 September 2005 for Shs. 1,500,000 had cost the company Shs. 2,000,000 on 1 October 2002. An air conditioner equipment purchased for Shs. 545,000 at the same time with the disposed of machinery was scrapped during the year since it was no longer required. 2. The furniture used by the company was acquired on 1 October 2003 at a cost of Shs. 800,000. 3. The value added tax incurred by the company in respect of the machinery was recovered from the tax authority against output value added tax. 4. Depreciation per annum is provided at the following rates: Machinery -25% on reducing balance basis Equipment - 20% on cost Furniture - 15% on cost Full year‟s depreciation is provided in the year of acquisition and none in the year of disposal. Required: (i) Ascertain the cost of the new machinery. (ii) Disposal accounts. (iii) Provision for depreciation accounts. (iv) A property, plant and equipment movement schedule for the year ended 30 September 2005.

    Date posted: November 19, 2018.  

  • Briefly explain the concept "substance over form" with respect to: (i) Motor vehicles acquired on hire purchase. (ii) Leasehold land.(Solved)

    Briefly explain the concept "substance over form" with respect to: (i) Motor vehicles acquired on hire purchase. (ii) Leasehold land.

    Date posted: November 19, 2018.  

  • The following information was extracted from the financial statements of Sunrise Ltd. and Sunset Ltd. in respect of the year ended 30 September 2005:(Solved)

    The following information was extracted from the financial statements of Sunrise Ltd. and Sunset Ltd. in respect of the year ended 30 September 2005: sunriseltd11857.png Required: For each company, compute the following ratios: (a)(i) Acid test ratio (ii) Inventory turnover (iii) Average collection period (iv) Return on capital employed (v) Debt equity ratio (b)(i)On the basis of the ratios computed in (b) above, comment on the overall performance of Sunrise Ltd. and Sunset Ltd. and advise which of the two companies would provide better investment. (ii) Explain the possible shortcomings of relying on your analysis in (b) above.

    Date posted: November 19, 2018.  

  • State four purposes of ratio analysis(Solved)

    State four purposes of ratio analysis.

    Date posted: November 19, 2018.  

  • Omondi and Maina trade as partners in a brick manufacturing firm sharing profits and losses in the ration of 3:2 after charging their annual salaries...(Solved)

    Omondi and Maina trade as partners in a brick manufacturing firm sharing profits and losses in the ration of 3:2 after charging their annual salaries of Shs. 2,500,000 each. The trial balance extracted from their records as at 31 October 2005 were as follows: omondiandmaina111020.png Additional Information: 1. On 1 March 2005, the partners agreed to admit Ombati into the partnership on the following terms: - Ombati to pay sh.3,400,000 as his capital contribution. - Ombati to be entitled to a salary of Sh.2,000,00 per annum and a share of 10% of the profits. Omondi and Maina were to continue sharing profits in their old ratios, but guaranteed that Ombati‟s share of profits after salaries would not fall below Sh.1,200,000 per year. Goodwill was agreed at Sh.2,100,000 but was not to be retained in the books. 2. The life assurance policy was surrendered on 1 December 2004 for Sh.9,500,000 and the proceeds paid directly to Omondi and Maina in their profit sharing ratio. The necessary entries in the current accounts were not made to account for this transaction. 3. The details of the savings bank account were as follows: omondiandmaina111020b.png 4. The actual balance on the bank savings account as at 31 October 2005 amounted to Sh.400,000. The difference was due to drawings by Omondi Sh.3,400,000. Maina Sh.3,000,000, Ombati Sh.1,200,000 and tax amounting to Sh.4,800,000 paid on behalf of the partners (Omondi Sh.2,400,000, Maina Sh.2,000,000 and Ombati Sh.400,000). 5. Inventory as at 31 October 2005 was valued at Sh.19,000,000. Depreciation is to be provided on plant and machinery at 10% per annum and on motor vehicles at 20% per annum. 6. Provision for doubtful debts should be maintained at 5% of the balance in the debtors ledger. Required: a) Trading, profit and loss and appropriation accounts for the year ended 31 October 2005. b) Partners' current accounts. c) Partners' capital accounts.

    Date posted: November 19, 2018.  

  • Araka Ltd., a company dealing in retail products, extracted from the following trial balance as at 30 September 2005(Solved)

    Araka Ltd., a company dealing in retail products, extracted from the following trial balance as at 30 September 2005: arakaltd111003.png Additional information: 1. Provision for doubtful debts should be made at 2% of the debtors ledger balances after writing of bad debts amounting to Shs. 1,370,000. 2. The suspense account was analysed as follows: arakaltd111003b.png 3. The motor vehicle sold during the year had been purchased on 1 February 2002 for Sh.6,500,000. 4. Bank statement as at 30 September 2005 showed bank charges of Sh.533,000. This had not been recorded in the cash book. 5. The debtors ledger control account did not agree with the list of balances in personal accounts. You ascertain that some invoices for October 2005 had been posted in the personal accounts as at September 2005. The list of balances was overstated by Sh.4,300,000. 6. Estimated corporation tax for the year ended 30 September 2005 was Sh.131,700,000. 7. The value of inventory as at 30 September 2005 was amounted to Sh.62,047,000. 8. The directors proposed to pay ordinary dividend of 10%. 9. The following petty cash expenditure had not been recorded: Shs. „000‟ Motor vehicle expenses 412 Sundry expenses 91 Casual workers wages 36 10. Depreciation is provided at the following rates: Buildings- 2% per annum on cost Plant and machinery – 20% per annum on reducing balance basis. Motor vehicle – 25% per annum on cost Full year‟s depreciation is provided in the year of purchase and none in the year of disposal. Required: a) Trading profit and loss account for the year ended 30 September 2005. b) Balance sheet as at 30 September 2005

    Date posted: November 19, 2018.  

  • Explain the accounting treatment that would be applicable in dealing with the following transactions relating to the accounts of Mlachake Ltd. for the year ended 31...(Solved)

    Explain the accounting treatment that would be applicable in dealing with the following transactions relating to the accounts of Mlachake Ltd. for the year ended 31 December 2004: (i) A debtor who owed the company Sh.200,000 was declared bankrupt on 1 February 2005. 25% of the debt had been recovered when the accounts were approved by the directors on 15 March 2005. (ii) Some items of inventory purchased for Sh.300,000 were damaged in the warehouse during the year. These items were repaired at Sh.50,000 and sold to a customer on 2 February 2005 at 75% of the normal selling price of Sh.400,000 (iii) On 10 December 2004, the company secured an order worth Sh.1.2 million from a foreign based company. The goods were shipped on 10 January 2005 and included in sales for December 2004.

    Date posted: November 19, 2018.  

  • Citing suitable examples, briefly explain of the following terms: (i) Accounting concepts (ii) Accounting policies (iii) Accounting standards(Solved)

    Citing suitable examples, briefly explain of the following terms: (i) Accounting concepts (ii) Accounting policies (iii) Accounting standards

    Date posted: November 19, 2018.