Professional Documents
Culture Documents
Financial Accounting
III
SUBJECT NO. 10
STRATHMORE
UNIVERSITY
DISTANCE
LEARNING CENTRE
P.O. Box 59857,
00200, Nairobi,
KENYA.
Tel:+254 (02) 606155
Fax: +254 (02) 607498
dlc@strathmore.edu
Email:
Copyright
ALL RIGHTS RESERVED. No part of this publication may be
reproduced, stored in a retrieval system or transmitted in any form or
by any means, electronic, mechanical, photocopying, recording or
otherwise without the prior written permission of the copyright
owner. This publication may not be lent, resold, hired or otherwise
STRATHMORE UNIVERSITY REVISION KIT
Syllabus
ii
Introduction
iii
Acknowledgment
We gratefully acknowledge permission to quote from the past
examination papers of the following bodies: Kenya Accountants
and Secretaries National Examination Board (KASNEB);
Chartered Institute of Management Accountants (CIMA);
Association of Chartered Certified Accountants (ACCA).
iv
Acknowledgment
Contents
Acknowledgment......................................ii
Contents..................................................iii
Part I: Introduction.................................iv
Approach To Examinations............................v
Syllabus........................................................vi
Analysis Of Recent Examinations...............viii
PART II: Revision Questions and Answers
..................................................................1
Questions Past Papers..................................1
Answers Past Papers...............................101
Part III: Comprehensive Mock
Examinations........................................243
Questions - Mocks......................................243
Answers......................................................274
Contents
Part I: Introduction
The examination approach of the Kenya Accountants and
Secretaries Examination board has changed radically with effect
from the June 2000 examination. The new syllabus is more
demanding on students knowledge, skills and examination
technique.
This revision kit is designed to supplement other reference
materials and the study texts supplied by the Distance Learning
Centre of the Strathmore University. Singular use may prove
inadequate and therefore effective study of the subject should be
done prior to use of this kit. The aim is to improve both knowledge
and examination technique by providing plenty of opportunity for
structured practise of past examination questions reflecting the
new examination scheme.
Remember that Accounting papers not only examine candidates on
knowledge but also the ability to present information in form of
good reports and adapt to practical challenges of meeting strict
deadlines. Therefore a candidate must be well prepared to enhance
the chances of passing the examination. To achieve a pass or score
highly thorough knowledge of the syllabus coupled with skilled
presentation of solutions i.e. either proper formats with or and
concise explanations to theory questions is essential.
The change to application of International Financial Reporting
Standards also poses an additional challenge to the students as it
does to professionals in the industry. It is especially demanding on
the students since International Financial Reporting Standards are
dynamic and the student must keep abreast with the changes.
The 2005 edition of Financial Accounting III revision kit includes
the following features:
a)
b)
c)
d)
Approach to Examinations
The syllabus;
An analysis of recent examinations;
Topical Guide
All question are provided with full suggested solutions and tutorial
notes prepared by Strathmore university.
If you attempt all the questions in the kit together with the mock
examinations you will have written answers equivalent to more than
ten examinations. So if you write good answers to all of them, you
should be well prepared for the final exam. Good luck!
vi
Introduction
Approach to Examinations
vii
Approach to Examinations
Ensure that you have covered the syllabus adequately either by the
Distance Learning Centre study packs or other reference materials.
It is very important to maintain a systematic approach to your
studies, right up to your examination. Whether it is through private
study, distance learning or attending classes, please develop a
proper exam strategy.
The following should be the recommended guide:
1. Start your practise and revision with a topic that you find
straight forward. This boosts your morale and gives you a bit of
self-confidence.
2. The kit includes a bank of illustrative questions covering all
aspects of the syllabus. Most of these questions are borrowed
from previous examination sittings. Attempt these questions and
you may approach the questions by starting with the syllabus
areas you are comfortable with. Please do not refer to the
solutions provided until you have completed.
3. Compare your answers to the suggested solutions provided. If
your solutions are correct then well done. If they are not correct
then no problem. Check the solution provided and study
carefully how the solution was arrived at.
4. Re attempt the questions again (may be at a later date) and this
time check your speed. Ensure that your speed is improved and
pay attention to formats and presentation. Your solutions should
be neat and well laid out.
5. Once the entire syllabus has been revised and you are confident
that you can answer questions successfully, attempt the three
mock exams at the end of the kit. Ensure that you sit the papers
under strict exam conditions. It may not be wise to refer to the
mock exams at any time before you are ready to attempt them.
Refrain from turning to these pages until later.
6. The purpose of practising the mock exams is for you to gain
experience on the methods of selecting questions, deciding on
the order in which you will attempt, managing your time well
and producing quality answers. Once you have finished each
mock paper and checking solutions please bear in mind that in
addition to the experience gained, please assess your
performance to determine whether you may be having problems
in any of the syllabus areas. Then you can revise again.
viii
Syllabus
Syllabus
PAPER NO. 10 FINANCIAL ACCOUNTING III
OBJECTIVE
To equip the candidate with knowledge on the preparation of
financial statements and reports for various organisations.
10.0 SPECIFIC OBJECTIVES
A candidate who passes this subject should be able to:
CONTENTS
10.1 Legal and institutional Framework of Financial
Accounting
-
Syllabus
-
ix
(Total: 20
xi
xii
MAY 2002
Question 1 Preparation of published financial statements
(Total: 25 marks)
Question 2 Partnership conversion to a limited company.
(Total: 20 marks)
Question 3 Branches Accounting foreign branches.
(Total: 20 marks)
Question 4 Consolidated balance sheets mixed groups.
(Total: 20 marks)
Question 5 Trust Accounts Investments
(Total: 15 marks)
DECEMBER 2001
Question 1 Consolidation Merger VS Acquisition.
(Total: 25 marks)
Question 2 Branch Accounts selling agencies.
(Total: 17 marks)
Question 3 Bankruptcy accounts for partnerships.
(Total: 20 marks)
Question 4 Partnership accounts: Conversion into limited
companies. (Total: 20 marks)
Question 5 Trust Accounts
(Total: 18 marks)
JUNE 2001
Question 1 Partnership amalgamation.
(Total: 25 marks)
Question 2 Consolidated balance sheets: vertical groups.
(Total: 20 marks)
Question 3 Branch Accounts: Autonomous branch.
(Total: 15 marks)
Question 4 Bankruptcy accounts for individuals.
(Total: 20 marks)
Question 5 Executorship accounts.
(Total: 20 marks)
DECEMBER 2000
Question 1 Branch accounts Selling agencies.
(Total: 25 marks)
Question 2 Consolidated profit and loss account.
(Total: 20 marks)
Question 3 Executorship accounts.
(Total: 17 marks)
Question 4 Partnership piecemeal dissolution.
(Total: 20 marks)
Question 5 Retirement benefit scheme final accounts.
(Total: 18 marks)
xiii
xiv
QUESTION NO
Preparation of
published financial
statements
REVISION
PAPERS
Refer to the
analysis of
Past papers.
Branch Accounts
Partnership Accounts
Group Accounts
Trust and
Executorship
Bankruptcy and
liquidation
Retirement benefit
schemes
MOCK PAPERS
Refer to analysis
of the mock
papers.
xv
Sh. 000
15,375
750
3,150
21,600
8,000
1,080
25,073
34,979
25,425
90
473
681
430
848
5,100
30,750
398
12,059
3,525
450
141,450
32
173
23
179,100
300
738
24,450
806
paid
Wages and salaries
Bank
268,654
268,654
Additional information:
1. The 10% convertible loan stock is secured against the plant.
2. (i.) During the year fixed assets were purchased as follows
Buildings Sh.750,000 and plant Sh.4,050,000.
(ii). Plant with an original cost of Sh.1,500,000.
3. Depreciation is to be charged as to buildings Sh.53,000 and
plant Sh.690,000.
4. The quoted investments had a market value at 30 June 2000 of
Sh.6,750,000.
5. The wages and salaries figure includes the following:
Directors Salaries
General Manager
Company Secretary
122,00
33,000
23,000
QUESTION TWO
The following is a summary of the balances in the records of Kwa
Limited and its subsidiary Jomvu Limited as at 31 March 2000.
Kwa Ltd
Sh. 000
Property, plant and equipment at cost
7,500,000 ordinary shares in Jomvu Ltd.
at cost.
6,000,000 preference shares in Jomvu
Ltd. at cost
Sh.5,000,000 6% debentures of Jomvu
Ltd.
Current assets
Jomvu
Ltd.
Sh. 000
250,000
220,000
165,000
60,000
5,000
145,500
143,400
625,500
363,400
300,000
50,000
98,500
60,000
30,000
87,000
625,500
100,000
80,000
40,000
44,400
30,000
20,000
10,000
5,600
1,200
32,200
363,400
28,000
32,000
60,000
15,600
44,400
Head Office
Sh.
Sh.
000
000
14,000
8,900
9,500
104,00
0
40,000
60,100 35,000
Branch
Kove
Kove
000
000
63,000
36,000
1,560
432,000
504,260
360,000
56,700
1,500
59,000
15,200
28,900
6,000
18,000
11,520
2,000
126,000
4,600
23,30
0
220,00
0
28,000
______
220,00
0
272,000
79,200
28,800
994,520
______
994,520
Sh. 000
4,250
3,250
360
220
105
40
302
1,200
370
165
230
37
267
120
147
10,409
QUESTION FIVE
(a) As a company reports become larger and more complicated as a
result of additional requirements, there is a danger that the
essential elements in them become obscure to the
unsophisticated user. There may be some merit in examining
whether companies should be required to issue, to those who
wish it, a simplified form of annual account.
Required:
Explain the arguments that may be advanced against the
publication of simplified accounts.
(15 marks)
(b) (i).
Distinguish between list A and list B contributories in
the case of company
liquidation.
(2
marks)
(ii).
Under what conditions would a list B contributory be
required to contribute in the case of company liquidation?
(3 marks)
(Total: 20 marks)
10
DECEMBER 2000
QUESTION ONE
Trendsetters Limited operates two branches, one in Nairobi and
one in Mombassa. These two branches are supplies from a
warehouse in Athi River town where the Head Office of the
Company is situated. All purchases are made at the head office.
Goods are charged to both branches all selling price, which is head
office cost plus 50%. All cash receipts in the branches are banked
daily. The following figures relate to the companys performance for
the year ended 30 September 2000 and financial position as at that
date.
Head
Office
Sh.
000
Cash sales banked
Credit sales
Stock at cost, 1 October 1999
Stock at selling price, 1 October
1999
Purchases
Expenses paid
Goods sent to branches (selling
price)
Goods received from debtors
Property, plant and equipment
(Net Book value: 30 September
2000)
Debtors at 1 October 1999
Bank overdraft at 1 October 1999
Trade creditors at 1 October 1999
Trade creditors at 30 September
2000
Ordinary share capital: 3 million
Sh.10 shares
Retained earnings at 1 October
1999
Nairobi
Branch
Sh.
000
110,820
12,300
Momba
sa
Branch
Sh.
000
168,000
8,400
18,300
24,150
9,008
124,155
12,100
10,825
180,225
8,525
28,000
1,200
35,000
1,100
11,750
233,175
19,540
25,000
11,800
42,550
41,200
30,000
45,946
Additional information:
1. Head office expenses are apportioned equally to the branches.
2. A debt for Sh.75,000 became had during the year at Mombasa
branch.
3. Goods were transferred at selling price from Nairobi to
Mombasa branch at Sh.405,000 and from Mombassa branch to
Nairobi at Sh.900,000.
FINANCIAL ACCOUNTING III
11
Sales revenue
Addis
Ltd.
Sh.
000
84,000
Bunyala
Ltd.
Sh. 000
66,000
Chania
Ltd.
Sh. 000
48,000
12
(3,824)
4,286
(50,862)
(13,440)
(8,400)
(2,140)
(1,420)
(3,757)
4,124
(49,862)
(8,050)
(3,950)
(1,050)
(300)
(2,822)
2,452
(38,430)
(9,600)
(6,400)
2,040
(3,000)
(4,500)
580
18,300
(450)
(450)
(500)
(750)
12,600
(150)
9,200
Nil
15,000
9,000
10,000
Nil
3,.000
Additional information:
1. Addis Limited acquired 180,000 10% preference shares of Sh.20
each and 800,000 ordinary shares of Sh.10 each on 1 December
1996 when the balance on the profit and loss account of Bunyala
Limited was Sh.8,100,000. Goodwill of Sh.2,500,000 had arisen
on the purchase of these shares. Addis Limited is amortizing this
goodwill over 5 years on the straight line basis.
2. Addis Limited acquired 180,000 ordinary shares of Sh.10 each in
Chania Limited on 1 March 2000: the purchase price of these
shares was to be fixed once the results for the year ended 30
November 2000 to maintain its trustee status.
3. Bunyala Limited makes sales to Addis Limited at its nominal
selling price. In the year ended 30 November 2000, Bunyala
Limiteds sales to Addis Limoted amounted to Sh.9,300,000.
Stock purchased from Bunyala Limited and held by Addis
Limited at cost amounted to Sh.540,000 and Sh.720,000 on 30
November 1999 and 30 November 2000 respectively.
4. Addis Limited sold an item of plant to Bunyala Limited on 1
December 1998 for Sh.2,400,000. Addis Limited had marked up
its cost by 20%. Bunyala Limited is depreciating this item of
plant to nil residual value on the straight line basis over 10 years
with the charge appearing as part of cost of sales.
5. There has been no intra-group trade between Chania Limited
and other two companies.
6. Group policy in relation to unrealised profit on intra-group sales
is of assets os to remove the whole of the unrealised profit from
the asset and from the company which made the profit on the
FINANCIAL ACCOUNTING III
13
Sh. 000
5,400
8,820
3,870
2,040
1,410
120
21,660
21,540
120
21,660
14
Sh.9,600,000
90
Sh. 75
Sh. 100
15
QUESTION FOUR
The trial balance extracted from the books of Newa, Omae, Pekka
and Omar on 30 April 2000 was as follows.
Sh.
Sh.
0
0
00
00
31 May 2000
30 June 2000
31 July 2000
16
31 August
2000
31 October
2000
Required:
(a) A partnership distribution schedule:
(12 marks)
(b) Summary bank realization and partners capital accounts.
(8 marks)
(Total: 20 marks)
QUESTION FIVE
(a) What meetings of creditors must be held and for what purpose
in the course of a creditors voluntary winding up?
(7 marks)
(b) The following trial balance was extracted from the accounting
records of the XYZ Retirement Benefits Scheme for the year
ended 30 September 2000.
Sh. 000
Accumulated fund as at 1 October
1999
Accrued expensed
Administrative expenses
Cash and demand deposits
Change in market value of
investments
Commutation and lump sum
retirement benefits
Contributions due within 30 days
Employer normal contributions
Individual transfers in from other
schemes
Individual transfers out to other
schemes
Investment income
Immovable property
Kenya Government securities
Members nominal contributions
Members additional voluntary
Sh. 000
461,560
240
2,840
23,460
22,640
4,820
4,940
36,480
3,150
1,860
47,400
132,320
263,605
18,240
4,560
7,640
87,835
320
19,990
571,950
571,950
17
contributions
Pensions
Quoted equity investments
Unpaid benefits
Unquoted equity investments
Required:
The statement of Changes in Net Assets (the Fund Account) for the
year ended 30 September 2000 and a statement of Net Assets as at
30 September 2000, in accordance with International Accounting
Standard 26 (Accounting and reporting by Retired Benefit Plans)
Hints:
The XYZ Retirement Benefits Schemes accounting policies state
that the reconciliation of the accumulated fund for the year is
included in Statement of Net Assets and administrative expenses
are included as the final item in the Statement of Charges in Net
Assets. In all other respects, the format used is in conformity with
that laid down in the Retirement Benefits Regulations in Retirement
Benefits Act.
(11 marks)
(Total: 18 marks)
18
JUNE 2001
QUESTION ONE
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:
Capital accounts
Current accounts: Apopo
Cheloti
Chuma
Creditors
450
420
0
1,500
1,065
0
1,950
1,485
0
1,800
1,050
5,250
2,625
150
750
300
240
7,800
3,975
390
9,750
5,460
240
225
165
630
1,020
8,550
4,05
900
270
Guserwa
0
360
600
120
750 Kurgat
450 390
1,05
120
9,750 Ochieng
0
1,020
60
36
0
5,46
0
4.
5.
6.
7.
19
Required:
(a) The opening journal entries of Cheloti Guserwa Kandie and Co.
(7 marks)
(b) The capital and current accounts of each partner (in columnar
form)
i. In the old practices, so as to indicate the resultant
indebtedness between the partners:
(8 marks)
ii. In the new practice, so as to indicate the balances on 1 April
1999 and 31 March 2000.
(10 marks)
(Total: 25
marks)
QUESTION TWO
The balance sheets of AC Limited, BEM Limited and CET Limited as
at 31 May 2000 were as follows:
AC Ltd.
Sh.
BEM
Ltd.
CET
Lld.
20
Fixed assets
Investments in
subsidiaries:
BEM Ltd. (Book value)
CET Ltd. (cost)
Current assets: Debtors
Cash
Share capital:
Authorized issued and
fully paid
Ordinary shares of Sh.10
Profit and loss account
Shareholders funds
12% loan stock
Current liabilities:
Bank overdraft (secured)
Creditors
Taxation
Sh.
000
36,200
Sh.
000
31,900
21,200
164,900
40,000
8,700
27,100
112,000
6,900
16,200
55,000
100,000
11,000
111,100
30,000
141,100
30,000
54,000
84,000
20,000
104,000
10,000
28,000
38,000
10,000
48,000
9,300
12,700
1,800
23,800
164,900
6,500
1,500
8,000
112,000
5,800
1,200
7,000
55,000
68,700
75,000
Additional information:
1. BEM Limited purchased 800,000 ordinary shares in CET Limited
on 1 June 1999 for Sh.36 million and Sh.5 million nominal of the
12% loan stock of CET Limited on the same day for Sh.4 million.
CET Limited paid an interim dividend of Sh.5 million on 9
January 2000. The directors have proposed a final dividend of
the same amount but this dividend has not been included in the
balance sheet above. The balance on the profit and loss account
of CET Limited was Sh.30 million at 1 June 1999. Interest on the
12% loan stock has always been paid up to date.
2. AC Ltd. Purchased 2,250,000 ordinary shares in BEM Ltd. On 1
June 1998 for Sh.70 million. The balance on the profit and loss
account of BEM Ltd. On that date was Sh.50 million. On the
same day AC Limited purchased Sh.10 million nominal of the
12% loan stock in BEM Limited for Sh.8 million. BEM Limited
made a profit after tax of Sh.16 million in the year ended 31 May
2000. BEM Ltd. paid a single dividend of Sh.20 million for the
year ended 31 May 1999, which AC Ltd. accounted for
appropriately. BEM Ltd. paid an interim dividend of Sh.10
million on 11 February 2000 which AC Ltd. credited to its profit
and loss account. A final proposed dividend of Sh.15 million has
not yet been reflected in the balance sheet of BEM Limited
above.
21
22
Capital
Drawings
Purchases
Cost of weighing and
packing
Sales
Goods sent/received by
branch
Selling and sundry
expenses
Account
receivable/payable
Head office branch
Current accounts
Balance at bank
Nairobi Head
Office
Sh.
Sh.
2,640,000
300,000
23,920,
200
415,800 17,040,00
0
7,814,400
2,688,0
00 7,000,200
2,760,0
00
_________
2,466,6 34,494,6
00
00
1,944,0
00
34,494,
600
Mombassa
Branch
Sh.
Sh.
7,682,4
00
324,000
1,104,0
00
7,680,0
00
28,800
1,809,6
00
408,0 ________
00
9,518,
9,518,4
400
00
23
24
Capital
Mortgage on shop land and
building
Loan ICDC
Loan Barclays Bank
Loan Co-operative Society
Loan A Kariuki
Loan W. Kuria
Trade creditors
Salaries, wages payable
NHIF, NSSF, PAYE
Bank overdraft
Shs.
180,000
450,000
180,000
90,000
30,000
15,000
3,000
171,000
2,700
540
2,760
0
1,125,0
00
Shs.
600,00
0
150,00
0
81,405
96,195
197,10
0
300
_______
1,125,0
00
Shs.
630,000
120,000
30,000
25
Shs.
90,000
2,000
250,000
300,000
400,000
1,226,000
20,000
5,000
10,000
26
Required:
(a) Journal entries to record the above transactions
(5 marks)
(b) The Estate cash book
(4
marks)
(c) The Estate income account
(3 marks)
(d) The Estate income account
(5 marks)
(e) Balance sheet of Kombo: deceased as at 31 January 2001
(3 marks)
(Total: 20 marks)
27
DECEMBER 2001
QUESTION ONE
Aberdare Horticulture (AHL) and Naivasha Fresh-Fruit Limited
(NFL) are exporters of horticultural and tropical fruits. Both
Companies are owned by small number of shareholders. These
shareholders have decided to amalgamate the two companies with
effect from January 2001, by means of a share exchange, all the
shareholders in NFL, with the exception of the production director
who owns 5% of the shares of the company (and who will retain his
shareholding in NFL) have exchanged each of their Sb 20 shares in
NFL for 2 Sh 10 share in AHL. However the exchange of shares has
not yet been accorded in the books of either company. Financial
consultants had valued the shares in NFL at Sh. 40 each and those
in Ahl at Sh. 17.50 each.
The trial balances of the two companies at 30 April 2001 were as
follows:
Administrative expenses
AHL
Sh.
Sh.
000 000
36,94
0
3,350
19,10
0
31,15
0
55,41
0
3,000
21,25
0
6,600
8,500
3,300
186,6
50
36,00
0
NFL
Sh.
Sh.
000 000
30,90
0
5,750
8,550
25,80
0
46,35
0
4,000
18,90
0
5,200
7,560
2,600
208,5
00
14,40
0
3,720
17,68
0
293,3
00
30,00
40,00
0
16,00
0
4,460
22,56
0
300,0
00
40,00
28
Stock
12,10
0
4,250
393,3
50
0
Taxation: Instalment tax paid
393,3
50
0
12,00
0
4,330
401,7
30
401,7
30
Additional information:
1. The sales and expenses of both companies occurred evenly over
the year to 30 April 2001. The rates of gross profit for both
companies are constant throughout the year.
2. The self assessment tax returns have not yet been field, but will
indicate corporation tax liabilities of Sh. 4,680,000 and Sh.
4,755,000 for AHL and respectively. Of these two amounts. Sh.
390,000 and Sh. 480,000, respectively of the liabilities are
included in the deferred tax balances brought forward included
in the trial balances above.
3. The directors of AHL, who comprise the three former directors
of the company and three of the four directors of NFL have
proposed that AHL and NFL would pay final dividends of Sh.
8,500,000 and 5,000,000 respectively.
Required:
The consolidated profit and loss account for the years ended 30 th
April 2001 and the consolidated balance sheet as at 30 April 2001.
Using both the acquisition and the pooling of interests methods in
both cases the fair values of the identifiable net assets approximate
the book values. Any goodwill that rises should be amortised on the
straight line basis over 60 months and the amortization should be
shown as a separate line item in the consolidated profit and loss
account. Produce also the statement of changes of equity for the
year. Show the proposed dividends as current liabilities. Round all
figures to the nearest Sh. 1,000
(Total: 25 marks)
QUESTION TWO
Victoria Gowns is a fashionable ladies-wear chain of clothing stores,
started in Kakamega, but now present in all the major towns in
Kenya and in Kampala, Uganda and in Dar-es-salaam, Tanzania.
The accounts of all the branches are maintained in the books of the
head office, now situated in Nairobi. The figures below that refer to
goods are stated at selling prices, following figures relate to
transactions carried out by the Mombasa branch in the year ended
31 May 2001:
Sh.00
0
FINANCIAL ACCOUNTING III
29
5,280
116,72
8
560
720
880
322
1,360
52,800
240
960
61,686
12,802
17,072
Additional information:
1. The Mombasa branch is managed by a particularly competent
group of women. Other than the thefts stated above, there were
no shortages or surpluses of goods or cash during the year.
2. Demand for certain casual wear has been high during the year;
to prevent stock-outs from occurring; these lines are normally
marked up in price using a formula linked to the number of
items sold in the proceeding week. Included in the opening stock
were goods with a normal selling price of Sh. 800,000 but which
had been marked up by a further 10% of this price. The normal
selling price of the goods is head office cost plus 60% of cost. All
these marked-up goods were sold in the year. Goods with a
normal selling price of Sh. 1,120,000 had been marked up by an
additional 15%. Three quarters of these goods had been sold by
31 May 2001.
3.
Required:
Prepare the Mombasa Branch Stock Account and the Mombasa
Branch Mark-up Account in the books of the Head office, and the
Memorandum Trading and Profit and Loss Account for the
Mombasa Branch for the year ended 31 May 2001
(Total:
17 marks)
QUESTION THREE
30
Assets:
Land and
building
Houses
Plant &
Equipment
Furniture,
etc,
Inventory
Trade
receivables
Cash
Investments
Motor cars
Polep
ay
Sh.
000
12,450
14,600
Lemasi
o
Sh.
000
Ayimb
a
Sh.
000
5,500
4,800
650
400
19,600
20,240
180
______
67,070
90
13,600
500
20,340
140
14,200
900
20440
Liabilitie
s:
Bank
overdraft
Creditors
Long-term
loans
Car loans
Excess of
assets
Over
liabilities
Polep
ay
Sh.
000
4,600
27,270
11,200
Lemasi
o
Sh.
000
670
3,300
450
3,840
380
600
24,000
15,990
15,550
_______
67,070
______
20,340
______
20,440
Additional information:
1. Lemasio and Ayimba have contributed equal amounts
to the partnership; always draw the same amount
partnership and share profits and losses equally. The
capital included in their personal assets under
investments,
Ayimb
a
Sh.
000
of capital
from the
partners
the title
31
Assets:
Land and building
Houses
Plant and Equipment
Furniture
Inventory
Trade receivables
Other investments
Motor cars
Lemasio
Sh.
000
Ayimba
Sh.
000
4,000
3,500
180
100
700
250
1,000
300
8,000
7,500
13,500
13,100
32
33
Sh.
000
Capital accounts at 1 November 1999:
Maina
Ojara
Net profit before tax: period to 30 April 2000
Operating profit before interest and tax: year to
30 April 2001
210,000 ordinary shares of Sh. 10 each, fully
paid up
20% debentures
Stock and work-in progress
Trade receivables
Cash at Bank and in hand
Interim dividend paid on 28 February 2001
Trade payables
Purchase consideration for company
Land and buildings
Plant and machinery
Vehicles
Depreciation:
Land and buildings
Depreciation:
Plant and machinery
Depreciation:
Vehicles
Loss on revaluation of net assets as at 30 April
Sh.
000
1,350
750
495
1,680
2,100
450
1,140
1,515
405
300
1,530
2,850
900
900
540
30
90
135
_____
8,610
60
8,610
Additional information:
1. The fair values of the identifiable assets and liabilities of the
partnership at 30 April 200 were:
Land and buildings
Plant and machinery
Vehicles
Stock
Trade receivables
Cash at Bank and in hand
Trade payables
Sh. 000
900
900
540
480
1,470
750
(2,505)
2,535
These fair values recorded in the books on 30 April and were the
basis used for computing the purchase consideration payables to
the partners. Depreciation for the year ended 30 April 2001 has
been provided for based on these figures.
2. The purchase consideration of Sh. 2,858,000 was satisfied by the
issue of 210,000 ordinary shares of Sh. 10 each, Sh. 450,000
20% debentures and the balance in cash. The ordinary shares
STRATHMORE UNIVERSITY REVISION KIT
34
3. Interest on the debentures for the year ended 30 April 2001 has
not been paid and has not accrued for either.
4. The company, which is called Maoja Limited, will pay a final
dividend of Sh. 1 per shares on the profit made in the year. This
had been decided at a meeting of the board of directors held on
30 April 2001.
5. Income tax at the rate of 30% on the adjusted profit for the year
needs to be provided for in the amount of SH. 470,000. No
installment tax has been paid since the year under consideration
is the first year in which the company operated.
6. Maoja Ltd. has a policy of amortising goodwill over five years on
a straight line basis. In the year to 3o April 2001, turnover was
Sh. 10,080,000, cost of sales was Sh. 6,720,000, distribution
costs were Sh. 1,092,000 and administrative expenses were Sh.
588,000. Included in these expenses items were Directors
Remuneration of Sh. 60,000, staff costs of Sh. 402,000
(including contributions to a defined contribution plan of Sh.
21,000) included in administrative expenses, and depreciation
included in distribution costs. Amortisation of goodwill should be
included in administrative expenses
Required:
(a). Prepare the Realisation and Capital Accounts of Maina and
Ojaro to record the dissolution of the partnership.
(7 marks)
(b). Prepare for Maoja Limited the income statement for the year
ended 30 April 2001 and the balance sheet at that date in
conformity with Kenya Companies Act and the International
Accounting Standards. Do not prepare the statement of
changes in equity deal with dividends proposed and paid in
the income statement. Ignore deferred tax.
(13 marks)
(Total: 20 marks)
QUESTION FIVE
Lawi Kiprops will stated that the residue of his estate, after
legacies to his sons and daughters, should be held in trust. The
trustees were authorized to retain any asset which was included in
his estate but was not an authorized investment under the Trustee
35
Act (Cap. 167 of the Law of Kenya). The residue of his estate
handed over to the trustee on 1 May 2000 comprised the following:
Probate
value
Sh. 000
330
540
130
300
3,750
36
Probate
value
Sh. 000
4,250
450
600
300
1,020
274
12,534
Additional information:
1. The market values of the assets above were the same as the
probate values except for the shares in E.A Breweries and in
BAT (K) which were quoted at Sh. 118 122 and Sh. 94 98
respectively, the 6% Nairobi City Council Stock which was
quoted at Sh. 54 58 and the 12% Kenya Stock and 10% Kenya
Stock which were quoted at Sh. 108 112 and Sh. 98 102
respectively.
2. On 1 May 2000, the trustees decided to divide the trust into the
Special Range, Fixed Interest and Wider Range parts; any
necessary balancing adjustments between the funds should be
made firstly in cash and then in 10% Kenya Stock 2005.
3. On 15 June 2000, the trustees sold the medals Kiprop had won in
athletics for Sh. 200,000.
4. On 30 September 2000, the tenants of the house in Kileleshwa
moved out of the house. It was sold for Sh. 3,9000,000 on 31
October 2005.
5. On 31 December 2000, the tenant of the house in Peponi
purchased the house, after he obtained an extension of the lease
for 50 years from the commissioner of Lands. The agreed sale
price was Sh. 6,000,000. The tenant paid Sh. 3,000,000 to the
Trustees. The remainder of the purchase price was a mortgage
loan to the tenant repayable over 6 years. Interest being
charged at 15% per annum.
6. The trustees purchased 45,700 ordinary shares in the Nation
media Group at Sh. 120 per share on 31 December 2000, on
which date the market values of all the other investments were
the same as on 1 May 2000. In addition, the trustees used the
balance of the cash available to purchase Kenya Government
Treasury Bills. When matured, they would be rolled over.
7. On 28 February 2001, the trustees decided to liquidate the
building society share account to use the proceeds to pay the
University fees of one on the beneficiaries of the trust. This
37
38
MAY 2002
QUESTION ONE
Viatu Ltd, which manufactures footwear, makes up its accounts to
31 March each year. The company has an authorised share capital
of Sh. 600,000,000 divided into 15,000,000 6.5% preference shares
of Sh. 20 each and 30,000,000 ordinary shares of Sh. 10 each. The
following trial balance was extracted as at 31 March 2002.
Trial balance as at March 2002
Sh000
Sh000
Cost of Sales
Motor vehicle expenses
Selling and distribution costs
Depreciation of motor vehicles for the
year
Wages and salaries
Administration expenses
Audit fees
Sales
Discounts received
Investment income trade investments
- others
Preference dividends paid
Debenture interest
Corporation tax paid instalment
Compensation to director for loss of
office
Depreciation of fixtures for the year)
8% debentures
Cash in hand
Ordinary share capital issued and paidup)
Bank balance
Preference share capital issued and
paid-up)
Inventory 31 March 2002)
Debtors/creditors
Deferred tax
Motor vehicles net book value)
Provision for doubtful debts
Fixtures and fittings net book value)
Profit and loss account 1 April 2001)
General reserves
Share premium
Freehold land and building cost)
Investments trade market value
699,992
59,684
78,840
12,580
95,834
11,492
1,400
13,000
1,600
8,615
8,500
1,040
1,191,86
4
812
1,072
1,608
3,000
20,000
11,745
200,000
204,132
336,440
200,000
24,800
102,000
3,000
11,300
14,400
270,000
30,000
61,610
_______
1,945,60
4
110,848
60,000
40,000
_______
1,945,60
39
Sh.35,000,000)
Others market value
Sh.62,000,000)
Additional information:
1. Wages and salaries include salary paid to Managing Director of
Sh. 30,000,000 and salary paid to Sales Director of Sh.
25,000,000.
2. Provision is due to be made for directors fees Sh. 150,000,000.
3. Provision for doubtful debts is to be adjusted to Sh. 16,822,000.
4. Timing differences of Sh. 4,000,000 are expected to reverse in
the near future.
5. The directors recommended an ordinary dividend of Sh.1.35 per
share.
6. Corporation tax for the year is Sh.11; 820,000.The corporation
tax rate is 30%on adjusted profit.
7. Land and buildings were professionally valued at Sh.300,000,000
at the year end. The directors wish to incorporate the valued
amount in the financial statements.
8. Information about other fixed asset is as follows:
Motor
vehicles
Sh
Cost (including additions during the year)
Additions during the year
Cost of assets disposed of during the year (No
entry made yet)
Accumulated depreciation of asset disposed of
during the year
Proceeds of asset disposed of (including in sales
in the trial balance)
51,200,0
00
2,240,00
0
2,800,00
0
2,150,00
0
715,000
Required
(a)
(13
(b)
(12
(Total: 25 marks)
Fixtures
&
fittings
Sh
20,800,0
00
1,600,00
0
1,455,00
0
905,000
500,000
40
Kamau
Maneno
Rotino
Freehold property
Furniture and fittings
Motor Vehicles
3.
4.
5.
6.
41
Shs.
27,000,000
2,400,000
6,000,000
Sh 000
18,000
9,000
6,000
14,400
36,000
60,000
6,000
3,000
1,200
600
1,500
900
900
25,800
6,000
9,000
600
3,600
7,200
300
9,000
12,000
______
117,900
Additional information;
3,600
1,200
117,900
42
i.
The sales during the second half of the year were 60% of the
total sales though the gross profit percentage remained the same
throughout the year.
ii. The selling expenses were proportional to the sales for each
period. All the expenses were incurred evenly throughout the
year.
iii. Salary drawings were made evenly. Drawing made after
incorporation were to be treated as directors salaries.
iv. There were no purchases or sales of fixed assets during the
year .Depreciation is to be provided on cost as follows;
Furniture and fittings
Motor vehicles
Share capital
Reserves
Profit and loss a/c
Premises at cost
Fixtures and fittings
Provision for dep.
fixtures & fittings
Stock 1 April 2001
Debtors
Creditors
6,400,00
0
35,100,0
00
12,336,0
00
43
17,550,0
00
9,200,00
0
980,000
65,630,0
00
4,500,00
0
27,084,0
00
8,598,00
0
101,090,
000
48,807,0
00
13,520,0
00
156,500,
000
15,900,0
00
19,250,0
00
7,330,00
0
210,890
,000
3,380,00
0
________
210,890
,000
28,514,6
00
19,815,4
00
418,919
,000
277,233,
000
129,350,
000
_________
418,919
,000
Additional information
1.
2.
3.
4.
5.
6.
Ksh.28,500,00
0
Zm.12,000,00
0
Zm.9,775,000
44
7.
8.
1 June 2001
31 March 2002
Average for the year
Date of purchase of closing
stock
Zumu
s
10
12
11
11.5
Ksh.
to
to
to
to
1
1
1
1
Required
(a). Trading, profit and loss account in columar form for the head
office, the branch and the combined business for the year
ended 31 March 2002.
(12 marks)
(b). Balance sheet of the office, branch and the combined business
as at 31 March 2002
(8 marks)
(Total: 20
marks)
(Use the temporal method to translate branch balances into
Kenya shillings)
QUESTION FOUR
On 1 April 2001 Mega Ltd .acquired 4,500,000 ordinary shares of
Ksh.20 par value in Lenga Ltd at a cost of Ksh.152, 000,
000.Further, on 1 July 2001 Mega Ltd acquired 15,000,000 ordinary
shares of Ksh 20 par value in Tera Ltd at a cost of Ksh.716,
600,000.Directors were appointed to the boards of both companies
by Mega Ltd so as to take an active part in their management.
Given below is the information extracted from the books of the
companies as at 31 March 2002.
45
Balance sheet as at 31
March 2002
Mega Lenga
Tera
Sh.
Sh.
Sh.
000
000
000
720,00
0
200,00
0 450,0
0
1,375,0
00
350,00
00 218,0
0
380,00
00
360,60
0 185,0
0
374,80
00
125,00
0,
0
48,000
868000 9,000
_______- 862,0
40,000
3,717,
1,123,
00
800
600
300,0
1,000,0
00
400,00
00 24,00
0
200,00
0
0
56,000
300,00 218,0
288,00
0
00
0
786000 542,0 744,00
2,286,
00
0
000
110,0
152,00
590,00
00
0
0
36,000 120,0
124,60
521,80
00
0
0 90,00
103,00
190,00
0
0
0
_______94,000
1,123,
3,717, 862,0
600
800
00
Sh
252,000,0
00
102,000,0
46
20%
10%
10%
Sh
864,000
1,512,00
0
1,584,00
0
3,960,00
0
47
Sh.
154,000
Sh.
162,000
Sh.
188,000
Huyu was to receive 10,000 shares of Sh. 10 per value in Lima Ltd.
and the balance due to him on capital would be made up of the
shares in Fimbo Ltd. Out of the accumulation assets, Huyu was to
receive Sh. 64,444 in cash and the balance in shares in the Pewa
Ltd.
Required:
(a).The beneficiaries and accumulation accounts for the period
ended 30 April 2002.
(8 marks)
(b). The distribution statements for the capital and accumulation
assets as at 30 April 2002.
(7 marks)
48
(Total: 15 marks)
49
DECEMBER 2002
QUESTION ONE
Emojong, Barmoi and Kimani have been partners sharing profits
and losses in the ratios 2:2:1. Accounts have been prepared on an
annual basis to 31 December of each year Emojong the only active
partner, died on 31 May 2002 and the remaining partners decided
to cease business from that date. The assets are to be realized,
outstanding debts paid and the remainder to be shared by the
partners (including the executors of Emojongs estate) in an
equitable manner, distributions of cash being made as soon as
possible.
A balance sheet prepared as at 31 May 2002 revealed the following
position:
Emojong, Barmoi and Kimani
Balance Sheet as at 31 May 2002
Accumulated
Net Book
Cost
Depreciation
Value
Sh.0
Sh.000
Sh.000
00
Fixed assets:
Goodwill
Freehold land and buildings
Plant and machinery
Fixtures and fittings
Motor vehicles
Current assets:
Stock
Debtors
Less: provision for doubtful
debts
Cash
Current liabilities:
Creditors
Bank overdraft
12,500
18,750
16,625
3,750
4,000
55,625
8,125
750
7,125
16,045
6,975
1,625
3,000
11,600
8,000
7,375
20
15,395
23,170
Financed by:
Capital income:
Emojong
Barmoi
Kimani
Current accounts:
Emojong
Barmoi
12,500
18,750
9,650
2,125
1,000
44,025
(7,775)
36,250
12,500
7,500
5,000
25,000
5,000
3,750
8,750
33,750
50
2,500
36,250
Additional information:
1. Premium have been paid on life assurance policies for each
partner to provide the firm with cash on death. The premiums
have been charged to insurance expense and the cash payable
on death of any partner is Sh.5,000,000.
2. The assets were duly sold and the monies received as follows:
14 June 2002
16 July 2002
20 August
2002
15 October
2002
Sh.
000
5,000
2,500
25,000
3,750
2,500
6,375
1,500
625
4,500
5,250
between
the
partners
account
accounts
(Total: 20 marks)
QUESTION TWO
Traders Limited operates two branches one in the head office in
Nairobi and the other in Busia. Purchases of stock are made
exclusively by the head office branch which does some modification
FINANCIAL ACCOUNTING III
51
to the stocks before they are sold. Goods are sent to the Busia
branch at modified cost plus 10% and all sales by both Busia branch
and head office branch are made at a gross profit of 25% on the
modified goods.
The trial balances as at 30 June 2002 before taking account of the under
mentioned adjustments were:
Capital
Purchases
Cost of modification
Drawings by the owner
Sales
Goods sent/received by branch
Selling and general expenses
Debtors/Creditors
Branch and head office current
accounts
Bank balances
Nairobi Branch
Sh. 000
Sh.
000
1,550
9,847.5
252
275
6,400
4,620
945
1,548
3,007
1,949
760
______
15,577
15,577
Busia branch
Sh.
Sh.
000
000
4,100
4,400
106
568
387.5
5,461.5
Additional information:
1. Goods worth Sh.220,000 sent to Busia branch in June 2002 were
not received ir recorded by the branch until July 2002 while a
remittance of Sh.421,500 from the Busia branch to the head
office in June 2002 was not received or recorded at head office
until August 2002. Any adjustmenta in respect of these items are
to be made in the head office accounts
2. There was a shortage in stocks of selling value of Sh.100,000 at
the Busia Branch. There was no shortage of surplus at the head
office.
3. Unmodified goods costing Sh.500,000 were at the Nairobi
branch as at 30 June 2002.
4. There was no loss or wastage in the process of modification of
stocks by the head office. The branch handles only goods
received from the head office.
Required:
Prepare in columnar form for the Nairobi branch, Busia branch and
the combined business.
(a) The trading and profit and loss account for the year ended 30
June 2002 (12 marks)
(b) The balance sheets as at 30 June 2002.
(8 marks)
54
1,307.
5
______
5,461.
5
52
(Total: 20 marks)
QUESTION THREE
(a) ABC Ltd. purchased equity shares in XYZ Ltd. for Sh.56 million
when the latters retained profits were Sh.88 million. The
retained earnings of XYZ Ltd. now are Sh.100 million. ABC Ltd.
holds 25% of XYZ Ltd.s equity shares and has amortised Sh.3
million premium on acquisition. XYZ Ltd has declared ordinary
dividends of Sh.4 million.
Required:
Determine the value of ABC Ltd.s investment in XYZ Ltd. using
the equity method
of accounting for associate companies.
(5 marks)
(b) G. Limited is a large manufacturing company that manufacture a
wide range of products. Due to the fluctuating nature of
economic environment, the companys management has sought
to diversify its interests by purchasing shares in other
companies in order to improve its reported performance. It has
been G. Ltds policy to appoint a director to the board of any
company where its investment comprises more than 20% of the
equity share capital, so as to take an active in the management
of the said company.
The following investment have been made:
On January 2001, 15% of the ordinary share capital of C
Limited
On 1 July 2001, 30% of the ordinary share capital of B.
Limited
On 1 July 2001, 75% of the ordinary share capital of T.
Limited and also 5,000 of the 10,000, 9% preference shares
of Sh.10 each in that company.
The draft profit and loss accounts of the four companies for
the year ended 30 June 2002 were as shown below
Turnover
Trading profit
Dividends receivable:
Corporation tax:
Profit after tax:
G. Ltd.
C. Ltd.
B. Ltd.
T. Ltd.
2,100,00 3,900,000
1,900,0 1,200,00
0
400,000
0
0
250,000
- 210,000
126,000
46,500
400,000
296,500 (170,000) 210,000
(90,000)
230,000 (85,000)
126,000
53
206,500
(132,000
)
74,500
450,00
0
524,00
0
125,000
(6,000)
(100,000)
124,000
306,000
430,000
(60,000)
65,000
235,000
300,000
(51,000)
75,000
(9,000)
(32,000)
34,000
200,000
234,000
Additional information:
1. Included in the stock of T. Ltd. were goods purchased from G.
Ltd. for Sh.24,000 after acquisition. G. Ltd. realized its usual
25% gross profit margin on this transaction.
2. The dividend due from C. Ltd have not yet been incorporated in
the draft profit and loss account of G. Ltd.
3. There was no goodwill arising on consolidation.
Required:
The consolidated profit and loss account of G. Limited and its
subsidiary for the year ended 30 June 2002.
(15 marks)
(Total: 20 marks)
QUESTION FOUR
(a) List and explain briefly the powers of liquidator
(5 marks)
(b) Hasara Ltd makes its accounts each year 31 October and has
been trading at a loss. On 31 October 2002, a resolution for a
voluntary liquidation was passed. The balance sheet as at
that date was as follows.
54
Sh.
000
Sh.
000
Current assets:
Stock
Debtors
Cash
8,750
13,375
125
22,250
Current liabilities:
Bank overdraft
Creditors
Interest payable (5% debentures)
3,750
11,250
500
Sh.
000
11,00
0
2,75
0
13,75
0
(15,500
)
Paid up capital:
6,750
20,50
0
5,000
12,50
0
2,500
20,00
0
(9,50
0)
10,00
0
20,50
0
Additional information:
1. The debentures are secured by a floating charge on the asset
and undertaking of the company.
2.
The bank overdraft is secured by a fixed charge on the
companys freehold property.
3.
The preference shares carry a right to a fixed cumulative
dividend of 10% per annum up to the date of liquidation and
a repayment of Sh.500 per share in priority to all other
classes of shares.
No dividend has been paid on the
preference shares for two years.
4.
Sh. 000
1,000
125
55
6.
12,500
2,000
6,250
12,250
Required:
The liquidators statement of account showing in order of priority,
the payments made and the computation of any calls to be made.
(15 marks)
(Total: 20 marks)
QUESTION FIVE
(a)
(i)
(ii)
(b)
(2
Accumulated fund as at 1
November 2001
Accrued expenses
Administration expenses
Cash and demand deposits
Change in market value of
investments
Lumpsum retirement benefits
Contributions due in 30 days
Normal contributions by:
Employer
Employees
Transfer in from other schemes
Individual transfers out to other
Sh.000
461,560
240
2,840
23,460
22,640
4,820
4,940
36,480
18,240
3,150
1,860
47,400
132,32
56
0
263,60
5
7,640
87,835
19,900
______
571,95
0
4,560
320
571,950
Required:
(i)
57
JUNE 2003
QUESTION ONE
Athi River Cement (ARC) Ltd. is a company quoted on the Nairobi
Stock Exchange. It makes up its accounts to 31 March each year.
The balance of the company as at 31 March 2003 is as follows:
Administrative expenses
Borrowings
Buildings: Valuation at 1 April 1998
Accumulated depreciation
Capital work in progress
Cash and bank balances
Cost of sales
Compensating tax payable
Deferred income taxes
Deferred expenditure
Distribution costs
Finance leases payable
Finance costs
Finance income
Inventories
Other operating expenses
Other operating income
Plant and machinery: Cost
Accumulated
depreciation
Prepaid operating lease rental: Cost
Amortisation of prepaid operating lease
rental
Revaluation reserve
Share capital
Share premium
Taxation
Turnover (net of VAT)
Trade and other payables
Trade and other receivables
Revenue reserve
Unclaimed dividends
Sh.
Mil
lion
99
Sh.
Mil
lion
103
180
30
74
5
601
8
151
15
109
7
27
2
186
3
4
907
283
80
20
110
450
188
17
884
160
194
_____
95
2
2,497
2,497
Additional information
1.
Borrowings comprise:
Bank overdraft (interest are payable in the year
20%)
STRATHMORE UNIVERSITY REVISION KIT
Sh.millio
n
53
58
2.
50
103
60
6
4.
5.
6.
Sh. Million
17
17
Minim
um
lease
Present
value of
minimum
59
payme
nts
Sh.
lease
payments
Sh.
3
8
11
8.
9.
10.
11.
5
5
7
Finance costs comprise:
Sh. Million
Interest on bank loan
9
Interest on bank overdraft
16
Interest on finance leases
2
27
Finance income:
Sh. Million
Interest received on bank deposits
2
Inventories comprise:
Sh. Million
Raw materials
48
Work in progress
29
Finished goods
51
Stores and spares
58
186
The depreciation charge for the year on the plant and machinery
was Sh.52 million and the amortisation charge of the prepaid
operating lease rental was Sh.2 million
All depreciation and amortisation charges are included in cost of
sales
12.
13.
Required:
Prepare the Income Statement and the Statement of Changes in
Equity for the year ended 31 March 2003 and the Balance Sheet as
STRATHMORE UNIVERSITY REVISION KIT
60
Capital and
Liabilities
Capital
Freehold land
Buildings
Plant and
machinery
Motor vehicles
Current assets:
Inventory
Trade
receivables
Cash at bank
Cost
Sh.0
00
2,000
3,000
12,00
0
4,00
0
21,00
0
Depreciat
ion
Sh.000
Nil
900
3,000
3,000
6,900
4,400
3,400
1,150
NBV
Sh.0
00
2,000
2,100
9,000
1,00
0
14,10
0
Fixed Capital
Accounts
Kioko
Lich
Sh.0
00
Sh.0
00
Meng
o
Sh.0
00
3,000
2,000
4,000
3,190
2,000
1,500
Sh.0
00
9,000
Current
Accounts
Current
Liabilities
Trade payables
8,95
0
23,05
0
Total
6,600
7,360
____
23,05
0
61
million; the one Licha uses cost Sh.1.4 million; the one
Mengo uses cost Sh.1 million; all the cars have a useful life
of eight years and a residual value of nil. Each partner was
to take over the motor car he uses Kiokos for Sh.400,000,
Lichas for Sh.260,000 and Mengos at Sh.205,000.
2
3.
4.
Required:
(a) Prepare the realization account of the partnership as at 31
March 2003
(8 marks)
(b) Prepare the partners capital accounts for the year ended 31
March 2003 (current accounts should be closed off to the capital
accounts as early as possible)
(8 marks)
(c) Prepare the opening Balance Sheet of Kiligo Limited.
(4 marks)
(Total: 20
marks)
QUESTION THREE
Mapito Limited is an insurance company with a head office in
Nairobi and branches in all the major towns in Kenya. Each branch
maintains a separate set of books. However, for control purposes,
all the property, plant and equipment I the branches are carried in
STRATHMORE UNIVERSITY REVISION KIT
62
the head office books, as are depreciation accounts for all these
items.
The current accounts between the head office and the Mombasa
branch do not agree at the companys year-end, 31 March 2003.
the accounts had been agreed at the previous year end 31 March
2002. The difference in the current accounts is due for the
following items:
1.
3.
4.
63
6.
7.
8.
Required:
Show the journal entries for both the head office and the Mombasa
branch, entries required to reconcile the current accounts.
64
The head office journal and the branch should be kept completely
separate. Unearned premiums are calculated on the
ths basis,
365
65
QUESTION FOUR
The voice of the Nation Limited is a Nairobi based media company.
Its Consolidated Income Statement for the year ended 30 April
2003, and its Consolidated Balance Sheets as at 30 April 2002 and
2003 are as follows:
Consolidated
Income
Statement for
the year ended
30 April 2003
Consolidated
Balance Sheet
as at 30 April
Sh.milli
on
Sales
Cost of sales
Gross profit
Distribution costs
Administrative
expenses
Operating profit
Finance costs: Int
expense
Share of results of
associate
Profit before tax
Tax: Group companies
Share of
associate
Profit before minority
interest
Minority interest
Profit after tax
3,325
(1,935)
1,390
(225)
(790)
375
(8)
50
417
(11
0)
(15)
Additional information:
(125)
292
(28)
264
2003
Sh.m
illion
2002
Sh.mill
ion
2,297
(931)
1,366
126
(30)
96
263
1,725
2,134
(733)
1,401
126
(17)
109
246
1,756
276
607
93
976
178
623
71
872
615
22
484
16
Non-current
assets:
Property, plant and
equip.
(Cost or
Valuation)
Accumulated
Depreciation
Intangible asset:
Goodwill
Amortisation
Investment in
associate
Current assets:
Inventories
Receivables and
prepayments
Cash and cash
equivalents
Current Liabilities:
Payables and
accrued expenses
66
1.
Current tax
Borrowings: bank
overdraft
8
645
331
2,056
133
645
331
1,940
500
260
839
1,599
240
500
133
725
1,413
204
110
107
217
2,056
200
123
323
1,940
Capital and
reserves:
Share capital
Revaluation reserve
Retained earnings
Shareholders funds
Minority interest
Non-current
liabilities:
Borrowings:
commercial paper
Deferred tax
67
Required:
Prepare the Consolidated Cash flow Statement for the year ended
30 April 2003 for the group using the indirect method.
(Total: 20 marks)
QUESTION FIVE
Kiura and Maina are life tenants of a trust set up by their uncle.
The trustees have investment powers restricted to those contained
in the Trustee Act (Chapter 167 of the Laws of Kenya) except they
could hold at their absolute discretion 300,000 shares of Sh.10 each
in Kilimanjaro Enterprises Limited, a horticultural exporting
company run by the uncle..
On 31 March 2002, the balance sheet of the trust was as follows:
Fixed interest
investment:
Wider range
investments:
Special range
investment:
Sh.0
00
2,000
1,800
200
Sh.0
00
4,000
Trust capital
Fixed interest fund
Wider range fund
Special range fund
4,000
3,000
11,00
0
4,000
4,000
3,000
11,00
0
A final dividend of 75% for the year ended 30 June 2002 was
received from E.A. Breweries Ltd. (payout rate 10%).
30
September
68
31
December
2003
28 February
31 March
Interest was received for the year on the 9th Kenya stock and
Sh.42,000 interest was received on the fixed interest cash at
bank.
61,250 Sh.10 ordinary shares in ICDI Limited were
purchased for Sh.40 per share using the fixed interest cash
and a suitable swich was made to ensure adherence to the
requirements of the Trustee Act. The market value of the
12% Kenya stock on this date was still par.
All remaining income cash was paid across to the life tenants,
after trust administration expenses of Sh.120,000 were paid
for the year.
Required:
(a)
69
DECEMBER 2003
QUESTION ONE
Kijiko and Sahani, who prepare their accounts annually to 30
September, are partners in retail business sharing profits and losses
in the ratio of 3:2 respectively.
On 31 March 2003, Kijiko retired and Mwiko was admitted as a
partner, profits and losses from that date being shared between
Sahani and Mwiko in the ratio of 2:1 respectively. For the purpose
of these changes, the value of the firms goodwill was agreed at Sh.
900,000. No account for goodwill is maintained in the books,
adjusting entries for the transactions between the partners being
made in their current accounts.
Interest on fixed capitals is allowed at 6% per annum but no
interest is charged or allowed on current accounts. The amount due
to a retiring partner is payable as to Sh. 250,000 on retirement, the
balance being payable in five equal annual instalments commencing
on the first anniversary of his retirement. The amount due to
retiring partner attracts interest at the rate of 8% per annum.
The trial balance of the partnership as at 30 September 2003 was
as follows:
Sh.
000
800
2,040
420
Sh.
000
180
180
60
148
640
510
3,800
250
80
360
54
380
168
410
400
500
300
70
_____
6,080
220
260
6,080
Additional information:
1. It was agreed that of the Sh. 400,000 introduced into the firm by
Mwiko on 1 April 2003, Sh. 100,000 should form his fixed
capital, the balance being credited to his current account
2. The stock as at 30 September 2003 was valued at Sh. 560,000.
3. Provision is to be made for depreciation on motor vehicles and
shop fittings at the rates of 20% per annum and 10% per annum
respectively on cost at the end of the year.
4. A motor vehicle which had cost Sh. 120,000 and on which
depreciation of Sh. 48,000 had been provided, was taken over by
Kijiko on his retirement at its down value.
5. The following drawings by partners are included in salaries:
Kijiko
Sahani
Mwiko
6.
7.
8.
Sh.
000
60
40
20
Required:
(a) The trading and profit and loss account for the year ended 30
September 2003, (Gross profit is to be apportioned on the basis
of turnover. Unless otherwise indicated, expenses are to be
apportioned on a time basis).
(10 marks)
(b) The partners current accounts as at 30 September 2003.
(4 marks)
(c) The balance sheet as at 30 September 2003.
(6 marks)
(Total: 20 marks)
QUESTION TWO
FINANCIAL ACCOUNTING III
71
Head office
Sh.
Sh.
000
000
28,00
0
17,80
19,000
0
208,000
120,2
00
Branch
Ush.
Ush.
000
000
126,00
0
72,000
3,120
864,00
0
80,000
70,000
720,00
0
3,000
118,0
00
30,40
0
57,80
0
12,00
0
Bank balance
9,200
46,6
00
440,0
00
1,008,
520
113,40
0
36,000
23,040
4,000
56,000
______
440,000
252,00
0
544,00
0
158,40
0
57,60
0
1,989,0
40
_______
1,989,
040
Additional information:
1. The cost of sales figure includes a depreciation charge of 10%
per annum on the cost of machinery.
2. A provision of Kshs. 600,000 for unrealized profit in the branch
stock is to be made.
3. The branch remitted Ushs. 32,000,000 on 30 October 2003
which was not received by the head office until 3 November
2003. The amount realized was Kshs. 3,980,000.
4. During September 2003, a customer of the branch paid the head
office for goods supplied by the branch. The amount due from
STRATHMORE UNIVERSITY REVISION KIT
72
him was Ushs. 640,000 which realized Kshs. 72,000. It has been
correctly dealt with by the head office but not yet entered in the
branch accounts.
5. Commission, which is payable to the branch Manager, is to be
provided at 5% of the net profits of the branch after charging
such commission.
6. The relevant exchange rates were as follows:
On 1 November 2002
On 31 October 2003
Average rate for the year ended 31 October
2003
On date of purchase of freehold building
and machinery
Required:
(a)
(b)
(c)
Ksh
s.
1
1
1
To
Ush
s.
10
8
9
73
QUESTION THREE
Rain Ltd., Storm Ltd. and Thunder Ltd. are in the business of manufacturing
tents. Their balance sheets as at 30 September 2003 were as below:
Non-current
assets:
Non-current
assets
(net of
depreciation)
Shares in
subsidiaries
Current
assets:
Stocks
Trade debtors
Cash
Current
liabilities:
Trade creditors
Rain Ltd.
Sh.
Sh.
000
000
Storm Ltd.
Sh.
Sh.
000
000
14,000
6,300
1,700
5,000
1,900
19,000
8,200
1,700
2,000
4,800
2,700
9,500
1,200
2,000
1,400
4,600
( 5,000
)
( 2,600
)
Net current
assets
Financed by:
Authorised and issued
Share capital:
Ordinary shares of Sh.100
Each fully paid
10% preference shares of
Sh. 100 each fully paid
General reserve
Profit and loss account
balance
Thunder Ltd.
Sh.
Sh.
000
000
1,600
800
1,100
3,500
( 1,800
)
4,500
2,000
1,700
23,500
10,200
3,400
15,000
5,000
2,000
6,000
2,500
3,000
3,000
( 80
0)
10,20
0
1,000
400
23,500
Additional information:
3,400
74
Sh. 500,000
(debit).
Sh. 600,000
(debit).
Sh. 300,000
(debit).
Sh.
1,000,000
Sh.
2,000,000
- 3. The following
inter-company
balance are included in the balances of trade debtors and trade
creditors:
Debtors:
Rain Ltd.
Non-current
assets:
Goodwill
Freehold property
Plant and machinery
Shares in
subsidiaries
Sh. 000
Sh.
000
Sh.
000
2,689
4,940
14,620
22,249
Current assets:
Stocks
Debtors
Cash in hand
Current liabilities:
Bank overdraft
Creditors
Customs and excise
tax
Accruals
Debenture interest
due
75
19,180
9,040
20
28,240
22,790
20,900
200
399
100
(44,389)
(16,149)
6,100
Financed by:
Share capital
5,000,000 ordinary
shares of Sh.20 each
fully paid
400,000 ordinary
shares of Sh.20
each- Sh.12.50 paid
10,000
5,000
15,000
Revenue reserves:
Retained profits
(losses)
Shareholders funds
Non-current
liability:
10% debentures
(12,900 )
2,100
4,000
6,100
Additional information:
1. The 10% debentures are secured by a first charge on freehold
property and the bank overdraft is secured by a floating charge
on the assets.
2. The accruals consisted of:
STRATHMORE UNIVERSITY REVISION KIT
76
4.
5.
6.
7.
Sh.
000
75
(b)
18
20
120 3.
A
86
399
holder of 20,000 of the partly paid shares was bankrupt and
it was anticipated that his trustees would be in a position to
pay a dividend of 25% to his unsecured creditors.
The companys assets were estimated to be realized as
follows:
Sh.
000
Freehold
4,480
property
Plant
and 14,000
machinery
Stocks
18,760
The debtors were considered to be good except as to Sh.
520,000 of which Sh. 400,000 were doubtful and were
expected to realize Sh.110,000. The remaining Sh.120,000
were considered bad. Goodwill was regarded as valueless.
Legal proceedings for breach of contract were pending
against the company as at 30 November 2003. The company
was considered to have a poor defence and attempts were
being made to settle the claim out of court for Sh.100,000
plus costs estimated at Sh.80,000. No provision for this claim
is included in the balance sheet.
The company had incurred losses of Sh.3,040,000,
Sh.3,840,000 and 6,020,000 respectively in each of the three
years ended 30 November 2003. The aggregate of the sums
charged to the profit and loss accounts during the three
years in respect of depreciation, debenture interest and
directors remuneration were Sh.2,380,000, Sh.600,000 and
Sh.1,800,000 respectively.
Required:
(a)
80
77
QUESTION FIVE
(a)
(b)
Sh.
000
2,200
2,800
110
90
200
50
5,200
150
____
100
5,450
5,450
Reuben attained the age of twenty one years on 31 October
2003,on which date the market prices of the investments were:
ABC Ltd. Shares
Sh.125
Mapingo Ltd. Shares
Sh. 100
Transactions in the three months to 31 October 2003
comprises:
1 August 2003:
Receipt of dividend of Sh.5 on each
share in ABC Ltd.
STRATHMORE UNIVERSITY REVISION KIT
78
79
JUNE 2004
QUESTION ONE
On 1 January 2003, H Ltd., a manufacturer of clay products, made
the following investments
Acquired 60% of the ordinary shares of S Ltd. for Sh.80,000,000
Acquired 40% of the preference shares of S Ltd. for
Sh.25,000,000
Acquired 30% of the ordinary shares of A Ltd. for Sh. 55,000,000
H Ltd. is represented in the board of directors of A Ltd. by two
directors.
The draft accounts of H Ltd., S Ltd. and A Ltd. for the year
ended 31 December 2003 were as follows:
Turnover
Profit before tax
Taxation
Profit after tax
Less proposed dividends:
Preference
Ordinary
Retained profits
Balance brought forward
Balance carried forward
Assets:
Non-current assets
Current assets:
Stocks
Debtors
Cash at bank
Total assets
Equity and liabilities:
Equity:
Authorized and fully paid:
3,000,000 ordinary shares of Sh. 100
par value
1,000,000 ordinary shares of Sh. 100
par value
500,000 Preference shares of Sh. 100
195,000
135,000
90,000
80,000
75,000
245,000
620,000
85,000
65,000
50,000
200,000
395,000
60,000
40,000
45,000
145,000
280,000
100,000
100,000
300,000
80
par value
Profit and loss account balance
Liabilities
Current liabilities:
Creditors
Proposed dividends
Taxation
Total equity and liabilities
120,000
420,000
50,000
105,000
255,000
80,000
180,000
80,000
60,000
60,000
200,000
620,000
35,000
60,000
45,000
140,000
395,000
30,000
40,000
30,000
100,000
280,000
Additional information:
1.
2.
3.
4.
5.
Required:
(a) Consolidated profit and loss account and statement of retained
earnings, of H Ltd., its subsidiary and associated company, for
the year ended 31 December 2003.
(10 marks)
(b) Consolidated balance sheet, of H Ltd., its subsidiary and
associated company, as at 31 December 2003.
(15 marks)
(Total: 25 marks)
QUESTION TWO
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:
Ali
Old firms
New firm
4
6
Bali
3
5
Chec
he
3
4
Dung
a
2
3
81
Non- current
assets:
Property
A and B Retailers
Sh.
Sh.
740,000
Fixtures and
fittings
Motor vehicles
Current assets:
Stock
Investments
Debtors
Bank balance
Current
liabilities:
Creditors
Bank overdraft
C and D Traders
Sh.
Sh.
1,000,0
00
140,00
0
180,00
0
1,320,0
00
180,000
300,000
1,220,0
00
830,000
80,000
680,000
340,000
1,930,000
(520,000)
-
Net assets
Capital
accounts:
Ali
660,000
580,000
1,240,000
1,410,0
00
2,630,0
00
(600,000)
(90,000)
1,500,0 Cheche
00
1,050,0 Dunga
00
2,550,0
00
Bali
Current
accounts:
Ali
30,000
Bali
50,000
80,000
Cheche
30,000
Dunga
40,000
2,630,0
00
550,0
00
1,870,0
00
1,100,0
00
700,00
0
1,800,0
00
70,000
1,870,0
00
82
C and D Traders
3.
Sh.
Stock
639,000
Motor vehicles
130,000
Fixtures and
fittings
Property
1,000,000
The property and fixtures of C and D traders were not to be
taken over by ABC and D Enterprises. These assets were sold
for Sh. 1,350,000 on 1 January 2004.
4.
Bali was to take over his firms investments at value of
Sh.76,000.
5.
The total capital of ABC and D Enterprises was to be Sh.
5,400,000. This was to be contributed by other partners in
their profit or loss sharing ratios, any adjustments necessary
being made in cash.
6.
Goodwill relating to the two firms was to be recognized as
follows:
(a)
(b)
A and B Retailers
C and D Traders
Sh.
630,000
Sh.
450,000
Required:
20 marks)
QUESTION THREE
83
Shs.
1,400,00
0
312,000
Shs.
160,000
Remittances
1,500,0
00
2,800,0
00
Sales
Cash at bank
Inventory at cost 1
January 2003
Rent and rates
Goods sent/received, at
cost
Purchases
80,000
519,000
80,000
1,200,0
00
2,797,98
0
170,000
1,567,56
0
300,000
150,00
0
7,536,54
0
Shs.
100,00
0
120,00
0
1,524,0
00
1,871,6
60
20,000
270,60
0
40,000
1,182,5
00
130,00
0
1,550,0
60
250,00
0
1,788,7
40
247,80
0
Creditors
Bank overdraft
Drawings
Shs.
165,380
_______
_______
50,000
_______
7,536,5
40
3,637,1
00
3,637,1
00
Additional information:
1. Goods sent to the branch on 24 December 2003 and which had a
cost value of Sh.17,500 were stolen in transit. Although the
insurance company has agreed to meet the claim to the extent of
60% of the cost, no entry has been made in the books.
2. Inventories at cost on 31 December 2003 were: Head office
Sh.473,700; Branch Sh.126,450.
3. Depreciation on furniture and equipment is to be provided at the
rate of 10% per annum on cost.
STRATHMORE UNIVERSITY REVISION KIT
84
Head office and Branch profit and loss accounts for the year
ended 31 December 2003.
(10 marks)
Branch current account and head office current account
reconciling the balances as at 31 December 2003
(4 marks)
Combined balance sheet as at 31 December 2003.
(6 marks)
(Total: 20 marks)
QUESTION FOUR
(a)
(b)
(c)
Sh.
461,56
0
240
2,840
23,460
22,640
4,820
4,940
36,480
3,150
1,860
47,400
132,320
263,605
18,240
4,560
7,640
87,835
19,990
571,950
320
______
571,95
0
85
Required:
(i)
(ii)
86
QUESTION FIVE
Matatizo Ltd. went into voluntary liquidation on 30 November 2003.
Its balance sheet as at that date was as follows:
Sh.
Assets:
Land and building
Plant and machinery
Patents
Stock
Sundry debtors
Cash at bank
Profit and loss account balance
Additional information:
1.
2.
5,000,00
0
12,500,0
00
2,000,00
0
2,750,00
0
5,500,00
0
1,500,00
0
5,625,00
0
34,875,0
00
10,000,0
00
3,750,00
0
9,000,00
0
5,000,00
0
750,000
6,375,00
0
34,875,0
00
87
Sh.
6,000,00
0
10,000,0
00
1,500,00
0
3,000,00
0
4,000,00
0
Required:
The liquidators final statement of account as at 31 May 1994.
(Total: 15 marks)
88
DECEMBER 2004
QUESTION ONE
HAPA Ltd. manufactures and sells a wide range of food products for
both wholesale and retail outlets. Its authorized ordinary share
capital is 5 million shares of Sh 100 par value.
The company has extracted the following trail balance as at 31
October 2004.
Sh 000
Ordinary share capital: issued and fully
paid
Retained earnings
10% debentures (secured on buildings)
8% debentures (secured on a floating
charge)
freehold buildings: Cost
Accumulated
depreciation
Plant and machinery: Cost
Depreciation
Additions-plant and machinery
Motor vehicles: Cost
Accumulated depreciation
Land
Profit for the year
Trade and other payables
Trade and other receivables
Inventories
Balance at Faida Bank
Directors remuneration
Balance at Faulu Bank
Investment ( market value: Sh. 35 million)
Interest received
Interim dividends paid
Tax paid
Dividend received
Sh 000
300,000
131,000
50,000
50,000
150,000
15,000
220,000
40,000
40,000
25,000
10,000
100,000
285,820
31,400
101,600
163,000
47,000
52,000
3,800
49,620
32,000
2,100
21,000
5,700
_______
963,720
1,400
963,720
Additional information
1.
Trading profit has been
derived as follows:
Sales
Cost of sales
Distribution costs
Administrative expenses
89
Sh.
000
927,420
82,670
136,090
Sh.
000
1,432,00
0
(1,146,1
80)
285,8
20
2.
3.
4.
5.
6.
7.
8.
90
Required:
(a
)
(b
)
91
QUESTION TWO
Nguo Fashion Ltd. has been operating a large retail shop in Nairobi.
On 1 July 2003, the directors opened new shops in Nakuru and
Kisumu.
All purchases were done in Nairobi branch and goods sent to other
branches at a uniform mark-up of 33 1/3% on their cost. After
deducting petty cash expenses, the branches banked all the
collections dairy. The head office paid for other expenses but
allowed each branch to keep a cash float of Sh. 100,000.
The records maintained by the office ( Nairobi branch), did not contain all
transactions relating to the other branches. The accountant at head office was
however able to obtain the following details for the year ended 30 June 2004:
Sales
Cash floats at June 2004
Sundry expenses
Banking head office account
Goods returned to head office
( selling price)
Goods sent to Kisumu branch
Goods sent to Nakuru branch
Inventory at 30 June 2004
( selling price)
Damaged inventory scrapped
( selling price)
Additional information:
1.
Nakuru branch purchased goods locally for Sh. 500,00 and
sold the at a margin of 331/3%. At 30 June 2004 the closing
inventory, at selling price, included Sh. 60, 000 in respect of
2.
these goods.
During the year, the branches organized a sales week when
3.
all prices were reduced by 10%. Sales realized during the
4.
week were; Nakuru Sh. 900,000 and Kisumu Sh. 1,080,000.
STRATHMORE UNIVERSITY REVISION KIT
92
Branches profit and loss accounts for the year ended 30 June
2004.
(d
)
QUESTION THREE
(a
)
(b
)
The following balances were extracted from the books of Pine Ltd.,
Cedar Ltd., and Oak Ltd. as at 31 March 2004.
Pine
Cedar
Oak
Ltd.
Ltd.
Ltd.
Equity and liabilities:
Sh. Sh. 000
Sh.
Authorized and issued share capital:
000
000
Ordinary shares of Sh. 20 par value
fully paid
12,000
6% cumulative preference shares of 28,000
4,000
Sh. 20 par value fully paid
3,000
Profit and loss accounts
6,300
5% debentures
10,460
1,600
1,050
Provision for depreciation of fixed
5,400
assets
9,600
80
1,600
Debentures interest accrued
1,300
Proposed dividends
3,360
3,960
Creditors
9,140
33,740
2,550
60,560
9,200
Additional information:
1.
Pine Ltd. acquired the shares of Cedar Ltd., cum dividend on 31
March 2003 and Cedar Ltd. acquired the shares in Oak Ltd. on 31
2.
march 2002.
The balances on the income statements of Cedar Ltd. and Oak Ltd.
comprises:
Cedar
Oak
Ltd.
Ltd.
Balances on 31 march 2002
Sh. 000
Sh.
FINANCIAL ACCOUNTING III
93
4,520
1,920
6440
1,140
5,300
2,400
7,700
1,380
6,320
000
490
400
890
890
160
1,050
1,050
The proposed dividends for the year ended 31 March 2003 were
subsequently paid by Cedar Ltd. Pine Ltd.s shares of the dividends is
included in its income statement.
4.
No entries have been made in the books of Pine Ltd. in respect of the
debenture interest due from Cedar Ltd. or for the holding companys
share of the proposed dividends in Cedar Ltd. for the year ended 31
5.
Mach 2004.
Proposed dividends are inclusive of preference dividends.
Required:
Pine Ltd. group balance sheet as at 2004.
3.
QUESTION FOUR
Nyoike, Kemei, Lasoi and Mutuku, who have been partners in a tile
manufacturing business sharing profits and losses in the ratio
4:3:2:1, had a serious disagreement on 15 January 2004 which
necessitated a dissolution of the partnership.
Sh. 000
21,250.0
19,802.5
7,500.0
5,000.0
53,552.5
15,870.0
9,602.5
782.5
General reserves
STRATHMORE UNIVERSITY REVISION KIT
26,255.0
79,807.5
10,000.0
17,500.0
10,000.0
7,500.0
45,000.0
17,500.0
94
Current liabilities:
Creditors
17307.5
79,807.5
Additional information:
1.
The assets, which were sold on piecemeal basis, realized cash
as follows:
10
Inventory (partial)
Sh.
February
Debtors (partial)
000
2004
Investments
8,750.
16
Furniture and fittings
0
February
Land and buildings
7,330.
2004
Debtors (partial)
0
27
Inventory (balance)
6,050.
February
Plant and machinery
0
2004
debtors (balance)
5,000.
03 March
0
2004
17,500
20 March
.0
2004:
1,250.
0
6,875.
15 April
0
2004:
16,400
.0
877.5
2.
3.
Required:
Using the maximum possible loss method, prepare:
(a
)
(b
)
QUESTION FIVE
(a
)
Partial intestacy.
95
open a salon.
The contract for the purchase of the house in
estate
will
be
96
JUNE 2005
Hours.
Time
allowed:
Partnership
balance sheet as
at 31 March2005
Sh. 000
1,500
6,800
1,000
5,600
4,000
13,000
1,600
1,800
1,900
300
13,900
1,550
350
1,000
150
9,560
3,000
3,350
6,420
125
29,895
(6,800)
7,1000
(4,000)
5,650
(9,920)
(5,625)
14,350
Additional Information:
1. On 1 April 2004, the partners agreed to take up the assets and
liabilities of the individual traders at book values except for
freehold property, plant and equipment and fixtures and fittings
which were to be revalued as follows:
Freehold
property
Jembe
Sh. 000
2,000
Panga
Sh. 000
1,500
97
6,500
5,500
1,500
1,500
98
Non-current assets:
Property, plant and equipment
Investment in Kacheliba Ltd.
Other investments
Lusiola
Ltd.
Sh. 000
Kacheliba
Ltd.
Sh. 000
26,400
30,000
1,000
57,400
16,200
9,500
7,200
300
17,000
74,400
4,000
1,500
_____
5,500
27,700
10,000
5,000
48,600
58,600
6,300
11,300
4,000
6,000
6,700
4,100
1,000
11,800
74,400
5,200
700
4,500
10,400
27,700
Current assets
Inventory
Accounts receivable
Bank
Total assets
Equity and liabilities:
Ordinary share capital (Sh.10
each)
Retained earnings
Non-current liabilities
12% debentures
Current liabilities
Accounts payable
Taxation
Dividends
Overdraft
Total equity and liabilities
6,000
22,200
Additional Information
1. The movement in Kacheliba Ltd.s earnings since acquisition was
as follows:
Balance as at 1 April 2003
Loss for the year ended 31 March
2004
Loss for the year ended 31 March
2005
Dividend paid in the year ended 31
March 2005
Balance as at 31 March 2005
Sh. 000
15,000
(3,000)
(1,700)
(1,400)
(6,300)
99
(20
QUESTION THREE
Jamila traders has a head office in Nanyuki and an automation
branch in Thika. The trial balances of head office and the branch as
at 30 September 2004 were as follows:
Head office
Sh.
Sh.
3,500,00
0
6,482,20
5
6,387,33
0
535,800
764,700
7,548,75
0
Thika branch
Sh.
Sh.
397,800
2,595,00
0
7,620,00
0
289,250
100
1,552,50
0
Sales
13,000,0
00
6,040,92
5
9,202,20
0
250,000
779,500
13,626,6
00
395,400
851,700
8,931,55
5
1,887,75
0
Accounts payable
230,500
197,250
487,500
8,836,68
0
1,258,95
0
1,239,00
0
Drawings
Provision for unrealised
profits
783,375
________
34,513,3
80
202,5
00
34,513,3
80
270,200
________
________
18,559,0
80
18,559,0
80
Additional Information:
1. Depreciation on furniture and fittings is to be provided at the
rate of 10% per annum using the reducing balance method.
2. A bonus of 10% is payable to the staff at the head office and the
branch. The bonus is based on net profits after charging these
bonuses.
3. Goods sent to the branch in August 2004 and which had an
invoice value of Sh.94,875 were stolen in transit. The insurance
company agreed to meet the claim to the extent of only 85% of
the cost of the goods.
4. Goods were invoiced to the branch at 15% above cost all sales
were at a mark up of 331/3% above the cost to head office.
5. No shortages of stock were reported at the head office or the
branch.
Required:
Prepare in columnar form for the head office. Thika branch and the
combined business. The income statements for the year ended 30
September 2004.
(12
marks)
QUESTION FOUR
Hamed and Hassan were in partnership trading under the name
Medsan Traders and sharing profits and losses in the ratio of 1:3
respectively. On 31 December 2004, a winding up petition was
FINANCIAL ACCOUNTING III
101
lodged against the firm on which date the balances extracted from
the books of the firm and the partners separate estates were as
follows:
Assets
Freehold property: Medsan Traders
Hamed
Plant and machinery: Medsan Traders
Furniture and fixtures: Medsan
Traders
Hamed
Hassan
Inventory Medsan Traders
Accounts receivable: Medsan Traders
Investments: Hamed
Hassan
Liabilities
Mortgage on freehold property:
Medsan Traders
Hamed
Bank overdraft: Medsan Traders
Accounts payables: Medsan Traders
Hamed
Hassan
Current
value
Sh. 000
Estimated
value
Sh. 000
11,000
7,000
3,000
1,000
12,000
10,000
1,500
800
1,500
1,800
8,000
12,000
1.500
2,000
1,200
1,500
6,500
See (note 1)
2,400
1,900
6,000
5,000
7,000
19,000
700
2,400
Additional Information:
1. Of the accounts receivable. Sh.9 million is estimated to be good
while Sh.1 million is estimated to be bad. 50% of the remaining
debts are expected to be paid.
2. The preferential accounts payables for Medsan Traders, Hamed
and Hassan were Sh.1,100,000. Sh.300,000 and Sh.500,000
respectively.
3. Medsan Traders bank overdraft was secured by a second
mortgage on the partnership freehold property and by the
deposit of Hameds investments together with his personal
guarantee.
Required:
Using the format laid down in the Bankruptcy Act (Cap 53) and
showing the legal position in relation to the double proof. Prepare
a) Statement of affairs as at 31 December 2004.
(10
marks)
b) Deficiency or surplus accounts as at 31 December 2004
(10
marks)
(Total: 20 marks)
STRATHMORE UNIVERSITY REVISION KIT
102
QUESTION FIVE
a) Briefly explain the following terms as used in trust and
executorship accounting:
i) Life tenant
ii) General legacy
iii) Demonstrative legacy
(2 marks)
(2 marks)
(2 marks)
Shs.
40,000
310,000
21,000
44,000
65,000
19,000
1,000
2,000
4,000
512,000
2. The following Valid claims were made against the estate and
paid by the executor:
Funeral expenses
Executor charges
Medical expenses
Debts
Sh.
17,000
9,000
11,000
5,000
Sh.
2,000
FINANCIAL ACCOUNTING III
103
3,000
7,000
21,000
104
DECEMBER 2005
3 Hours.
Time allowed:
Sh.
000
108,000
120,000
120,700
168,120
620
100
127,450
50,754
200,000
270,000
47,500
60,000
119,046
1,574,50
0
Cost of sales
Salaries and wages
Distribution cost
Administrative expenses
Interest charges
670,396
238,720
86,560
165,592
79,9
60
2,555,87
0
________
2,557,87
0
Additional Information
1. Details of property, plant and equipment were as follows:
Values as at 1 November 2004
Cost
Sh. 000
500,000
Accumulat
ed
depreciatio
n
Sh. 000
-
105
200,000
107,722
807.722
90,000
18,000
108,000
A plant which cost Sh.100 million was acquired during the year.
2. The cost of inventory as at 31 October 2005 included items
valued at Sh.9.6 million that were considered to be obsolete.
The remaining inventory had a value of Sh.111.1 million.
3. Provision for doubtful debts at 5% of the accounts receivable is
to be made.
4. The bank loan is repayable in ten equal annual installments of
Sh.30 million.
5. The corporation tax amounting to Sh.47.5 million represents the
estimated tax charge for the previous year. This liability was
agreed with the tax authority at Sh.45 million. Current year tax
is estimated to be Sh.85 million.
6. The details of salaries and wages were:
Sh. 000
Factory wages
Warehouse wages
Office salaries
Directors remuneration
125,510
32,716
79,780
714
238,720
25,460
42,000
12,500
79,960
106
(270)
620
580
40
620
Sh.
million
1,420
990
70
107
Sh.
million
1,890
Sh.
million
650
95
300
80
2,635
2,210
2,480
5,115
940
680
-
750
350
140
1,570
Non-current liabilities:
10% debentures
Bank loan
Deferred tax
300
260
310
Accounts payable
Bank overdraft
Accrued loan interest
Proposed dividend
Current tax
875
15
280
130
2,060
2,810
135
870
1,300
5,115
100
1,380
100
300
140
730
115
5
200
160
1,620
3,830
500
Additional Information
1. The cost of sales includes depreciation of property, plant and
equipment amounting to Sh.320 million and a loss on sale of
plant of Sh.50 million.
Goodwill
Others
Sh.
million
1,830
1,480
1,980
100
540
1,210
3,830
108
2004
Sh.
Sh.
million
million
1,380
1,200
580
480
1,960
1,680
10
(400)
(300)
1,570
1,380
Required:
Group cash flow statement for the year ended 30 September 2005,
using the indirect method in conformity with International
Accounting Standard (IAS)7.
(20 marks)
QUESTION THREE
Beta East Africa Ltd. manufactures tubeless tyres at its head office
plant located in Nairobi. It operates an overseas outlet at Kampala
which maintains its own books of account.
The tyres are transferred to the branch at head office cost plus 25%
mark-up. All sales are at a uniform margin of 50%.
The trial balances extracted from the books o both the head office
and the Kampala branch as at 30 June 2005 were as follows:
Cash at bank
Accounts receivable
Inventory 30 June 2005
Plant and equipment net book
value
Accounts payable
Share capital
Motor vehicles net book value
Branch and head office current
accounts
Sales
Cost of goods sold
Operating expenses
Goods sent to branch
109
Head office
Ksh.
Ksh.
000
000
6,000
45,000
40,000
150,000
Kampala branch
Ush.
Ush.
000
000
130,000
260,000
80,000
44,000
192,000
65,000
50,000
15,000
95,000
390,000
280,000
70,000
______
656,000
30,000
656,000
1,600,00
0
930,000
360,000
_______
1,760,00
0
Additional Information
1. Goods sent to Kampala branch by the head office which had
cost the head office Ksh.80,000 were received by the branch on
15 July 2005. Included in the closing stock of Kampala branch
were goods received from head office valued at Ush.23,600,000.
The balance of the inventory at the Kampala branch were
purchased locally in Uganda when the exchange rate was
Ush.12 to Ksh.1.
2. A customer of the head office whose operations are situated in
Kampala, made a settlement of Ush.420,000,000 to Kampala
branch on 15 June 2005. This transaction was properly recorded
by the Kampala branch but the head office had not been notified
by the time the trial balance was extracted on 30 June 2005.
3. Depreciation is to be provided on plant and motor vehicles using
the reducing balance method at 10% and 20% respectively per
annum.
4. The head office expenses include Ksh.3,000,000 that related to
Kampala branch.
The head
office allocates 1/3
of the
depreciation expenses on plant and equipment to the branch.
5. The rates of exchange prevailing on various dated were:
Date
1 July 2004
15 June 2005
Rate
9 Ush./Ksh.
12
________
1,760,00
0
110
30 June 2005
Sh.
000
93,250
2,500
95,750
Current assets
Cash in hand
Accounts receivable
Saw milling
Logging
Inventory
Saw milling
Logging
250
32,000
54,000
115,000
56,250
Total assets
Capital and liabilities
Capital accounts: Kuni
Moto
86,000
171,250
257,500
353,250
131,500
81,000
212,500
111
Non-current liability:
Loan
Current liabilities
Bank overdraft
Creditors:
Saw milling
Logging
6,000
44,750
77,000
13,000
90,000
134,750
353,250
Additional Information
1. The partners agreed that effective from 1 January 2005, the
business would be taken over by two separate limited
companies, Kuni Ltd. And Moto Ltd. Took over the saw milling
business and Moto Ltd. Took over the logging business.
2. The providers of the loan agreed to accept 10% debentures in
the new companies; Sh.3,600,000 being applicable to Kuni Ltd.
And Sh.2,400,000 to Moto Ltd.
3. Kuni Ltd. took over the land and buildings, furniture, cash and
bank overdraft. The assets and the liabilities were transferred
at book values and the partners were paid Sh.25,000,000 being
goodwill for the saw milling business and Sh.20,000,000 for the
logging business
4. On 1 January 2005, the purchase consideration was satisfied by
the allotment of fully paid equity shares of Sh.10 each in the
respective companies as shown below:
112
JUNE 2006
hours.
Time
allowed:
113
2,180
420
680
750
1,670
700
410
540
240
390
80
1,180
3,360
Stone
90
1,040
2,710
70
700
1,400
500
500
260
1,300
2,060
480
980
380
210
20
250
650
10
200
420
2,710
1,400
Additional information:
1
114
2
60
10
20
115
Sh.'000'
980
300
600
970
770
400
520
260
240
300
820
860
3,510
3,510
Additional information
1
Due to some disagreement on the running of the firm, the
partners decided to dissolve the partnership on 31 March
2006 after the following events had taken place.
2
3
4
Sh.
Credit purchases of raw materials
202,500
Raw materials used in production
357,500
Direct wages paid
780,000
Payment to suppliers of raw materials 450,000
Credit sales of finished goods
2,800,000
Cash received from credit customers
2,250,000
Payment for general expenses
1,596,500
Cash drawings:
Jipcho
260,000
Kiptum
150,000
Limo
140,000
Joint life assurance policies premium amounting to Sh.
60,000 was on 15 February 2006. The policies covered the
lives of the three partners.
Customers were required to pay a deposit for special orders.
As at 31 March 2006, all goods relating to special orders had
been supplied by the partners.
Work-in-progress as at 31 March was valued at Sh. 457,000."
STRATHMORE UNIVERSITY REVISION KIT
116
5
Asset
Joint life assurance policies
Accounts receivable (part)
Raw materials (part)
Accounts receivable
Raw
materials
and
work
-in-
Non-current assets
Required:
(a) Statement of distribution of cash received.
(6 marks)
(b) Partner's capital accounts showing balances as at 31 March
2006 and 15 May 2006.
(10 marks)
(c) Realisation account.
(2
marks)
(d) Bank account.
(2 marks)
(Total:
20
Marks)
QUESTION THREE
117
2
The value of goods marked down to boost sales at the
branches were as follows:
Value at
Marked
Balance in stock at
selling price
down to
marked down
values
Mombasa branch
Kisumu branch
Sh. '000'
200
300
3
The debtor balances and bad debts written off were as
follows:
Mombasa branch
Kisumu
branch
Sh.'000'
Sh.'000'
Debtor balances as at 31 March 2006 378
567
64
96
118
(a)
(7 Marks)
(7 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
(Total: 20 Marks)
QUESTION FOUR
Peter Munuve filed his own petition in bankruptcy and the receiving
orders were issued by the court on 31 March 2006.
The balances extracted from his books of account as at 31 March
2006 were as follows:
Assets
Sh.'000'
Free hold land
1,250
1,000
Furniture and fittings
710
500
Motor vehicle
290
1,000
Stock
1,200
2,550
Sundry debtors
1,520
1,100
Bank balance
20
Drawings
560
Total assets
5,550
6,150
Liabilities
Sh.'000'
Loan from bank
Loans from a SACCO
Mortgage on freehold land
Sundry creditors
Bank overdraft
Total liabilities
Additional information:
1
The official receiver appointed by the court has established
the realisable values of the bankrupt's assets to be as
follows:
Sh.'000'
Freehold land
1,800
Furniture and fittings
500
FINANCIAL ACCOUNTING III
119
Motor vehicle
140
Stock
800
Sundry debtors:
Good
1,000
Doubtful-of which Sh. 300,000
is estimated s realisable
400
Bad
120
Private assets debtors other than personnal effects
28
Peter Munuve's private obligations amounted to Sh. 12,000.
Sh.'000'
- Assessed income taxes (2003-Sh.100,000, 2004-Sh.85,000
and
2005-Sh.120,000)
305
- Rent due to Government (Sh.50,000 per annum)
300
- Nairobi City Council rates for the year ended 31 December
2004.
20
- 5 months wages due to 5 employees at Sh. 5,000 per
employee
125
- 3 months salary due to Munuve's uncle.
24
- Employees NSSF contributions for 36 months at Sh. 12,000
per
annum
36
- Loan from John Kopesha for purchase of trading stock.
100
6
Required:
(a)
A detailed statement showing the order of priority in which
the sundry creditors would be paid.
(6 Marks)
STRATHMORE UNIVERSITY REVISION KIT
120
(b)
(c )
20
marks)
QUESTION FIVE
(a)
(b)
(c )
During his lifetime Ambrose Shamala had advanced his two sons
Sh.500,000 each to enable then commence and run a hardware
business. Ambrose Shamala has also advanced Sh.400,000 to
Nafula to purchase equipment for use in her hair salon business.
The net estate of Ambrose Shamalla after payment of all the
expenses and liabilities on 31 May 2006 was
Sh. 9,000,000.
Required:
A distribution statement showing how the net estate of Ambrose
Shamala would be shared out. (6 Marks)
(Total:
marks)
15
121
DECEMBER 2006
3 hours.
Time
allowed:
60,000
24,000
Cost of sales
(42,000)
(20,000)
Gross profit
18,000
4,000
Other income:
Interest received
75
4,000
Expenses:
Distribution costs
Administrative expenses
Finance costs
Profit before tax
(3,500)
(100)
(2,500)
-
(100)
(200)
12,475
3,600
122
(3,000)
9,475
(600)
3,000
Sh. '000'
19,320
11,280
33,800
Current assets:
Inventories
8,000
8,000
5,000
3,000
Accounts receivable
4,200
3,400
Cash at bank
5,800
1,600
Total assets
15,000
8,000
45,600
16,000
10,000
25,600
35,600
2,000
8,400
10,400
7,500
2000
3,200
2,500
400
10,000
3,600
45,600
16,000
Additional information:
FINANCIAL ACCOUNTING III
4
5
6
123
Required:
(a)
Group income statement for the year ended 30 September
2006.
(10 marks)
(b)
20
QUESTION TWO
Bara Ltd, a company quoted on the stock exchange ,extracted the
following trial balance as at 31 October 2006.
Sh. '000'
Land and buildings at cost
Plant at cost
Purchases
Distribution
Administrative expenses
Loan interest paid
Leased plant rental
Sh. '000'
270,000
156,000
78,200
10,000
5,500
2,000
22,000
Dividend paid
15,000
37,800
124
Accounts receivable
53,200
Investments (long-term)
90,000
Revenue
Income from investment
Ordinary shares of sh.10 each
Retained earnings
8% debentures
Accumulated depreciation: Buildings
Plant
Accounts payable
Differed payable
Balance at bank
739,700
278,400
4,500
150,000
119,500
50,000
60,000
26,000
33,400
12,500
5,400
739,700
Additional information:
1
The land and buildings were purchased on 1 November 1990.
The cost of land was sh.70 million or buildings have been
purchased by Bara Ltd. since then. However, on 1 November
2005,the land and buildings were professionally valued at
sh.80 million respectively. The estimated useful life buildings
before the revaluation was 50 years. However, the
revaluation did not change the useful life of the buildings.
Plant is depreciated at 15% per annum using the reducing
balance method. Depreciation expense is to be included
under cost of sales in the income statement.
2
On 1 November 2005, Bara Ltd. entered into a five year lease
agreement for an item of plant. This item had an estimated
useful life of five years. The annual rental which was payable
in advance with effect from 1 November 2005 was sh.22
million.
The fair value of the plant is sh.92 million and the implicit
interest rate is 10% per annum.
3
The 8% debentures were issued on 1 January 2006 and
interest is payable six months in arrears.
4
The income tax for the yaer to 31 October 2006 estimated at
sh.28.3 million. The differed tax provision as at 31 October
2006 was increased to sh.14.1 million.
5
Inventories were valued at sh.43.2 million as at 31 October
2006.
Required:
Prepare in accordance with International Financial Reporting
Standards (IFRSs)
125
(b)
Statement of changes in equity for the year ended 31 October
2006 (4 marks)
(c )
Balance sheet as at 31 October 2006
marks)
(8
(Total:
marks)
20
(b)
A
3
4
B
2
3
M
2
2
N
1
1
126
A and B Advocates
Advocates
Sh. '000'
'000'
Non-current assets:
Motor vehicles
9,000
Office equipment
Goodwill
M and N
Sh.
10,000
4,000
4,000
3,000
12,000
6,000
5,000
Current assets:
Investments
7,500
Accounts receivable
13,000
Cash
Total assets
20,000
2,500
30,000
13,000
50,000
30,000
25,000
B
M
N
15,000
40,000
Current liabilities:
Client account
Accounts payable
Bank overdraft
15,000
10,000
25,000
5,000
5,000
10,000
Total capital and liabilities
50,000
30,000
FINANCIAL ACCOUNTING III
3,500
1,500
5,000
127
Additional information:
1
Provision or bad and doubtful debts was to be made at 5% of
the accounts receivable.
2
Able and Mine Advocates was to take over the assets of the
partnership at the following agreed values:
A and B Advocates
Advocates
3
4
and
Sh. '000'
Sh. '000'
Motor vehicles
9,000
8,000
Office equipment 3,500
3,000
Goodwill
7,500
5,000
The investments of A and B Advocates were sold on 1 January
2006 for sh.8,000,000.
The capital for Able and Mine Advocates amounted to
sh.75,000,000 which was contributed by the partners in their
profit sharing ratios, any adjustments being made in cash.
The client account and the accounts payable were settled
immediately on amalgamation.
Required:
Prepare the following accounts to record the above transactions:
(i)
Realisation accounts
marks)
(ii)
Capital accounts
marks)
(iii)
Cash accounts
marks)
(iv)
Able and Mine Advocates account
marks)
4
(3
(3
2
(Total: 20
marks)
QUESTION FOUR
Fast Lane Ltd. acquired a competitor's branch in Kitui on 1
November 2005 for sh.1.5 million. The fair value of the net assets
acquired was sh.1,000,000 which comprised property, plant and
equipment and inventories at sh.900,000 and sh.100,000
respectively.
Kitui branch maintains its own books of account except for fixed
assets ledger which is maintained by the head office.
STRATHMORE UNIVERSITY REVISION KIT
128
Kitui
Branch
sh.'000'
sh.'000'
Ordinary share capital
sh.'000'
sh.'000'
330
Retained earnings
(1 November 2005)
3,600
250
Balance at bank
220
Inventories
(1 November 2005)
1,420
Accounts payable
182
Investment in branch
165
Purchases
190
1,500
6,380
Sales
Goods sent to branch
810
5,406
3,180
2,280
180
365
12,048
3,525
Additional information:
1
The only entry made in the books of Fast Lane Ltd. in respect
of the acquisition of the Kitui branch was the consideration
FINANCIAL ACCOUNTING III
129
paid.
2
Goods are sent to the branch from the head office at a markup of 20%. Goods which cost the head office sh.1,000,000
were sent to the branch on 28 October 2006. These goods
were received by the branch on 5 November 2006.
Required:
(a)
(b)
(c)
QUESTION FIVE
Moses Waigwa died as a result of a motor accident on 5 September
2006. His estate at death after payment of debts, funeral and other
expenses consisted of the following assets.
Sh.
Freehold house
900,000
Furniture and other personal effects
120,000
Ornamental collection
12,000
12,000 ordinary shares in Kenya Company Ltd.
210,000
Sh.100,000 nominal 10% Treasury stock 2008
92,000
Amount due from motor insurance company 114,000
Debt due from paul
50,000
Cash in hand and balance a bank
262,000
STRATHMORE UNIVERSITY REVISION KIT
130
4
To each of my sons Maina and Kamau,the sum of Sh.
2,000,000
5
To my daughter Ziporah, my holding of Sh. 100,000 nominal
101/4% Treasury stock 2008 and Sh. 40,000 to my nephew
Richard payable out of my holding of 9% Treasury stock
2007.
6
To my niece Sarah, my holding of 3,000 shares(ordinary) in
Kenya Company Ltd.
7
To my cousin Kenneth, my motor car.
8
10
131
20
132
Shirika Jipya
Income statement for the yaer ended 30 June 2000
Sh.000
Sh.000
Turnover
179,100
Cost of sales (W1)
(143,023)
Gross profit
35,077
Other operating income: Profit on
173
disposal
300
473
Investment
35,550
income
24556
Expenses
832
(25,388)
Other expenses (W)
10,162
Finance cost
(4,200)
Profit before tax
5,962
Income tax expense
Profit for the period
WORKINGS
Sh.000
1.
Cost of sales
Opening stock
Purchases
Closing stock
Add:Depreciation on:
Buildings
Plant
2.
Finance cost
Debenture interest (10% x 8,000)
Paid
Accrued
Add: Preference share dividend
paid
25,073
141,450
166,523
(23,243)
143,280
53
690
144023
800
450
350
800
32
832
133
Other expenses
Increased provision (bad debts)
Audit fee
Wages and salaries
Bad debts
3.
4.
30
53
24,450
23
24556
Interim dividends
Ordinary share capital
Preference share capital
430
32
462
4,290
(15)
(75)
4,200
Shirika jipya
Statement of changes in equity for the year ended 30
june 2000
(b)
Bal as at 1.7.99
Gain on inv.
revaluation
Purchase of
shares
Transfer to CRR
Profit for year
Dividends:
Interim (W4)
Ordina
ry
share
capital
Sh.00
0
15,375
15,375
-__
15,375
Share
Premiu
m
Sh.00
0
3,150
-__
3,150
(37.5)
-__
3,112.
5
Capital
redempt
ion
reserve
Sh.000
-__
-
Investm
ent
revaluat
ion
Sh.000
3225
750
-
Retain
ed
Profits
Sh.00
0
21,600
-__
21,600
(750)
5,962
-__
750
(430
)
3225
26362
Total
Sh.0
00
40,12
5
-__
40,12
5
-3225
(37.5)
5,962
(430)
-__
4884
4.5
134
6.
7.
8.
9.
15,375
25
21,525
Accruals
Wages
VAT
Interest
Audit fee
13
21,538
34,859
806
(787.5)
18.5
473
681
350
53
1,557
Accrued tax
Estimated for year
Overestimated
Paid
4,290
(15)
(738)
3,537
Sh.00
0
1,080
1,080
Shirika Jipya
Balance sheet as at 30 June 2000
Sh.000
Non Current Assets
Plant, property and equipment
(Note 4)
Investments
Current Assets
Inventory
Receivables (W6)
Bank (W7)
Sh.000
23,498
6750
30,248
23,243
34,859
18.5
Financed by
Authorised share capital
1.5m ordinary shares @ Sh.29
75,000 preference shares @
Sh.10
FINANCIAL ACCOUNTING III
58,120.5
88,368.5
37,500
750
38,250
135
15,375
750
3,112.5
3,225
8,000
1,005
7,087.5
26,382
48,844.5
9,005
25,425
1,557
4,537
30,519
88368.5
2.
charging:
Sh.000
122
743
53
24,328
3.
4.
Cost/valuation
Bal b/d
Additions
Disposal
Bal c/d
Depreciation
Bal b/d
Land
Sh.00
0
Buildin
gs
Sh.000
848
848
28,200
4,050
(1,500)
30,750
13,214
Plant
Sh.00
0
Total
Sh.00
0
4,350 33,398
750
4,800
- (1,500)
5,10 46,698
398
13,612
136
(1,155)
690
=
848
848
12,749
18,001
14,986
- (1,155)
53
743
451
4,649
3,952
13,200
23,498
19,786
137
Sh.000
NON CURRENT ASSETS
Property, plant & equipment
(Less: Accumulated depreciation)
470,000
(90,000)
380,000
24,840
404,840
287,900
692,740
300,000
50,000
66,100
107,640
457,640
Trade payables
Accrued interest
Propsed dividends - Group
- Minority interest
Sh.000
15,000
119,200
900
30,000
3,900
154,000
692,740
Workings
1.
Ordinary share
capital =
Preference share
capital =
6,000,000 x 100
8,000,000
= 75%
138
2.
165,0
00
60,00
0
_____
Share of equity
Ordinary share capital
[75% (100,000 +
20,000)]
General reserve
[75% (40,000
20,000)]
Retained Earnings
(75% x 28,000)
Group Profit & Loss
(Preacquisition
dividends)
Preference (75% x
5,600)
Ordinary (75% x
5,000)
Preference share
capital
75% x 80,000
Goodwill:Amortised
C/d
225,0
00
3.
GOODWILL AMORTISATION
31,050
4.
Sh.00
0
90,000
15,000
21,000
4,200
3,750
60,000
6210
24840
225,00
0
6,210
Cost of
5,000 Share of nominal or face
debenture
____ value
5,000
(25% x 20,000)
5,000
5,000
FINANCIAL ACCOUNTING III
139
(a)
7,500
2,50 Bal b/d Jomvu
0
10,00
0
10,000
10,000
140
Preference dividends
Sh.00
0
(b)
Sh.00
0
4,200
Bal b/d
1,400
Jomvu Ltd
5,600
5,600
5,600
300
900 Jomvu Ltd
1,200
Sh.0
0
0
1,200
1,200
7.
Sh.00
To cost of control a/c
Pre-acquisition retained
earnings
Pre-acquisition dividends
Preference
Ordinary
Goodwill amortisation
Unrealised profit (20/120 x
6M)
To MI a/c (25% x 44,400)
To consolidated Balance
sheet
21,000
4,200
3,750
6,210
1,000
11,100
107,64
0
Sh.00
0
Bal b/d
Kwa
Jomvu
98,500
44,400
Share of post
acquisition
Preference (W5b)
Ordinary (W5a)
4,200
7,500
300
Share of debenture
interest
154,90
0
154,90
0
8.
Sh.0
Cost of control
Sh.0
0
0
Bal b/d
15,00
0
Kwa Ltd
Jomvu Ltd
5,000 (40,000 20,000)
50,00
0
70,00
0
141
50,00
0
20,00
0
70,00
0
142
9.
Sh.00
0
30,000
5,000
11,100
20,000
66,100
QUESTION THREE
Mwenyeji ltd
Translated trial balance as at 30.06.00
Origina
Trial Rate Transla
l balance
ted
Kove0
Kove0
Sh.000
00
00
Freehold Property
Debtors/creditors
Sales
Cost of sales:
Depreciation
Other
Provision for
depreciation
Administrative costs
Closing stock
Machinery
Remittances
Cash at bank
Selling and
distribution cost
Commission expenses
Commission accrued
Head office current
Exchange gain
63,000
35,680
12,600
347,40
0
56,700
18,000
11,520
126,00
0
272,32
0
79,200
28,800
1,200
995,75
0
1,560
432,00
0
1,200
504,26
0
1/7
1/8
1/9
9.000
4,460
1/7
1/9
1/7
1/9
1/8
1/7
NA
1/8
1/9
1/9
1/8
NA
1,800
38,600
995,72
0
2,000
1,440
18,000
29,990
9,900
3,200
133
118,52
3
Trial
balan
ce
Sh.00
0
195
48,00
0
8,100
150
60,10
0
1.978
118,5
23
143
5
105
= 1,200
144
Sales
Goods sent to branch
Cost of sales
Gross profit
Exchange gain
Administrative costs
Selling and distribution
Managers commission
Provision for UP
Retained profit:: Year
B/f
C/f
MWENYEJI LTD
PROFIT AND LOSS A/C FOR THE YEAR ENDED 30.06.00
HEAD OFFICE
BRANCH
BRANCH
Sh.000
Sh.000
Sh.000 Sh.000
Sh.000
Sh.000
104,000
432,000
48,000
35,000
139,000
432,000
48,000
(59,000)
360,000
40,400
80,000
72,000
7,600
1,978
80,000
72,000
9,578
15,200
18,000
2,000
23,300
28,800
3,200
1,200
133
300
38,800
48,000
5,333
41,200
24,000
4,245
MWENYEJI LTD
BALANCE SHEET AS AT 30.06.00
HEAD OFFICE
BRANCH
Sh.000 Sh.000
Sh.000
Sh.000
34,355
(300)
Current Assets
Stocks
Debtors
Bank
Cash in transit
Total current assets
28,900
8,900
4,600
1,990
HO Current A/c
Share capital
Retained Profit
COMBINED
Sh.000 Sh.000
152,000
152,000
64,700
87,300
1,978
89,278
17,200
26,500
133
43,833
45,445
2,000
47,445
BRANCH
Sh.000
Sh.000
COMBINED
Sh.00
Sh.00
0
0
14,000
4,500
18,500
63,000
69,300
132,300
9,000
9,900
18,900
23,000
14,400
37,400
34,055
52,555
132,300
18,900
37,400
11,520
35,680
79,200
44,390
96945
1,440
4,460
9,900
126,400
258700
255940
40,000
47,445
87,445
Current Liabilities
FINANCIAL ACCOUNTING III
30,040
13,360
14,500
1,990
15,800
34700
34,355
59,890
97290
40,000
47,445
87,445
145
9,500
-
1,560
1,200
9,500
96945
195
150
2,760
258700
9,695
150
345
34700
9,845
97290
146
Bal b/d
Profit
Remittances
Bal c/d
Remittance
60,100 Cash in transit
4,245 Bal c/d
64,345
BRANCH BOOKS
HEAD OFFICE CURRENT A/C
Kove0 Sh.0
Kove0
00
00
00
272,32
29,99 Bal b/d
504,26
0
0
Profit
0
255,94
34,35
24,000
0
5
528,26
64,34
528,26
0
5
0
64,700
Sh.000
28,000
1,990
34,355
64,345
Sh.0
00
60,10
0
4,245
64,34
5
147
QUESTION FOUR
(a)
Son Kikwajuni
Son Mnazini
Friend Mulungu (100 + 50)
Nephew Shaibu: Balance (200
120)
Wife Daranjani
STRATHMORE UNIVERSITY REVISION KIT
1,707
148
(b)
149
QUESTION FIVE
(a)
150
(b)
NOTE
In case the assets of the company are not sufficient to pay the
liabilities in the event of a companys winding up, the
liquidator can ask a list B contributory, to contribute towards
the assets of the company if any of the following conditions is
satisfied:
-
151
DECEMBER 2000
QUESTION ONE
BRANCH STOCK A/C
Bal b/d
GSTB
Mark up
Contra: Stock
transfer
Profit & Loss
Surplus
NAIRO
BI
Sh.000
18,300
82,770
41,385
900
MOMBA
SA
Sh.000
143,355
204,810
24,150
1,201.5
60,075
405
30
Debtors: sales
Contra: stock transfer
Profit & Loss: Stolen
stock
Mark up: Stolen stock
Mark up: Normal loss
CB: Sales*
Bal c/d
NAIRO
BI
Sh.000
12,300
405
44
22
54
107,728
22,802
MOMBA
SA
Sh.000
143,355
204,810
NAIRO
BI
Sh.000
6,100
41,385
300
MOMBA
SA
Sh.000
47,785
68,260
8,400
900
170,825
24,685
Conta: stock
transfer
BS: Stolen stock
BS: Normal loss
Gross Profit: P
& L*
Bal C/d
NAIROB
I
Sh.000
MOMBAS
A
Sh.000
135
22
54
39,973
7,601
300
59,732
8,228
47,785
68,260
NAIRO
BI
Sh.000
Bal b/d
Branch stock
Contra: Stock
transfer
MOMBA
SA
Sh.000
8,050
60,075
135
152
Bal b/d
BS
Sales
13,500
Branch
debtors
BS: cash
sales
NAIRO
BI
Sh.000
12,100
107,728
119,828
Nairobi Branch
Mombasa
1,100 Branch
8,400 Cash
Bad
debtors
Bal c/d
9,500
BRANCH CASH A/C
MOMBA
SA
Sh.000
8,525 HO Bank:
170,825 Remittanc
e
Branch
expenses
P & L:
stolen
cash
179,350
8,525
75
900
13,500
9,500
NAIRO
MOMBA
BI
SA
Sh.000 Sh.000
110,820
168,000
9,008
10,825
525
GSTB A/C
Sh.00
0
82,770
120,15 Purchases
0
202,82
0
12,100
1,400
119,828
179,350
Sh.00
0
202,920
202,920
Cash book: HO
Bal c/d
CREDITORS A/C
Sh.00
0
Opening stock
11,750 GSTB
Purchases
233,17 Closing stock
5
244,92
5
Branch cash
Nairobi
Mombasa
Bal c/d
Bal b/d
110,82 Expenses
0 Creditors
168,00 Tax instalments
0
45
278,86
5
153
Sh.000
42,550
233,175
275,725
Sh.000
202,920
42,005
244,925
Sh.000
11,800
19,540
234,525
13,000
278,865
TRENDSETTERS LTD
PROFIT & LOSS FOR THE YEAR ENDED 30.09.00
NAIROBI
MOMBASA
COMBINED
BRANCH
BRANCH
Sh.0 Sh.000 Sh.0 Sh.00 Sh.0 Sh.00
00
00
0
00
0
Gross profit
39,973
59,732
99,705
Surplus: Mombasa
30
30
39,975
59,762
99,735
Expenses
Sundry expenses
9,008
10,82
19,83
HO expenses
9,770
5
3
Bad debts
9,770
19,54
Stolen cash
75
0
STRATHMORE UNIVERSITY REVISION KIT
154
Stolen stock
Profit before tax
Tax @ 30%
Profit after tax
Dividends (20% x
30,000)
Retained profit:
Year
B/f
C/f
(18,822)
21,151
525
-
(21,195
)
38,567
75
525
44
40,01
7
59,718
(17,91
5.4)
41,802
.6
(6,00
0)
35,802
.6
45,94
6
81,748
.6
155
TRENDSETTERS
BALANCE SHEET AS AT 30.09.00
Sh.000
Sh.000
88,000
Current Assets
Stock:
Head office
Nairobi Branch @ cost
Mombasa Branch @ cost
Debtors:
Nairobi Branch
Mombasa Branch
Financed by:
Issued and paid up share capital
3M ordinary shares @ Sh.10
Revenue Reserves: Profit & Loss
Suspense Account
Current Liabilities
Trade creditors
Tax payable
Proposed dividends
Bank overdraft
42,005
15,201
16,457
1,400
900
75,963
163,963
30,000
81,748.6
54
41,200
4,915.4
6,000
45
52,160.4
163,963
Shs. 000
156
88,000
Current Assets
42,450
(14,150)
23,800
11,750
2,300
42,350
130,350
30,000
45,946
54
76,000
Current liabilities
Bank overdraft
Trade creditors
Total equity and liabilities
11,800
(42,550)
54,350
130,350
QUESTION TWO
WORKINGS
1.
Cost
Profit
Selling
price
B
sells
to A
%
75.36
24.64
100
A
Sells
to B
%
100
20
120
Trading
Sh.000
UPOs
Sh.000
UPCs
Sh.000
UPFA
Sh.000
7,008.4
8
2,291.5
2
9,300
406.94
133.06
540
542.59
177.41
720
2,000
400
2,4000
33,600
(13,440)
(8,400)
11,760
360
1,000
67.5
13,187.
5
(2,140)
(1,420)
(3,560)
9,627.5
9,627.5
(3,000)
4,500)
2,127.5
18,300
20,427.
5
157
16,260
(8,050)
(3,950)
4,260
4,260
(1,050)
( 300)
(1,350)
2,910
2,910
900
(500)
(750)
760
12,650
13,410
9,200
(9,600)
(6,400)
(6,800)
6,800
2,040
2,040
(4,760)
7,522.5
2
(150)
(4,910)
9,200
4,290
Final
Retained profit:
Year
B/f
C/f
35)
56,77.65
(17,650)
10,415.6
5
10,415.6
5
(3,190)
(190)
(3,380)
7,035.65
(486.87)
7,522.52
(3,000)
(4,500)
22.52
19,965.5
6
19,988.0
8
158
PAT
Pre-acquisition
Depreciation
adjustment
UPCS
UPOS
Pref 900
Group
40%
360
Total MI
Group sales
Ord 2005.65
MI
60%
540
Group
80%
1,604.5
2
MI 20%
401.13
Group
60%
(2,042)
MI 40%
(1,428)
Group cost of
sales
Chania
(4,760)
1,190
(3,570)
Subsidiary
Subsidiary
Intergroup
159
Chania Intergroup
Depn adj.
QUESTION THREE
1999
1.10 Balance
b/d
31.10 Rent
1.11 Kenya
stock
31.12 Interest
in Kenya stock
2000
31.04
Dividends
(Media)
30.06 Interest
in Kenya stock
30.06
Dividends:
Uchumi
TRUST CASHBOOK
Capita Incom
l
e
Sh00 Sh00
0
0
1999
1,410
120 1.12
120 Uchumi
2,640
360
3,450
180
360 1.09
660 Distributio
n
1.09 Life
Tenants
1.09
Executors
1,800
600
-
78
1,402
320
4,050
1,800
TRUST CAPITAL
Sh000 1999
1999
Incom
e
Sh00
0
2000
4,050
1999
Capita
l
Sh00
0
INCOME ACCOUNT
Sh000 1999
STRATHMORE UNIVERSITY REVISION KIT
Sh000
21,540
4,200
630
300
360
27,030
Sh00
160
2000
01.09 Life Tenants
K
L
01.09 Distribution
A/C N
0
120
120
360
120
180
660
360
1,.920
161
DISTRIBUTION A/C
Sh000
01.09 House in
Milimani
01.09 3900 share:
Uchumi
01.09 Capital cash
01.09 Income cash
2000
31.01 Income:
Rent
01.09 CB
01.09
Executor A/c
9,600
2,925
600
78
13,203
01.09 CB
31.01 Trust
capital
01.09 Trust
income
Sh000
12,125
78
1,402
_____
13,203
Sh.0
00
440
Sh.0
00
1,402
___
____
440
1,402
Kenya stock
interest:
K
L
N
Media group
dividends
K
L
N
39,000 shares in
uchumi dividend:
K
L
N
71,000 shares
Uchumi dividend
K
120
120
30
30
39
39
71
71
-
240
60
60
78
78
142
142
480
120
78
78
284
-
280
120
120
156
156
284
284
Sh
320
Total
Sh.00
0
120
60
30
150
39
117
78
71
335
-
Sh.0
00
720
720
180
180
234
234
426
426
162
L
N
Rental income
K
L
N
240
120
120
-
480
240
120
120
-
Total Income
K
120 + 30 + 39 + 71 + 120
78
440
1,402
163
QUESTION FOUR
(a)
(i)
Capital a/c
Current a/c
Cash available (W1)
Maximum possible
loss
Reallocation of
losses
Reallocation of NS
Loss
Cash distributed
Capital balance
Cash available
Maximum possible
loss
Realoccation of
losses
Cash distributed
Capital balance
Cash available
Maximum possible
loss
Reallocation of Os
loss
Cash distributed
Capital balance
Cash available
NEWA
Sh.000
240
16,200
6,750
(1,700)
(250)
14,500
6,500
(1,172)
13,328 (5,331.2
)
1,168.8
(1,251.2
____
)
1,172
(82.4)
13,328
82.4
(1,203)
12,123
6,500
____
1,203
12,125
(2,565)
9,560
(4,850)
1,650
(770)
880
5,620
_____
2,565
9,560
(3,560)
6,000
3,560
6,000
(6,400)
(3,824)
1,796
(96)
1,700
3,920
2,400
1,520
2,400
400
OMAE
Sh.000
QAMAR
Sh.000
4,050
(1,350)
2,700
PEKKA
Sh.000
480
2,700
(300)
2,400
(3,998.4)
(1,298.4)
(1,298.4)
2,700
(2,665.6)
(265.6)
265.6
2,400
(1,332.8)
1,567.2
(312.8)
1,254.4
(82.4)
1,172
1,728
(3,637.5)
937.5
937.5
2,700
(2,425)
(25)
25
=
2,400
(1,212.5)
515.5
(192.5)
323
1,405
(2,808)
(168)
168
2,700
(1,912)
488
(48)
440
1,960
(1,956)
449
(24)
425
980
1,800
900
1,800
1,200
760
1,200
600
380
600
120
80
40
160
Cost distributed
Capital balance
Cash available
Surplus (profit on
realization)
2,700
200
2,900
164
REALISATION A/C
Sh000
Freehold property
6,000 15/5 CB
Plant and equipment
1,395 31/5 CB
Office equipment
2,030 30/6 CB
Vehicles
1,075 31/7 CB
Stock
3,405 31/8 CB
Debtors
1,590 31/10 CB
Dissolution expense
200
Profit on realization:
N
160
O
120
P
80
Q
40
400
16,095
Sh000
975
1,192
1,203
2,565
3,560
6,600
____
16,095
BANK A/C
Sh000
975
1,192
1,203
2,565
3,560
6,600
_____
Realisation
Sh000
Bal b/d
Creditors
Capitals: 1st
Distribution
2nd
3rd
4th
5th
210
785
1,172
2,565
1,203
3,560
6,400
16,095
16,095
Sh.
2,167
995
1,172
Curre
nt
CB
N
SH.0
00
250
880
M
SH.0
00
1,350
-
O
SH.0
00
200
-
CAPITAL A/CS
P
SH.0
00
- B/d
1,172 Curren
323 t A/c
N
SH.0
00
6,750
-
M
SH.0
00
4,050
-
O
SH.0
00
2,700
-
P
SH.0
00
2,700
200
1,700
1,520
2,560
900
1,920
440
760
1,280
6,910
4,170
2,780
429 Profit
380 on
640 realizat
ion
2,940
165
160
120
80
40
____
____
____
____
6,910
4,170
2,780
2,940
166
Capital A/c
Current a/c
PSR
Capital/unit of
profit
Capital in PSR
Surplus capital
Capital
PSR
Capital/unit of
profit
Capital in PSR
Capitals
PSR
Capital/Unit of
profit
Capital in PSR
Newa
Omae
Sh.000 Sh.000
240
6,750
4,050
(250)
(1,350)
6,500
2,700
Pekka
Sh.000
Total
Sh.000
2,700
(300)
2,400
Qamar
Sh.000
480
2,700
200
2,900
16,200
(1,700)
14,500
4
1,625
(3,600)
2,900
3
900
(2,700)
-
2
1,200
(1,800)
600
1
2,900
(900)
2,000
10
N/A
(9,000)
5,500
700
4
725
(1,200)
1,700
1,700
4
425
(1,700)
-
600
2
300
600
-
2,000
1
2,000
300
1,700
1,700
1
1,700
(425)
1,275
5,500
7
N/A
2,100
3,400
3,400
5
N/A
(2,125)
1,275
Newa Omae
Sh.00 Sh.0
0
00
880
880
880
820
880
1,700
2,580
320
1,200
900
1,520
900
4,100
900
2,560 1,920
6,660 2,820
Pekka
Sh.00
0
440
440
440
160
600
760
1,200
1,280
2,480
Qamar
Sh.00
0
1,172
103
220
323
1,495
205
220
425
1,920
80
300
380
2,300
640
2,940
Total
Sh.00
0
1,172
103
1,100
1,203
2,375
1,025
1,540
2,565
4,920
560
3,000
3,560
8,500
6,400
14,900
167
168
QUESTION FIVE
(a)
Normal
Additional
18,240
4,560
voluntary
Transfers in:
Individual transfers in from other schemes
3,150
62,430
Investment income
Pensions
Commutation of pensions & lump sum
retirement benefits
Payments to and on account of leavers:
Individual transfers out to other schemes
Changes in market value & investments
FINANCIAL ACCOUNTING III
22,800
59,280
47,400
(7,640)
(4,820)
1,860
(14,320)
95,510
(22,640)
Administrative expenses
169
(2,840)
70,030
170
Immovable property
Current assets
Contributions due within 30 days
Current liabilities
Shs.
263,605
87,835
19,990
23,460
394,890
132,320
4,940
(320)
(240)
(560)
Unpaid benefits
Accrued expenses
Net current assets
Accumulated fund as at 01.01.99
Net new money invested as
per revenue A/C
4,380
531,590
461,560
70,030
171
JUNE 2001
QUESTION ONE
Office
Equip.
Goodwil
l
WIP
Debtors
Apop
o&
Co
Sh00
0
450
1,500
1,800
5,250
Guser
wa &
Co
Sh00
0
420
1,065
1,050
2,625
Kand
ie
____
9,000
____
5,160
___
855
Sh0
00
150
240
240
225
New firm
Office
Equip
Goodwill
WIP
Debtors
Capital:Ap
opo
Cheloti
Chuma
Guserwa
Kurgat
Ochieng
Kandie
Apop
o&
Co
Sh00
0
Guser
wa &
Co
Sh000
Kand
ie
Sh00
0
300
1,800
1,800
4,200
300
300
300
9,000
420
1,050
1,050
2,100
140
240
60
5,160
150
150
240
180
135
855
Realizati
on loss
Contra
Bal to
new firm
CAPITAL A/C
Apop Chelo
o
ti
Sh.0 Sh.0
00
00
240
240
600
2,250 2,250
____
____
3,090 2,490
Chu
ma
Sh.0
00
2,850
120
1,830
4,800
Chum
a
Sh.0
00
450
60
300
800
Sh.00
172
Realization
Cash
Bal to new firm
0
135 B/d
15
750
900
900
____
900
Bal.
B/d
Capital
:
Cheloti
Apop
o&
Co
Sh0
00
750
1,590
1,830
4,170
173
Apop
o&
Co
Sh0
00
Guser
wa &
Co
Sh000
2,820
450
900
4,170
360
630
990
Chuma
Guser
wa
Journal Entries
Dr
Cr
Office Equipment
300
Goodwill
1,800
WIP
1,800
Debtors
4,200
Cash
900
Capitals: Cheloti
4,500
Chuma
4,500
To record takeover of assets and capital from Apopo, Cheloti and
Company.
Office Equipment
Goodwill
WIP
Debtors
Cash
Capitals: Guserwa
Kurgat
Ochieng
420
1,050
1,050
2,100
630
2,250
2,250
750
Kandi
e
Sh000
15
120
30
165
174
1st Six
Months
Sh000
2,400
300 x 6
1,800
4,200
2nd Six
Months
Sh000
2,400
300 x 7
2,100
4,500
Full Year
Sh000
4,800
3,900
8,700
Net profit
Salaries:
Cheloti
Chuma
Guserwa
Kurgat
Ochieng
Kandie
Maina
Profit share:
Cheloti
175
4,200
4,500
8,700
300
300
300
300
300
720
720
360
360
120
120
-
(1,800)
2,400
2,400
-
300
300
300
300
300
300
540
540
480
480
120
180
60
600
600
600
600
600
300
(2,100)
2,400
2,400
-
1,260
1,260
840
840
240
300
60
Chuma
Guserwa
Kurgat
Ochieng
Kandie
Maina
(3,900)
4,800
4,800
-
176
Papers
Answers
Past
CURRENT A/C
Drawin
gs
Drawin
gs
Bal c/d
Chelot
i
270
360
390
Chum
a
270
360
390
Guser
wa
270
180
210
Kurga
t
270
180
210
Ochie
ng
270
60
90
Kandi
e
270
60
90
Main
a
-
1,020
1,020
660
660
420
420
Salaries
Profit
share
Bal b/d
Salary
Profit
share
Capital
a/c
Bal c/d
1,355
1,355
990
990
510
570
425
Chelot
i
300
720
Chum
a
300
720
Guser
wa
300
360
Kurg
at
300
360
Ochien
g
300
120
Kan
die
300
120
Main
a
-
1,020
390
300
530
125
-
1,020
390
300
540
125
-
660
210
300
480
-
660
210
300
480
-
420
90
300
120
-
420
90
300
180
-
300
60
65
1,355
1,355
990
990
510
570
425
Chelo
ti
4,500
-
Chuma
4,500
-
Guser
wa
2,250
750
-
Kurg
at
2,250
750
-
Ochien
g
750
-
Kandi
e
750
250
-
Main
a
250
125
4,500
3,375
4,500
3,375
3,000
3,000
3,000
3,000
750
750
1,125
1,125
375
375
CAPITAL A/C
Cash book
Current
a/c
Bal c/d
Bal c/d
Chelot
i
1,000
125
3,375
Chum
a
1,000
125
3,375
Guserw
a
3,000
Kurga
t
3,000
Ochien
g
750
Kandi
e
1,125
Maina
4,500
3,375
4,500
3,375
3,000
3,000
3,000
3,000
750
750
1,125
1,125
375
375
375
Bal b/f
Cash book
Current
A/c
Bal b/d
177
QUESTION TWO
INVESTMENT IN CET BY BEM
Sh000
4,00 Loan stock
1,000
5,000
Bal b/d
To COC A/C
Investment in loan
stock
To CBS
Bal b/d
To COC
BEM
%
75
25
100
Sh000
10,000
__ __
10,000
Sh000
10,000
_ ___
10,000
Sh000
20,000
__ __
20,000
CET
%
60
20
20
100
COST OF CONTROL
Sh000
A/c: Investment in
BEM
BEM: Investment in
CET
Sh000
5,000
____
5,000
Sh000
22,500
37,500
6,000
18,000
2,000
1,000
3,600
6,400
97,000
178
Papers
Answers Past
Sh000
15,350
_____
15,350
M. I
Sh000
9,000 OSC: BEM
22,450 Profit & Loss BEM
OSC: CET
_____ Profit & Loss CET
31,450
Investment in CET
CBS
136,800
6,400
143,200
Current Assets
Debtors
Cash
Total Current Assets
36,800
43,300
80,100
223300
Financed by:
Share capital
Retained earnings
Shareholders fund
Minority interest
Total shareholders funds
100,000
2,300
102,300
22,450
124,750
30,000
10,000
5,000
45,000
Current Liabilities
Creditors
Tax payable
Bank overdraft
Dividend to MI
Proposed dividends
25,000
4,500
9,300
4,750
10,000
53,550
223300
Sh000
7,500
10,750
4,000
9,200
31,450
179
QUESTION THREE
JOSHUA
BOOKS OF HEAD OFFICE
Branch Current A/c
Sh000
Bal b/d
2,466,60 Goods in transit
Profit
0 Cash in transit
544,800 Bal c/d
3,011,40
0
3,011,40
0
Books of Branch
Head Office Account
Sh000
Bal b/d
2,354,40 Profit
0
_______
2,354,40
0
Bal b/d
Profit
Bal c/d
Sh000
132,000
525,000
2,354,400
3,011,400
Sh000
1,809,600
544,800
_______
2,354,400
Joshua
Trading Profit & Loss Account
For the year to 31.3.2000
Head Office
Sh000
Sh00
0
Sales
17,040
Goods sent to branch
7,814.
4
Cost of Sales
24,854.
Purchase of goods
23,920.
4
Less closing stock
2
(2,160
Packaging costs
)
21,760.
Goods from Head
2
%
100
10
110
15
125
Branch
Sh000 Sh000
Combined
Sh000 Sh000
7,680
7,.680
24,720
24,720
23,920.2
(2,160)
21,760.2
415.8
22,176
7,682.4
180
Papers
office
Less: stock lost
Goods available for
sale
Less closing stock
Gross profit
Expenses
Selling and sundry
expenses
Stock loss
Unearned profit
Answers Past
415.8
22,176
22,176
(1,440)
2,688
91.2
(52.8)
7,629.6
(871.2)
(20,73
6)
4,118.4
324
52.8
-
(6,758.4)
921.6
(376.8)
544.8
Joshua
Balance Sheet
As at 31.3.2001
Head Office
Branch
Sh0
Sh0 Sh000 Sh000
00
00
Current Assets
Stocks in
warehouse
Raw materials
Finished goods
Stocks in transit
Finished goods
Less unrealized
2,354
.4
(79.
2)
MARK UP
Stocks
at cost
Sh.000
1,440
792
120
2,352
Combined
Sh000 Sh000
2,275
.2
871.2
2160
2232
1,140
408
120
3864
2352
2,160
1,440
132
(12)
120
3,012
48
-
(2,779.
2)
1,339.
2
Non-Current A/c
Branch current
a/c
Less: unearned
profit
22,128
(2,352)
(9,776)
4,944
(3,060)
1,884
2,760
1,944
525
181
-
8,949
1122
4.2
2,640
1,884
4,524
(300)
4,224
FINANCED BY:
Capital b/f
Add profit
Less drawings
Head office
current account
Current
liabilities
Creditors
7,000
.2
TOTAL EQUITY
AND LIABILITIES
525
2382.6
2382.6
2,640
1,884
4,524
(300)
4,224
2354.4
28.2
7000.
2
1122
4.2
11253
7,029
28.2
7,029
2382.6
11253
182
Papers
Answers Past
QUESTION FOUR
KORIR
STATEMENT OF AFFAIRS
AS AT MARCH 2001
GROSS
LIABILITI LIABILITIES
ES
Sh.
277,260 Unsecured
511,500 creditors
Fully secured
creditors
Less value of
194,400 security
Surplus below/to
contra
Partly secured
creditors
Value of
7,740 security/surplus
above
Deficiency ranking
Unsecured
Preferential
Creditors
EXPECTE
D TO ASSETS
TANK
277,260
511,500
675,000
163,500
Stock
Furniture
Personal
assets
Debtors:
194,400 good
Doubtful
148,500
300,000
Bad
6,195
45,900
36,195
Estimated
to produce
7,740
Cash in
hand
Inheritance
receivable
Sunday
personal
assets
Surplus
from fully
secured
creditors
per contra
ESTIMATED
TO
PRODUCE
30,000
120,000
9,000
60,000
22,500
300
7,500
9,000
15,000
264,300
(7,740)
256,560
66,600
Deduct
preferential
creditors
per contra
Deficiency
as per
deficiency
a/c
990,900
323,160
DEFICIENCY ACCOUNT
FINANCIAL ACCOUNTING III
323,160
Sh
180,0
00
54,00
0
30,00
0
7,500
183
W2:
W3:
Surplus/defic
it
148,500
15,000
163,500
Value of
security
148,500
Surplus/defic
it
45,900
W4:
338,10
0
30,000
51,405
13,695
3,500
14,400
197,10
0
_______
66,6
00
338,1
00
W1:
Sh
Sh.
90,000
15,000
3,000
166,500
274,500
QUESTION FIVE
WORKINGS
INCOME APPORTIONMENT
Sh.
2,700
540
4,500
7,740
184
Papers
(i)
Answers Past
(ii)
10,000
6,667
3,333
10,000
(iii)
1,226,400
x100
105
= 1,168,000; Interest = 5% x
1,168,000=
1,226,400
58,400
48,667
9,733
58,400
JOURNAL ENTRIES
1.
2.
Sh.
90,000
2,000
250,000
300,000
1,226,400
20,000
Sh.
5,000
10,000
2,273,400
4.
5.
6.
2000
31/10
15/12
15/12
20/12
31/12
31/12
Estate capital
Furniture a/c
KFC Shares
Debtors
Invest in F Pro
Inv in Kombo
Invest in
Kombo
2001
185
96,000
90,000
6,000
290,000
10,000
300,000
5,000
10,000
15,000
10,000
10,000
6,667
3,333
6,667
3,333
1,275,067
9,733
1,226,400
48,667
9,733
Sh.
5,000
10,000
20,000
1,836,
Sh.
33,0
186
Papers
Answers Past
33,06
6
334
66
1,871,
334
33,0
66
Sh
9,733
3,333
30,000
33,066
Sh
2,273,40
0
6,000
6,667
______
2,286,06
7
187
Sh.
Sh.
400,000
10,000
1,836,334
2,246,334
Income assets
Cash at bank or in hand
33,066
2,279,400
2,246,334
33,066
Estate capital
Estate income
2,279,400
188
Papers
Answers Past
DECEMBER 2001
QUESTION ONE
Note: The examiner requires the use of merger method of accounting.
Merger method of accounting relates to accounting for mergers as per the
requirements of IAS 22. Currently the new IFRS 3 that supersedes IAS 22
prohibits the use of merger accounting where a merger takes place. All
mergers should now be accounted for the same way as acquisition or
purchase method.
(a)
ACQUISITION APPROACH
AHL and its subsidiary
Consolidated profit and loss account
For the year ended 30th April 2001
AHL
Sh.00
0
Sales
Less: Cost of sales
Gross profit
Less: Expenses
Admin expenses
Distribution
expenses
Goodwill
amortisation.
Pre-tax profit
Tax
Post-tax profit
Profit attributable
toMI
Profit attributable
to s/hoilders
36,940
55,410
-
NFL
Sh.00
0
293,30
0
(186,6
50)
106,65
0
(92,35
0)
14,300
(4,290
)
10,010
10,010
Sh.00
0
30,900
46,350
-
Sh.00
0
300,00
0
(208,5
00)
91,500
POST ACQ.
NFL
Sh.00 Sh.00
0
0
100,00
0
(69,50
0)
10,300 30,500
15,450
-
(77,25
0)
14,250
(4,275
)
9,975
(25,75
0)
4,750
(1,425
)
3,325
9,975
3,325
WORKINGS
W1
Acquisition dates
8 Months
1.5.2000
31.4.2001
Dividends
receivable
4 Months
14.2001
= 95% of proposed dividends
= Sh. 4,750,000
FINANCIAL ACCOUNTING III
CONSOLIDATE
D
Sh.00 Sh.00
0
0
393,30
0
(256,1
50)
47,240 137,15
70,860
0
303
(118,1
00)
18,747
(5,715)
13,032
166
12,8
66
13032
Accounting
treatment
189
DR dividends receivable
CR Group P& l a/c (Postacquisition)
CR Cost of control (Preacquisition)
4,750
2,850
1,900
Post acquisition
dividend
= 2,850
Dividends receivable
= 4,750
= 1,900
Pre-acquisition
dividends
190
Papers
Answers Past
W2
Consideration given:
Ordinary share
capital
(95% x [40,000] x. 2
x 10)
20
Share premium
(95% x [40,000] x 2 x
(17.5-10)
20
38,00
0
21,43
2
618
1,900
4,55
0
66,50
0
W3
Current year goodwill
armotised
Minority interest profit
& loss
Minority interest
dividend share
= 4,550 x 4
60
= 5% x
3,325
= 5% x
5,000
= 303
= 166
= 250
Balance c/d
W4
Taxation
Cash
Balance c/d
4,290
390
____
4,680
3,720
____
3,720
2,000
1,128
49
3,177
Tax
Balance c/d
191
4,460
____
4,460
Balance
b/d
Shares
issued
Profit for
the year
4,330 P& L
425 Deferred tax
4,755
30,000
38,000
SHARE
P
R
E
M
I
U
M
Sh.000
RETAINE
D PROFIT
Sh.000
TOTA
L
Sh.00
0
MINORIT
Y
INTERES
T
Sh.000
TOTAL
SHOLDER
S FUNDS
Sh.000
28,500
-
17,680
12,866
47680
66500
12866
1261
2000
166
48941
68500
13032
(11500
)
(250)
(11750)
11554
6
3177
118723
3000
8500
(11500)
Less
Dividends:
Interim
Final
Total
(Balance
b/d)
4,275
480
4,755
68,000
28,500
19,046
0
0
192
Papers
Answers Past
Non-Current Assets
Property, plant and
equipment
(note 1)
Goodwill
Less amortization
75590
4550
303
4,247
79,83
7
56,950
24,100
5,750
Current Assets
Debtors
Stock
Cash
Total Assets
86800
166,6
37
EQUITY AND
LIABILITIES:
Current Liabilities
Creditors
Bank overdraft
Proposed dividends
NHL Minority
Dividends
Tax due
68,00
0
28,50
0
19,04
6
115,5
46
3,177
7,31
0
126,0
32
27,650
3,350
8,500
250
855
40,60
5
166,6
37
NOTE 1
PROPERTY PLANT AND EQUIPMENT
COST
ACCUMULATED
Freehold
land &
buildings
Plant and
Machinery
Motor
vehicles
TOTAL
40150
(16060)
76000
(30400)
11800
(5900)
127950
(52360)
24090
193
45600
5900
75590
NFL
GROUP
Sh.00 Sh.000 Sh.00 Sh.00
0
0
0
300,000
593,30
(208,500
0
)
(395,15
30,900
91,500 67,840
0)
46,350
101,76 198,15
(77,250)
0
0
14,250
4,755
(169,60
(480)
9,435
0)
(4,275)
(870) 28,550
9,975
(4,290)
10,010
8,565
19,985
Sh.0
00
Sales
Cost of sales
Gross profit
Administrative
expenses
Distribution
expenses
Profit before tax
Taxation
Current
Transfer from
deferred tax
Less: Minority
interest
(5% x 9975
=498.75)
Group net profit
(499)
19,486
Sh.000
Total
69,112
38,000
19,486
(6,800)
(8,500)
111,298
194
Papers
Answers Past
Ordinary share
capital
- AHL
To consolidated
balance sheet
Sh.00
0
Balance b/d
390
- AHL
480
- NFL
7,310
8,180
MINORITY INTEREST A/C
Sh.00
0
Ordinary share
3,177 capital
5% x 40,000
- P& L 5% x
22,560
3,177 Current profit
(499 5% x 4,000
5%)
AHL GROUP
CONSOLIDATED BALANCE SHEET
AS AT 30TH APRIL 2001
Sh.00 Sh.0
0
0
Sh.00
0
38,000
Sh.00
0
3,720
4,460
____
8,180
Sh.00
0
2,000
1,128
49
3,177
75590
56,950
24,100
5,750
86800
16239
0
EQUITY AND
LIABILITIES:
68,00
0
4329
8
11129
8
3,177
7,31
0
12178
5
Current Liabilities
Creditors
Bank overdraft
Proposed dividends
NHL Minority
Dividends
Tax due
TOTAL EQUITY AND
LIABILITIES
195
27,650
3,350
8,500
250
855
40,60
5
16239
0
196
Papers
Answers Past
QUESTION TWO
MOMBASA BRANCH STOCK A/C
Sh.000
Opening stock
Goods received from
HO
Goods from Voi
Sales returns to
Mombasa
Mark up on selling
price (15% x 1120)
5,280
116,728
560
880
168
_____
123,616
Goods to Taita
Returns to HO
Cash sales
Cash stolen (sales)
Goods stolen
Credit sales
Balance c/d
Sh.00
0
720
1,360
52,800
240
960
61,686
5,850
123,61
6
Mark up on:
Mark up on: Opening
Goods Taita (3/8 x 720)
270 Stock
Returns to HO (3/8 x
510
(3/8(5,280 80)
1,360)
360 + 80)
Goods stolen (3/8 x 960)
Goods from HO
Customer return to Voi
147
(3/8 x 116,728)
(3/8 x 280) + 42)
Goods from Voi (3/8 x
Closing stock
2,220 560)
(3/8 (3,850 42) + 42)
42,674 Upward adjustment
P& L
_____ on: Stock
46,181
(15% x 1,120)
WORKINGS
(1)
Goods returned by customer
115%
322
100%
100 x 322 = 280
115
Profit = 320
(2)
Mark up = 60 = 3/8
160
Sh.000
2030
43773
210
168
_____
46,181
197
MOMBASA BRANCH
MEMORANDUM TRADING, PROFIT & LOSS A/C
31.05.01
Sales: Cash
52,800
Cash stolen
240
Credit
61,280
Sales returns: To Mombasa
880
Branch
322
To Voi Branch
Net sales
Cost of sales
32,550
Opening stock (5280 2030)
72,955
Goods from Head office
350
(116728 43773)
76,555
Goods from Voi (560 210)
(450)
(850)
Goods sent to Taita (720 270)
(600)
Branch returns to Head Office
(175)
(1360 510)
(3630)
Goods stolen (960 360)
(5705)
Return to Voi (322 147)
Closing stock (5850 2220)
12,802
Gross profit as per Branch
17,072
Mark up
600
Less Expenses
240
Administration expenses
Distribution cost
Goods stolen
Cash stolen
FO R YEAR ENDED
114,726
(1,202)
113,524
(70,850)
42,674
(30,714)
11,960
QUESTION THREE
POLEPAY TRADERS
STATEMENT OF AFFFAIRS AS AT 30. 04 2001
Liabilities
Unsecured
creditors
Fully secured
Value of
security
To contra
Party secured
Value of
security
To rank
Preferential
Surplus to firm
Pole
pay
Sh.00
0
31,050
11,200
(8,000)
3,200
820
Lemas
io
Sh.0
00
80
3,300
4,00
700
280
(250)
130
590
790
80
Ayimb
a
Sh00
0
70
9,040
(5,700
)
3,340
380
Unfledged
assets
Plant &
Equipment
Furniture
Inventory
Receivables
Other
investment
Cash
Surplus contra
Pole
pay
Sh.00
0
Lemas
io
Sh.00
0
Ayimb
a
Sh00
0
7,500
13,500
13,100
180
34,280
820
33,460
790
180
700
90
700
1,670
590
1,080
100
140
240
380
(140)
198
Papers
Surplus c/d
Answers Past
_____
34,250
____
1,080
____
3,410
Less
preferential
Surplus from L
Deficiency
_____
34,250
_____
1,080
3,550
3,410
Liabilities
Excess of assets
Over liabilities
Revaluation gain
Surplus from
Deficiency as Per
SOA
Pole
pay
Sh.00
0
Lemas
io
Sh.00
0
Ayim
ba
Sh00
0
24,00
790
-
15,99
0
-
15,55
0
3,550
24,79
0
15,99
0
19,10
0
199
Realization
loss
Land &
buildings
Houses
Plant &
Equipment
Furniture
Inventory
Receivables
Other
investments
Motor car
Loss on
guarantee
Loss on capital
Surplus to firm
Surplus c/d
Pole
pay
Sh.00
0
Lemas
io
Sh.00
0
Ayimb
a
Sh00
0
4,450
7,100
6,100
7,140
-
1,500
470
900
250
12,000
790
80
1,300
300
300
600
46,00
0
12,00
0
-
24,790
15,990
19,10
0
Other Investments
Lemasia
=
13,600 12,000
=
1,600
Then:
1,600 700 =
900
Ayimba
=
14,200 12,000
=
2,200
Then:
2,200 1,900
=
300
Ayimba:
Security
3,500
300
1,900
5,700
REALISATION A/C
Sh.00
0
2,595 Loss on
315 realization
Purchase
consideration
2,910
Deficit
340
300
2,700
3,340
Sh.00
0
60
2,850
2,910
200
Papers
Answers Past
2,595
QUESTION FOUR
a)
1.11.99
30.4.01
30.4.00
Net profit
= 495
Net assets
Taken over
capital
plus
profit)
Goodwill
Sh.
000
60
2,850
____
2,910
Sh 000
2,595
(60)
2,535
Realisation loss
Invest. in ord.
Shares
Invest. in 20%
Debentures
Dissolution exps.
Shared
C book
(b)
Capital a/c
Maina
Ojara
Shs.
Shs.
000
000 Balance b/d
36
24 Profit share
1260
840 Goodwill
270
180 Dissolution
54
36 exps. Paid
306
- C book
1,926
1,080
Maoja Ltd
Income Statement for the year ended 30.04.01
FINANCIAL ACCOUNTING III
Maina
Shs.
000
1350
297
189
90
1,926
Ojara
Shs.
000
750
198
126
6
1,080
201
Sh.000
Sales
Cost of sales
Gross profit
Distribution expenses
Administrative expenses (W2)
Finance costs
Profit before tax
Income tax expense
Profit after tax
Dividends: Interim
Final
Sh.000
10,080
(6,720)
3,360
1,092
651
90
(1,833)
1,527
470
1,057
300
210
(510
547
Note that final proposed dividends have been included in the income
statement because the examiner rquires so. Currently IAS 10 requires
proposed dividends if declared after the year end to be given as notes to the
accounts.
Maoja Ltd
Balance Sheet as at 30.04.01
Sh.000
Sh.000
2,085
Non current Assets
252
Plant, property and equipment (Note
2,337
4)
Goodwill
Current Assets
Inventory
Receivables
Cash and bank
Total current Assets
Total Assets
Financed by:
Issued and fully paid share capital
210,000 ordinary shares of Sh.10
each
Retained profits
Shareholders funds
Long term liabilities
20% debentures
Current liabilities
Payables
Accruals (debenture interest)
Current tax
Proposed dividends
1,140
1,515
405
3,060
5397
2,100
547
2,647
450
3,097
1,530
90
470
210
2,300
202
Papers
Answers Past
5397
W2:
Administrative expenses
Given
Add goodwill amortised
(315/5)
Sh. 000
588
63
651
2.
Directors
remuneration
Depreciation
Amortisation of
goodwill
Staff costs
3.
The tax expense for the year has been arrived at after charging
tax at a corporate rate of tax of 30% applicable in Kenya.
4.
Cost/valuation
Bal as at
01.05.00
Additions
Bal as at
30.04.01
Depreciation
Bal as at
01.05.00
Charge for the
year
Bal as at
30.04.01
NBV as at
30.04.01
Vehicle
s
Sh.000
Total
Sh.00
0
900
900
900
900
540
540
2,340
2,340
30
30
870
90
90
810
135
135
4050
255
255
2,0850
QUESTION FIVE
203
(a)
SCHEDULE OF ASSET DIVISION
ASSET
VALUATION
E.A. Breweries Ltd.
shares
BAT(K) Ltd shares
Medals won in athletics
3000 x 120
= 360
6000 x 96
= 130
130
56 x 500
= 280
100
WIDE
RANG
E
360
576
FIXED
INTERES
T RANGE
SPECIA
L
RANGE
130
House in Kileleshwa
House in Peponi
Shares in Laki Ltd
Shares in Wiro Ltd
Fidelity Building
Society shares
& Kenya Stock 2005
10% Kenya stock 2002
Cash at Bank
3,750
4,250
450
600
300
(500 x 1.10)
=550
(1 x 1,000)
=1,000
274
12,520
280
3,750
4,250
450
600
300
434
0
550
566
214
____
1,670
1,670
9,180
BALANCING ADJUSTMENT
Find balance b/d
Cash
Wide range
Fixed interest range
1,236
830
275
10%
stock
434
566
Balance
c/d
1,670
1,670
204
Papers
Answers Past
(b)
WR
1/5 Bal b/d
15/6 Sale of
medals
Transfer
30/9 sale of house
in
Kileleshwa
Transfer
31/12 Sale of
Peponi hse
Transfer
From F
Range
2001 Liquidate
building
society
30/4 Mortgage
1
00
1,9
50
1,5
00
1,9
34
WR
15 June
Transfer
20 Sept
Transfer
31 Dec
2001
28/2 School
fees
30 Apr Bal c/d
300
6,4
20
6,7
20
5,484
2001
Fee University
30/4 Treasury
bills
300
4,3
24
5,784
11,1
50
WR
1,6
70
FR
1,6
70
100
100
1,9
50
1,9
50
3,0
00
3,0
00
6,7
20
6,7
20
Note 6
Shares purchased
45,700 x 100
Available cash
Deficit
F. Range
1,93
4
1,89
0
5,484
(3,550)
1,934 = 1,890 + 1,935
3,824
FINANCIAL ACCOUNTING III
4,32
4
SR
9,18
0
70
150
Workings
(1)
FR
SR
200
3,90
0
3,00
0
500
7,1
00
WR
300
500
5,7
84
(c)
1,75
0
11,1
50
7,10
0
205
(1,934)
1,890 To be used to purchase
treasury bills
206
Papers
(d)
Answers Past
LAWI KIPROP
TRUST BALANCE SHEET
AS AT 30 APRIL 2001
Shares in EAB (3000 x 120)
Treasury bills
BAT shares (6000 x 96)
500,000 6% Stock
1,500 shares inLaki Ltd
Shares in NMA
2500 shares in Wiro
Mortgage due
Sh.500,000 12% stock
Treasury bills Sh.1m 10% stock
Financed by:
Trust capital:
Wide Range
Fixed Range
Special Range
Sh.000
360
2,390
576
280
450
5,484
600
2,500
550
1,000
14,190
6,420
6,720
1,050
14,190
207
MAY 2002
QUESTION ONE
(a)
Viatu Ltd
Income statement for the year ended 31 March 2003
Sh.000
Turnover (W1)
Cost of sales
Gross profit
Other Incomes : Discount received
812
Profit on disposal
15
Investment income
2,680
Selling and distribution expenses
Administrative expenses
Finance costs
Profit before tax
Income tax expense: Current
Deferred
Profit for the period
176,104
245,688
1,600
Sh.000
1,190,694
(699,922)
490,657
3,507
494,164
(423,392)
70,772
11,820
(1,800)
(10,020)
60,752
Viatu Ltd
STATEMENT OF CHANGES IN EQUITY AS AT 31.03.02
Bal b/f
Prior
adjustment
Restated
Rev. gain on
NCA
Rev. gain on
investment
Rev. gain on
foreign
Net profit:
year
Dividends:
Interim
Ordina
ry
share
capital
Sh.00
0
Preferen
ce share
capital
Sh.000
Share
premiu
m
200,000
200,000
-
200,000
200,000
-
400,000
400,000
-
Sh.000
Gener
al
reserv
e
Sh.00
0
600,00
0
600,00
0
-
F.A
Rev.
Reserv
e
Sh.00
0
30,000
390
-
Retain
ed
earnin
gs
Sh.00
0
110,84
8
110,84
8
60,752
Total
Sh.0
00
610,8
48
610,8
48
30,00
0
39060,75
2
(13,00
0)
Bal b/d
200,000
200,000
40,000
60,000
30,390
158,60
0
(13,00
0)
68,89
90
208
Papers
(b)
Answers Past
Viatu Ltd
Balance sheet as at 31 March 2002
Sh.000
Sh.000
334,900
62000
396900
204,132
319,618
30,000
14,745
568,495
965395
FINANCED BY:
300,000
300,000
600,000
200,000
200,000
400,000
40,000
30,390
60,000
158,600
20,000
1,200
102,000
3,205
150,000
Workings
Turnover
As per trial balance
Less proceeds and disposals
2.
21,200
710190
255,205
965395
1.
130,390
158,600
688,990
Sh.000
1,191,864
(1,215)
1,190,649
4.
Administrative expenses
Wages and salaries
As per TB
Audit fees
Depreciation: fixtures
Compensation of director for loss of
office
Provision for doubtful debts (16,822
14,400)
Directors fee
Profit on assets disposed
Motor
Fixtures &
Cost
vehicles
Fittings
Acc. Dep.
2,800
1,455
NBV
2,150
905
Proceeds
650
550
Profit &
715
500
Loss
6,500
209
78,840
59,864
25,000
12,580
176,104
70,834
11,492
1,400
1,040
8,500
2,422
150,000
245,688
Total
4,255
3,055
1,200
1,215
Profit U Loss
Bal c/d (30% x 4,000)
Sh.000
1,800
1,200 Bal b/d
3,000
Sh.000
3,000
3,000
210
Papers
Answers Past
Directors fee
Compensation to director for loss of
office
Depreciation
Auditors fee
Staff costs
Sh.000
205,000
8,500
13,650
1,400
40,834
Note 3 Taxation
Corporation tax is based on the adjusted profits for tax purpose at a
corporation tax rate of 30%
Note 4 Propety plant and equipment
Freehold
land &
Buildings
Sh.000
Bal as at 01.04.01
Additions
Disposals
Revaluations
270,000
30,000
Motor
vehicl
es
Sh.00
0
48,960
2,240
(2,800)
-
Bal as at 31.03.02
300,000
48,400
19,345
300,000
270,000
13,820
(2,150)
12,580
24,250
24,150
35,140
8,460
(905)
1,040
8,595
10,750
10,740
COST/VALUATION
Accumulated
Depreciation
Bal as at 01.04.01
Eliminated on
disposal
Charge for the year
Bal as at 31.03.02
NBV as at 31.03.02
NBV as at 01.04.01
Fixtures
&
Fittings
Sh.000
19,200
1,600
(1,455)
-
Total
Sh.00
0
338,16
0
3,840
(4,255)
30,00
0
367,74
5
22,280
(3,055)
13,650
32,845
315,88
0
315,88
0
Note 5 Dividends
During the year the company paid a dividend of sh.1.30 on the preference
shares outstanding. The directors are now proposing a dividend of sh.1.35
per s share on the number of ordinary shares outstanding at the end of the
year.
QUESTION TWO
211
212
Papers
Answers Past
Kamaro ltd
Trading profit and loss account for the year ended 31 May 2002
Six months to
Six months to
30.1.01
31.05.02
Sh.0
Sh.0
Sh.00 Sh.000
00
00
0
Sales
24,00
36,000
Cost of sales
0
21,600
Gross profit
14,40
14,400
Less Expenses
0
Administrative expenses
3,000
9,600
3,000
Selling expenses
1,200
1,800
Audit fees
600
600
Incorporation expenses
600
Depreciation: Furniture
300
120
Motor vehicle
1,200
600
Interest on loan
450
Directors salaries
1,650
Goodwill written off
3,500
11,870
Net profit
2,530
Less salaries: - Kamau
750
6,750
Maneno
450
2,850
Rotino
450
Share of profits: Kamau
Maneno
Rotino
400
400
400
1,650
1,200
Total
Sh.000
3,000
3,000
1,200
600
420
1,800
450
1,650
3,500
750
450
450
400
400
400
(1,20
0)
-
Sh.0
00
60,00
0
36,00
0
24,00
0
18,02
0
5,380
1,650
3,730
(1,200
)
2,530
CAPITAL ACCOUNTS
Drawings
Share
capital
Kam
Manen
Sh.0
00
750
23,00
0
Sh.000
450
23,510
23,75
0
23,960
Rotino
Sh.000
450
11,060
11,510
Kamau
Sh.000
Balance b/d
Salaries
Profits
Goodwill
Revaluation
Interest
Loan
18,000
750
400
4,500
100
23,750
Manen
Sh.000
9,000
750
400
4,500
100
450
9,000
23,960
Rotino
Sh.000
6,000
450
400
4,500
100
11,510
213
Kamaro ltd
Balance sheet as at 31 May 2002
Ksh.
000
Non Current assets
Property, plant and equipment
(note 1)
Goodwill
Current Assets
Inventories
Accouts receivable
Prepayments
34,680
10,000
14,400
9,000
600
24,000
68680
Financed by
: Ordinary share capital
Retained profits
Current liabilities
Accounts payables
Accruals
Bank overdraft
Ksh.
000
57,630
2,530
59,980
7,200
300
1,200
8,700
68,680
NOTE 1
PROPERTY, PLANT AND EQUIPMENT
COST ACC.UMULA
TED
DEPRECIATI
ON
Freehold property
27,000
Furniture and fittings
2,400
(120)
Motor vehicles
6,000
(600)
Motor vehicles
Capital: K
M
R
NBV
27,00
0
2,280
5,40
0
34,68
0
Revaluation account
1,200 Freehold property
100
Furniture &
100
Fittings
100
300
1,500
1,200
300
____
1,50
0
214
Papers
Answers Past
215
QUESTION THREE
Dolly manufacturers
Trading Profit and Loss Account 31 march 2002
Sales
Goods sent
to branch
Cost of Sales
Opening
Stock
Purchases
Goods from
Head office
Less closing
stock
Gross profit
Expenses
Depreciation
Fitting
Administrati
on
Distribution
UPCI and
GIT
Exchange
Loss
Managers
Commission
Net Profit
Profit and
Loss b/f
Profit and
Loss c/f
Head office
KSh.
KSh.
000
000
101,090.
000
_16,900.
000
14,050.0
117,990.
00
000
65,630.0
00
_________
79,680.0
00
28,500.0
(51,180.
00)
000)
66,810.0
00
1,600.00
0
19,250.0
00
7,330.00
0
490.000
0
________
(28,670.
000)
38,140.0
00
_
Zm.
000
Branch
Zm. 000
48,807.0
00
156,500.
000
205,307.
000
(21,775.
000)
9,450.00
0
28,514.6
00
19,815.4
00
0
0
_4,353.0
00
KSh.
000
KSh.
000
(183,532.
000)
93,701.00
0
Branch
KSh.
000
25,203.0
00
____0.00
0
25,203.0
4,437.0
00
00
15,650.
000
20,087.
000
(2,050.0
(18,037.
00)
000)
7,204.63
6
(62,133.0
00)
31,568.00
0
900.000
2,592.2
36
1,801.4
00
0
1,005.0
23
__394.0
91
2,500.00
0
21,842.2
36
9,131.40
0
0.000
1,005.02
3
__394.09
1
277,233.0
00
_____0.00
0
277,233.0
00
(6,6692.
148)
473.253
Combined
KSh.
000
126,293.
000
_________
126,293.
14,050.0
000
00
70,067.0
00
_________
84,117.0
00
(52,807.
(30,310.
000)
000)
73,524.6
36
(34,872.
748)
38,613.2
52
12,000.0
00
50,613.2
52
216
Papers
Answers Past
Balance Sheet
Head office
KSh. 000
KSh. 000
Non Current
Assets
Premises
Fixtures &
Fittings
Less
Depreciation
Current
liabilities
Creditors
Managers
Commission
Net Assets
Branch
KSh.00
KSh.00
0
0
Combined
KSh.000
KSh. 000
45,000.00
0
45,000.00
0
16,000.00
0
Branch Current
Accts
Less UPCs
Current Assets
Stock at
warehouse
- in transit
Debtors
Bank balance
Cash in transit
Cash in hand
Branch
Zm000
Zm.000
14,659.25
2
(240.000)
28,500.00
0
1,000.000
17,550.00
0
(8,000.00
0)
53,000.00
0
14,169.25
2
67,169.25
2
9,200.000
94,500.00
0
9,000.0
00
(9,450.00
0)
85,050.00
0
_(900.0
00)
8,100.0
00
__980.000
57,694.00
0
Profit&Loss
Account
Head office
current account
4,500.000
________
(4,500.00
0)
(8,900.00
0)
61,100.00
0
19,775.00
0
2,050.0
00
35,100.00
0
2,925.0
00
30,274.58
3
1,000.000
20,475.00
0
27,084.00
0
2,257.0
00
11,457.00
0
464.000
Share capital
Reserves
25,000.00
0
464.000
__8,598.0
00
90,557.00
0
_53,194.0
00
120,613.2
52
50,000.00
20,000.00
_50,613.2
52
12,336.00
0
__4,353.0
00
(16,689.0
00)
__716.5
00
7,948.5
00
_73,868.0
00
158,918.0
00
1,028.0
00
__361.2
50
(1,390.7
50)
158,918.0
00
158,918.0
00
120,613.2
52
_1,696.50
0
65,367.08
3
6,559.2
50
14,659.
250
14,659.
250
14,659.
250
5,528.000
__361.250
(5,890.75
0)
_59,513.2
5
120,163.2
50
50,000.00
0
20,000.00
0
50,613.25
2
_________
120,163.2
50
217
218
Papers
Answers Past
Workings
Translated Trial Balance
Branch
Fixtures and fittings
Debtors
Creditors
Bank
Cash
Sales
Purchases
Goods from Head office
Head office current
account
Administration expenses
Distribution expenses
Commission expenses
Commission accrued
Depreciated Fixtures
Depreciated Provision
Closing Stock-Ex. Kenya
-Local
Closing Sd-Ex. Kenya
-Local
Exchange loss balance fig)
Zm. 000
94,500.000
35,100.000
27,084.000
8,598.000
Branch
Zm. 000
12,336.000
277,233.000
48,807.000
156,500.000
28,514.600
19,815.400
4,353.000
9,450.000
12,000.000
9,775.000
_________
454,497.000
129,350.000
4,353.000
9,450.000
12,000.000
9,775.000
_________
454,497.000
1/10.5
1/12
1/12
1/12
1/12
1/11
1/11
1/10
ACT
1/11
1/11
1/11
1/12
1/10.5
1/10.5
1/10
1/11.5
1/10
1/10.5
KSh. 000
9,000.000
2,925.000
2,257.000
716.500
Balance b/d
_______
15,900.00
2,592.236
1,801.400
394.091
361.250
900.000
900.000
1,200.000
850
_1,005.02
3
43,728.25
0
1,250.00
464.00
14,186.00
15,900.00
Managers Commission
Cost of sales relating to goods from head office
Zm. 000
Goods from Head office
156,500.000
Less Closing Stock
12,000.000)
144,500.000
Mark up of 50%
72,250.000
216,750.000
Commission at 2%
4,335.000
250,203.000
14,186.000
KSh.
000
Goods in transit
Cash in transit
Balance c/d
1,028.000
4,437.000
15,650.00
0
KSh. 000
1,200.000
850
_________
43,728.250
219
QUESTION FOUR
WORKINGS
1.
4,500
x 100%
15,000
Control in Tera
2.
(Associate)
15,000
x 100% 75%(Subsidiary)
20,000
3.
= 30%
%
Sh. 000
100
32,000
25
8,000
125
40,000
75% x = 6,000
8,000 = 2,000
25% x 8,000
8,000
Sh. 000
152,000
300,000
24,000
116,000
132,000
20,000
20,000
= 4,000
2
INVESTMENT IN ASSOCIATE
Sh.000
Cost of investment
152,000 Premium
Share of post
21,600 Amortization
acquisition profit
Balance to CBS
_____
173,600
4.
Analysis of Tera
COST OF CONTROL
Sh.00
0
Sh.000
4,000
______
173,600
Sh.00
0
220
Papers
Cost of
investment
Answers Past
716,00
0
Goodwill amortization C/D =
5.
6.
50,000
x 9/12 = 7,500
5
Cost of control
136,50 Balance b/d (Mega) (786
(120,000 +
0 200)
16,500)
Tera Ltd (288 10% x 400)
MI (25% x
62,00 Associate (investment)
248,000)
6,000 Share of post acquisition
UPCS
Share of dividends:
Depreciation
18,000 subsidiary
adjustment
7,500
(75% x 40,000 x 9/12)
(180,000 x 10%)
400 Associate (30% x 30,000)
Goodwill
653,10
amortization
0
Premium
______
To CBS
887,10
0
MINORITY INTEREST
Sh.00
0
UPCS
2,000
To CBS
174,00
0
_____
176,00
0
300,00
0
42,000
120,00
0
16,50
0
7,500
180,00
0
50,00
0
716,00
0
Sh.000
586,000
248,000
21,600
22,500
9,000
______
887,100
Sh.000
100,000
14,000
62,000
176,000
221
853,200
225,600
180,000
(18,000)
1,240,600
222
Papers
Answers Past
Sh.000
732,600
499,800
9,000
12,000
40,00
0
Financed by:
Share capital
Share premium
Capital Reserve
Retained Earnings
920,000
1,240,60
0
42,500
169,60
0
2,372,70
0
1,293,40
0
366,610
0
1,000,00
0
200,000
300,000
653,10
0
215,310
0
174,00
0
2,327,10
0
Current liabilities
Creditors 590 + 152)
Tax (190 + 103)
Dividends proposed (Mega) (20%
x 2M
MI share dividend (25% x 40,000)
Bank overdraft
Sh.000
742,000
293,000
200,000
10,000
94,0
00
QUESTION FIVE
FINANCIAL ACCOUNTING III
1,339,00
0
366,610
0
223
Maintenance
Distribution
A/C
Bal c/d
HUY
HAW
HAO
Sh.0
00
Sh.0
00
154,0
00
Sh.0
00
162,0
00
553,4
72
267,2
02
54,06
6
707,4
72
429,2
02
242,0
66
188,0
00
HUYU
Sh.000
Balance b/d
Capital income
(1:1:1)
Acc. Income
Revaluation gain
WALE
Sh.000
HAO
Sh.00
0
41,400
207,900
148,500
74,714
70,258
148,500
375,520
35,282
69,30
0
707,472
429,202
148,5
00
12,50
6
11,76
0
242,0
66
WORKINGS:
1.
207,900
x 124,740 = 37,520
691,200
Wale
Hao
2.
414,000
x 124,740 = 74,714
691,200
69,300
x 124,740 = 12,506
691,200
New MPs
Sh
90
120
120
120
160
140
Fimbo Ltd
Lima Ltd
Peva Ltd
Total
3.
Difference
Sh
30
40
20
No. of
shares
Sh
9,600
12,600
13,200
Gain to
Acc.
Sh
288,000
504,000
264,000
1,056,000
414,000
x117,300
691,200
Wale
207,900
x117,300
691,200
35,282
Hao
69,300
x117,300
691,200
11,760
70,258
Sh.
1,672,000
3,344,000
5,016,000
Bal b/d
Revaluation gain
Sh.
3,960,000
1,056,000
5,016,000
224
Papers
(b)
Answers Past
Sh.
1,600,000
72,000
1,672,000
64,444
489,028
553,472
Trust capital
Accumulation A/c
Sh.
1,672,000
_______
1,672,000
553,472
_______
553,472
225
DECEMBER 2002
QUESTION ONE
(a)
STATEMENT OF DISTRIBUTION
USING MAXIMUM POSSIBLE LOSS METHOD
Total Emojon
Sh.000
g
Sh.000
Capital a/c
25,000
12,500
Current a/c
8,750
5,000
33,250
17,500
Cash available (W1)
(12,925)
Maximum possible loss
20,825
(8,330)
1st Distribution
12,925
9,170
capital balance
20,825
8,330
cash available
(8,500)
maximum possible loss
12,325
(4,930)
2nd Distribution
6,500
3,400
capital balance
12,325
4,930
cash available
(9,800)
maximum possible loss
2,125
(1,010)
3rd Distribution (W2)
9,800
3,920
Total distribution
31,225
16,490
(b)
Goodwill
Buildings
Plant & Machinery
Fixtures
Motor vehicles
Stock
Debtors
Dissolution expenses
Bal b/d
Realisation:
June
July
August
October
Barmoi Kimani
Sh.000 Sh.000
7,500
5,000
3,750
11,250
5,000
(8,330)
2,920
8,330
(4,165)
835
4,165
(4,930)
3,400
4,930
(2,465)
1,700
2,465
(1,010)
3,920
10,240
(505)
1,960
4,495
Realisation A/c
Sh.
12,500 CB: June
18,750
July
9,650
August
2,125
October
1,000 Discount received
8,000 Capital: E
7,375 1,010
250
B
1,010
K
505
59,650
CASH & BANK A/C
Sh.
20 Bal b/d
Creditors
7,520 Dissolution expenses
31,250 Loan
8,500 Capital: E
9,750 1,010
_____
B
Sh.
7,500
31,250
8,500
9,750
125
2,525
59,650
Sh.
16,045
7,000
250
2,500
31,225
226
Papers
Answers Past
1,010
K
505
57,020
57,020
227
CAPITAL A/CS
Realisat
ion
CB
E
Sh.00
0
1,010
16,490
17,500
B
Sh.0
00
1,010
10,24
0
11,25
0
K
Sh.0
00
505
4,495
E
Sh.000
Bal b/d
Current
a/c
12,500
5,000
5,000
17,500
W1:
Sh.
K
Sh.00
0
5,000
5,000
Sh.
20
7,500
31,250
38,770
Bal b/d
June Realisation
July Realisation
Creditors
Discount received
Bank overdraft
Loan
B
Sh.0
00
7,500
3,75
0
11,25
0
7,125
(125)
16,045
2,500
25,545
12,925
W2
Shs.
9,750
50
9,800
Given
QUESTION TWO
TRADERS LTD
TRADING, PROFIT & LOSS A/C FOR THE YEAR ENDED 30.06.02
Sales
GSTB
HEAD OFFICE
Sh.000
Sh.000
6,400
4,620
11,020
Cost of Sales
Purchases
Cost of modification
Goods received by branch
Goods lost
Closing stock (W1)
Gross profit
Less Expenses
Lost goods
Provision for unrealized profit
Selling and general expenses
Net Profit
9,847.5
252.5
(780)
BRANCH
Sh.000
Sh.000
4,100
4,100
(9,320)
1,700
84
945
4,400
(88)
(704)
(1029)
671
88
0
106
(3,608)
492
(194)
298
WORKINGS
1.
Closing stock
(a)
Head office
Purchases
Unmodified goods
Less: GSTB
Sh.000
9,847.5
(500)_
9,347.5
110
100
x46200
(4,200)
COMBINED
Sh.000 Sh.000
10,500
10,500
9,847.5
252.5
(80)
(1,620)
80
0
1,051
(8,400)
2,100
(1,131)
969
228
Papers
Answers Past
100
(5,120)
x6400
125
Modification cost
252.5
280
500
780
Branch
Goods received
Cost of sales
Stock lost at invoice
Sh.000
4,400
(3,608)
100
110
x100
x
125
100
(c)
(88)
704
Combined
Head office
Sh.000
780
100
x704
110
100
x220
Goods in transit
110
Branch
640
200
1,620
TRADERS LTD
BALANCE SHEET AS AT 30.06.02
HEAD OFFICE
Sh.000
Sh.000
Non current assets
Branch Current account
Less UPCI at the branch
Current Assets
Stock
Goods in Transit
Debtors
Cash in transit
Bank
EQUITY AND LIABILITIES
Capital
Add net profit
Less drawings
Head office current a/c
Current liabilities
Creditors
1,605.5
(64)
780
200
1,548
421.5
760
BRANCH
Sh.000
Sh.000
COMBINED
Sh.000 Sh.000
1,541.5
3,709.5
5,251
704
568
387.5
1,659.5
1,659.5
1,550
969
2,519
(275)
2,244
1,420
200
2,116
421.5
1,147.5
5,305
5,305
1,550
969
2,519
(275)
2,244
1,605.5
3,007
54
3,061
5,251
1659.5
5305
Sh.
1,949
298
____
2,247
Goods in transit
Cash in transit
Bal c/d
Sh.
220
421.5
1,605.5
2,247
Bal c/d
Sh.
1,605.5
_____
1,605.5
229
Bal b/d
Profit
Sh.
1,307.5
298
1,605.5
230
Papers
Answers Past
QUESTION THREE
(a)
Sh.
56,00
0
3,00
0
59,00
0
Sh.
3,000
1,000
55
Premium amortisation
Preacquisition dividend
(25% x 4m)
To consolidated balance
sheet
59,00
0
Sh.
3,300,000
(2,924,00
0)
370,000
37,500
15,000
422,500
(141,000)
281,500
260,50
0
21,000
Turnover
Operating expenses
Operating profit ( Less UPCI )
Share of Bs profit after tax (30% 125,000)
Dividend due from C Ltd (15% x 100,000)
Profit before tax
Taxation:
Profit after tax
Profit attributable to ordinary s/holders
Profit attributable to Minority interest
281,500
Retained
Profits
Sh.000
450000
TOTAL
Sh.000
Minority
Interest
Sh.000
Total share
holders
fundsl
Sh.000
260500
132000
(132000)
578500
=
=
=
=
9% x 100,000
=9,000
16,500
50% x 9,000 =4,500
4,500 + 16,500
=21,000
TAKE NOTE
In this question, goodwill arising from consolidation has been amortized
over its useful life.however, under the new IFRS 3(Business combination),
231
Powers of a liquidator
Under section 241 of the Companies Act the liquidator has some
powers some of which are exercisable with the consent of the court or
a committee of inspection while others are exercisable without
consent.
Powers exercisable with consent
To blame or defend any action or other legal proceedings in the
name and on behalf of the company.
To carry on the business of the company in so far as may be
necessary for beneficial winding up.
To appoint an advocate to assist in the performance of his duties
To pay any class of creditors in full
To make any compromises or arrangement with creditors
To compromise all calls, liabilities to calls depts. And other
liabilities.
Powers exercisable without consent
To sell any movable or immovable properties of the company
To execute deeds and other documents in the name of the company
and on its behalf
To prove rank and claim in the bankruptcy or insolvency of a
contributory
To draw, accept or endorse any of exchange, a promissory note in
the name of a company.
Raise money on the security of the companys assets
Appoint an agent to do business which he can not do himself
STRATHMORE UNIVERSITY REVISION KIT
232
Papers
(b)
Answers Past
Hasara Ltd
Liquidators Statement of Account
Sh.
Sales of pledged assets
Freehold property
Bank overdraft
12,500
(3,750)
2,000
6,250
12,250
125
1,500
30,875
Sh.
625
504
10,000
500
10,500
10,746
5,000
1,000
6,000
2,500
30,875
233
WORKINGS
1.
Preferential creditors:
Rates 6 months to 31.10.02
Managers salary (max)
Wages for 15 employees
PAYE
125
4
129
50
325
504
2.
125
500
625
3.
1,000
2,500
3,500
35
3,500 = 100
35
250 100 = 150
QUESTION FIVE
(b)
(i)
Sh.
Sh.
18,240
4,560
36,480
22,800
3,150
47,400
109,830
7,640
4,820
1,860
Sh.
Sh.
263,605
87,835
19,990
Fixed Assets:
Freehold property
Current Assets
Contributions due within 30 days
Current liabilities
Unpaid benefits
Accrued expenses
(14,320)
95,510
(22,640)
72,870
(2,840)
70,030
107,825
23,460
394,890
132,320
527,210
4,940
(320)
(240)
(560)
4,380
234
Papers
Answers Past
531,590
461,560
70,030
531,590
235
JUNE 2003
QUESTION ONE
Income statement for the year ended 31 March 2003
Sh. Million
884
(601)
283
6
289
109
99
3
27
(238)
51
(17)
34
Share Premium
Sh. Million
450
188
110
450
188
(4)
106
At 1 April 2002
Net profit
Excess depreciation
At 31 March 2003
Revaluatio
n Reserve
Sh. Million
Retained
Earnings
Sh.
Million
95
34
4
133
848
60
15
923
186
194
5
385
1,308
50
5
151
206
160
2
53
225
1,308
Total
Sh.
Million
843
34
877
236
Papers
Answers Past
2
8
Depreciation of PPE
Amortisation of Intangibles
Directors emoluments - Fees
- Others
Other staff costs
- Wages and salaries
- Social security costs
- Terminal benefits
Auditors remunaeration
Loss on dsposal of motor vehicles
2
12
81
2
3
Sh.m
58
7
14
86
2
3
Note 3 Taxation
Corporation tax is based on the adjusted profits for tax purpose at a
corporation tax rate of 30%
Note 4 Inventories
Inventoires comprise of the following items
Sh m
48
29
51
58
186
Raw materials
Work in progress
Finished goods
Stores and spares
QUESTION TWO
(a)
Sh.000
2,000
3,000
12,000
4,000
5,200
Sh.000
Depreciation accounts:
Buildings
Plant and machinery
Motor vehicles
Trade payables
990
4,500
3,500
5,100
4,100
1,280
3,220
3,665
3,665
3,665
10,995
45,795
237
Partners capital
accounts
Kioko
Licha
Mengo
Kiokos account:
Debtor
Purchaser (Kiligo Ltd)
a/c
400
260
205
865
840
30,000
45,795
238
Papers
Answers Past
(b)
Partnership Capital Accounts
2003
March 31
drawings
March 31
Realisation
A/c:
Cars
March 31
Realisation
A/c:
debtor
Purchaser A/c
Kiok
o
Sh.0
00
1,440
Lich
a
Sh0
00
960
Meng
o
Sh.00
0
1,200
400
260
205
840
10,20
0
8,40
0
11,400
12,88
0
(c)
9,62
0
12,805
2002
April 1 Balance b/f
April 1 Current A/cs
2003
March 31 P & L
Appropriation A/c:
Interest on capital
1,800
Share of profit
3,600
5,400
March 31 Realisation
A/c Profit
Cash book
3,220
Kiok
o
Sh.00
0
3,000
3,190
Licha
Sh.0
00
2,000
2,000
Meng
o
Sh.00
0
4,000
1,500
600
1,200
400
1,200
800
1,200
3,665
3,665
3,665
1,22
5
355
1,64
0
12,88
0
9,620
12,80
5
Kiligo Limited
Balance Shet as at 1 April 2003
Sh.000
Non-current assets
Property, plant and equipment at cost:
Freehold land
Buildings
Plant and machinery
Sh.000
5,000
4,000
10,000
19,000
2,400
21,400
5,700
2,900
4,500
Total assets
EQUITY AND LIABILITIES
Share capital: authorized, issued and fully
paid:
Sh.2 million share sof Sh.10
Share premium
Current liabilities:
Trade payables
TOTAL EQUITY AND LIABILITIES
13,100
34500
20,000
10,000
30,000
4,500
4,500
34500
Purchaser Account
Realisation account
Sh.
30,00
0
Partners capital
accounts:
Kioko
Licha
Mengo
30,00
0
10,20
0
8,400
11,40
0
30,00
0
Sh.
Shares
680,000
560,000
760,0
00
2,000,0
00
239
5,200
4,100
1,280
10,580
(5,100)
17,490
15,690
Sh.000
12,010
5,480
17,490
1,800
3,600
5,400
240
Papers
Answers Past
QUESTION THREE
Mapito Limited head
office journal
1
.
2
.
3
.
Dr.
Sh.0
00
846
Cr.
Sh.0
00
846
228
228
5
.
6
.
Mombasa branch
equipment account
Mombasa branch current
account
To record the airconditioning units in the
Mombasa
branch_____________
Mombasa branch current
account
Mombasa branch
equipment depreciation
account
To record the depreciation
charge for the year to 31
March 2003_________
(a) Mombasa branch
current account
Mombasa branch motor
car
depreciation account
To record the
depreciation charge
for the year ended 31
March 2003.
(b) Mombasa branch motor
car
depreciated account
Mombasa branch motor
car a/c
Mombasa branch
current account
amount due
Mombasa branch
current account
Profit on sale
960
96
960
96
Dr.
Sh.000
846
Premium account
Likoni Ferries Ltd. account
To record the return premium
due to likoni Ferries
Ltd._______________
228
Bank account
Head office current account
To record the fact that the
cheque has gone stale/been
stopped___________
Debtors Rainbow Travels
Ltd. account
Travel expenses account
Head office current account
To record the amount as a
branch expense and to show
Rainbow Travels as a debtor
650
960
Cr.
Sh.0
00
846
228
650
68
68
136
96
960
96
300
300
300
300
1,200
1,200
280
280
280
2
282
241
8
.
Managers account
Profit on disposal of motor car
account
To record the profit made by
the branch on the sale of the
car.______________
Depreciation on PPE account
Head office current account
To record the depreciation
charge on PPE for the year
ended 31 March 2003______
Claims paid account
Mombasa branch current
account
To record the payment of
the claim raised by China
Roads Limited____
1,100
1,100
280
280
670
670
1,100
1,100
Note:
No entry is required in respect of the outstanding claim, raised by China
Roads Limited brought forward at the beginning of the year it will be taken
to the revenue account when the books are closed, and deducted from the
sum of claims paid in the year and claims outstanding carried forward.
QUESTION FOUR
The Voice of the Nation Limited
Consolidated Cash Flow Statement for the year ended 30 April 2003
Operating activities
Sh.million
Sh.milli
on
417
265
(17)
13
8
(50)
636
(98
)
16
131
685
(8)
(120
(163)
70
18
(90)
(150)
557
(75)
242
Papers
Answers Past
To minority interest
Net cash used in financing
Increase in cash and cash equivalents
Cash and cash equivalents at start::
Cash and cash equivalents
Bank overdraft
( 40)
(280)
202
71
(188)
(117)
93
(8)
85
WORKINGS
PPE ACCOUNT
B/F 2
Reval.
ML
CB
2,134
72
48
120
163
2,417
Depreciati
on
Disp.
11
0
1
5
2
8
15
0
83
9
1,14
2
Revaluation Reserve
20
47
931
2,297
2,417
Taxation
CB
12 B/f C
C/f C
0
D
D
2 P&L
2
10
7
24
9
Revenue reserve
Tax G
Assoc.
Minori
ty
Div.
paid
C/f
20
100
Deprecia
tn
PPE
Disposal
C/f
B/f
PBT
B/f
P&
L
733
265
-
998
249
72
5
41
7
PP
E
P&
L
10
0
1
7
Deprec
.
C.B
11
7
Investment in
Associate
B/f
246
P&L
50
47
70
Minority interest
B/f
CB
40 PPE
C/d
24 Rev.
0 Res
117
Ta
x
CB
C/f
____
188
72
260
998
Disposal Account
16
123
110
B/f
PPE
C/f
28
0
204
48
28
280
1
5
1
5
26
3
_____
___
1,14
2
296
29
6
QUESTION FIVE
Trust Cash Account
(a)
Inco
me
Sh.0
00
2002
Apr.1
Jun.3
0
Sep.3
0
Nov.3
Bal. b/f
Income
A/c
Income
A/c
E.A.B. Ltd
200
300
F1
Sh.0
00
WR
Sh.0
00
SR
Sh.0
00
200
4,400
2,250
2,250
4,500
2002
Jun.30
Nov.3
0
Nov.3
0
2003
Income A/c
Distrib.
Contra
12% Kenya stock
Inv. In ICDCI
Inco
me
Sh.0
00
200
F1
Sh.0
00
WR
Sh.0
00
4,500
6,650
120
SR
Sh.0
00
2,450
K.E Ltd.
Contra
Income
A/c
Income
A/c
180
42
_____
_____
_____
722
2,450
6,650
4,500
243
Feb.2
8
Mar.3
1
Mar.3
1
Mar.3
1
shares
Inc. A/c expenses
Inc. A/c K 201
Inc. A/c M 201
402
____
____
____
722
2,450
6,650
4,500
Income Account
2002
June
30
2003
Mar.
31
Mar.
31
Mar.
31
Sh.000
CB: School fees paid for K &
M
200
120
201
201
2002
June 30
Sep. 30
Dec. 31
Dec. 31
722
Sh.00
0
200
300
180
42
___
722
FIF
Sh.0
00
Nov,
30
Contra
2003
Mar
31
Bal. c/d
WRF
Sh.0
00
SRF
Sh.0
00
4,500
2002
April 1
Nov. 30
Nov. 30
6,250
6,650
____
6,250
6,650
4,500
Nov. 30
2003
Apr.1
Bal b/f
Inv. In EAB Ltd
Shares: Surplus
Inv. In
Kilimanjaro
Ent: surplus
Contr
Bal b/d
FIF
Sh.00
0
4,000
WRF
Sh.00
0
4,000
SRF
Sh.00
0
3,000
400
2,250
2,250
1,500
-
6,250
6,650
4,500
6,250
6,650
244
Papers
Answers Past
(b)
Sh.000
Fixed interest
investment
Wider range
investments
2,000
1,800
2,450
4,200
2,450
Sh.000
6,250
6,650
12,900
6,250
6,650
12,900
Trust capital:
Fixed interst fund
Wider range fund
245
DECEMBER 2003
QUESTION ONE
(a)
2003
Sh.000
Sh.000
Sh.000
Turnover
Less cost of sales
Opening stock
Purchases (2040 + 10)
Less closing stock
Gross profit
Expenses
Salaries (W2)
Wages
Rates & Lighting (W3)
Professional charges
General expenses
Lease amortisation
Depreciation:
Motor vehicles
Shop fittings
Loan interest (Kijiko)
Net profit/(loss)
Interest on capital:
K
S
M
Bal shared in PSR:
K
S
M
Sh.000
510
2,050
2,560
(560)
660
1,140
260
190
73
17
172
8.2
260
190
73
17
236
8.2
520
380
146
34
408
16.4
42
9
-
30
9
33
72
18
32.76
15
9
(81.12)
(54.08)
-
(771.2)
(111.2)
9
3
(24)
(135.2)
181.2
90.6
-
135.2
-
(856.2)
283.8
(12))
271.8
272.04
15
18
3
(81.12)
127.12
90.6
-
Sh.000
3800
2,000
1,800
1,62.4
184.84
36
136.6
136.6
-
Current Accounts
Kijiko
Sh.000
Goodwill
Drawings
Loss
share
To loan
a/c
Bal c/d
60
81.12
633.88
775
Saha
ni
Sh.0
00
600
40
54.08
125.1
2
Mwik
o
Sh.0
00
300
20
73.6
0
819.3
6
393.6
8
Kijiko
Sh.000
Bal b/d
Cash
Goodwill
Interest on
capital
Profit share
220
540
15
775
Saha
ni
Sh.0
00
260
360
18
181.2
Mwiko
Sh.00
0
819.3
6
393.68
300
3
90.6
Loan A/c
Sh.000
60
250
856.88
1,173.84
Motor vehicle
Cash
Bal c/d
Sh.000
500
633.88
33
1,173.84
Capital A/c
Current A/c
Interest on loan
Workings:
Professional charges
As per TB
Sh.000
54
246
Papers
Answers Past
Salaries
As per TB
Less Drawings by partners
Adjusted
Half yearly
3.
(20)
34
17
640
(120)
520
260
168
(22)
146
73
Half yearly
Goodwill
Kijiki
Sahani
Adjustments
(3/5 x 900)
(2/5 x 900)
Sh.000
540
360
900
(2/3 x 900)
(1/3 x 900)
Sh.000
600
300
(2/5 x 900)=360
(c)
Sh.000
Sh.000
Sh.00
0
820
300
180
1,300
16.4
192
78
286.4
803.6
108
102
1,013.
6
Current Assets
Stock
Debtors
Prepayment
Bank
560
80
22
148
810
1823.6
EQUITY AND
LIABILITIES:
Capital A/c:
Sahani
Mwiko
300
100
400
Current A/c
Sahani
Mwiko
125.12
73.6
198.72
598.72
856.
88
1,455.
6
Current Liabilities
Creditors
Accruals: General expenses
TOTAL EQUITY AND
LIABILITES
360
8
368
1823.6
QUESTION TWO
(b)
Currently IAS 21 does not refer to the temporal method and closing
rate method of translating results of the branch. It does not
FINANCIAL ACCOUNTING III
247
248
Papers
Answers Past
Ush.000
126,000
71,360
Ush000
KSh.000
18,000
8,920
1/7
1/9
1/7
1/9
1/9
1/8
1/7
N/A
1/8
1/9
1/8
N/A
Bal fig
3,600
77,200
3,120
864,000
25,200
694,800
113,400
36,000
57,600
23,040
252,000
544,000
158,400
2,394
2,394
1,007,88
0
_______
191,434
_____
191,434
Rate
1/7
1/8
1/9
HO cost
of sales
______
300
120,200
3,956
237,046
237,046
5
105
= 2,394
80,000
Branch cost
of sales
70,000
Inter
co.transfer
600
Unrealised
profit
Amini Ltd
Balance Sheet as at 31.10.03
Head Office
Sh.0
Sh.
00
000
Branch
K.00
K.00
0
0
Branch
Sh.0
Sh.0
00
00
Combined
Sh.0 Sh.00
00
0
28,00
0
9,00
0
37,00
0
126,0
00
138,6
00
264,6
00
18,00
0
19,80
0
37,80
0
46,00
0
28,00
0
74,80
0
NonCurrent Asset
Buildings
Machinery
Branch Current
A/c
Less: UP
Current Assets
Stock
Debtors
Bank
Cash in transit
Current Liabilities
Creditors
Accrued
commission
Net Current
Assets
16,200
(c)
390
96,000
4,000
6,400
2,880
36,000
59,980
19,800
266
KSh.000
68,71
0
(600
)
57,80
0
17,80
0
9,200
3,98
0
88,78
0
19,00
0
68,1
10
105,1
10
23,04
0
71,36
0
158,4
00
252,8
00
3,120
2,39
4
264,6
00
2,880
8,920
19,80
0
37,80
0
31,60
0
390
300
(690)
60,08
0
26,72
0
29,00
0
3,98
0119,7
80
19,39
0
30
74,80
0
129,400
(19,0
00)
69,7
80
174,8
90
(5,51
4)
80,00
0
94,89
0
174,8
90
(b)
247,2
86
511,8
86
511,1
86
249
30,91
0
68,71
0
68,71
0
0
(10,6
90)
100,0
90
174,8
90
80,00
0
94,89
0
174,8
90
Amini Ltd
Trading, Profit and Loss A/c for the year ended 31.10.03
Sales
Goods sent to
branch
Cost of sales
Gross profit
Exchange gain
Expenses
Administrative
Selling &
distribution
Commission
Provision for UP
Net profit::Year
B/f
C/f
Head Office
Sh.0
Sh.0
00
00
208,0
00
70,0
00
278,0
00
118,0
00
30,40
160,0
0
00
46,60
0
160,0
00
600
Branch
K.00
K.00
0
0
864,0
00
Branch
Sh.0
Sh.0
00
00
96,00
0
Combined
Sh.0 Sh.0
00
00
304,0
00
864,0
00
720,0
00
144,0
00
144,0
00
96,00
0
80,80
0
15,20
0
3,95
6
19,15
6
304,0
00
129,4
00
174,6
00
3,9
56
178,5
56
77,60
0
82,40
0
95,99
4
48,00
6
36,00
0
57,60
0
2,394
-
4,000
6,400
266
-
10,66
6
8,490
34,40
0
53,00
0
266
-
8,766
9,089
40
0
9,489
Bal c/d
Profit
120,200
8,490
______
128,690
Sh.000
Remittances
Cash in transit
Bal c/d
Books of Branch
Head Office Current A/c
56,000
3,980
68,710
128,690
250
Papers
Remittances
Bal c/d
Answers Past
USh.000
544,640
511,886
1,056,526
Sh.000
59,980
68,710
128,690
Bal b/d
Profit
Sh.000
Sh.000
1,008,520
48,006
1,056,526
120,200
8,490
128,690
251
QUESTION THREE
Rain Ltd and its subsidiaries
Consolidated Balance sheet as at 31
Sh.000 Sh.000
Non Current Assets
Tangible assets
Intangible assets: Goodwill (W2)
22,000
1,006
23,006
Current Assets
Stocks (2 + 1.2 + 1.6 0.05)
Debtors (W6)
Cash (2.7 + 1.4 + 1.14 + 0.2)
4,750
6,500
5,400
16650
39656
15,000
7,780
2,328
25,108
6,048
31,156
8500
39,656
Workings
Determination of group ownership structure
1.
Storm Ltd
Ordinary
Preferenc
e
1/6
60%
Rain Ltd:
Direct
Indirect
Thunder Ltd
Ordinary
(60% x 55%)
Minority Interest
40%
5/6
42%
Cost of Control
2.
Sh.000
Investment in Storm:
Ordinary
Preference
Share of retained losses
(60% x 500)
Investment in Thunder
(60% x 1,900) by Storm
Rain spent in Thunder
3,400
600
300
4,300
1,140
1,000
____
6,440
3.
25%
33%
58%
Sh.000
Share of Storm equity
Ordinary share capital (60% x
5000)
General reserves (60% x 1000)
Preference share capital
(i/6x3,000)
Goodwill I
Share of Thunder equity
Ordinary share capital
(58%x2,000)
Profit b/f (58% x 300)
Goodwill II
3,400
600
500
200
4,300
1,160
174
806
6,440
Sh.000
760
320
6,048
Sh.000
2,000
2,500
1,200
252
Papers
Answers Past
_____
7,128
840
420
158
7,128
4.
Sh.000
Rain Ltd
UPCs (200/800 x 200)
Bal b/f
Thunder ltd:
Cost of control a/c
25% x 300
75
33% x 300
99
Minority interest
(42% x 400)
Consolidated balance sheet
50
800
Sh.000
2,500
300
320
400
174
168
2,328
3,520
____
3,520
5.
Sh.000
600
1,200
420
7,780
10,000
Sh.000
Bal b/f
Rain
Storm
Thunder
6,000
3,000
1,000
10,000
6.
Sh.000
4,800
2,000
800
Rain Ltd
Storm Ltd
Thunder Ltd
____
7,600
Sh.000
200
400
300
200
6,500
7,600
7.
Group debtors
To consolidated balance sheet
Sh.000
900
8,500
____
9,400
Sh.000
5,000
2,600
1,800
9,400
Rain Ltd
Storm Ltd
Thunder Ltd
QUESTION FOUR
HASARA LTD
STATEMENT OF AFFAIRS AS AT 30.11.2003
Sh.000
Assets not specifically pledged
Cash in hand
Debtors (8,510 + 110)
Stocks
Plant and machinery
Amounts receivable from calls (2,850 + 25%
x 150)
20
8,630
18,760
14,000
2,887.5
44,297.5
Liabilities
Secured creditors
Preferential creditors
22,790
20,900
201
108
48,497
Unsecured creditors
Trade creditors
Contingent liability
Estimated Surplus as regards creditors
253
Surplus carried
to last column
Sh.000
380
380
44,677.5
4,480
44,297.5
48,775
(356)
44,321.5
(22,790.0)
21,531.5
20,900
243
108
(21,251)
280.5
18,000
17,719.5
DEFICIENCY ACCOUNT
Net trading losses for the three years ended 30th
November 2003 after charging:
Depreciation
Debenture interest
Directors remuneration
Estimated losses now written off:
Goodwill
Debtors
Stock
Plant and machinery
Legal claim
Calls in arrears not receivable ( 20,000 X sh.7.50 X 75%)
Freehold property
Sh.000
Sh.000
(12,900)
2,380
600
1,800
2,689
410
420
620
108
112.5
460
(4,819.5)
17,719.5
Preferential creditors
Customs and Excise tax
Managers salary ( max imum amount)
Wages of 3 workment ( max 3 X 4000)
Rates
Taxes
(a)
Sh 000
200
4
12
20
120
356
254
Papers
(b)
(i)
Distribution ()
Bal c/d
Answers Past
Trust Capital
Sh.000
2,850
2,850
5,700
Bal b/d
Revaluation gains
Sh.000
5,200
500
5,700
255
Initial
MPS
Sh.
110
93
Increased
MPS
Sh.
125
100
Increases
Sh.
110
90
191,434
125
100
191,434
15
10
15
6
No. of
shares
Sh.000
20
30
Gain
Sh.0
00
300
200
500
1
1
237,046
15
10
237,0
46
Accumulation A/c
(ii)
Maintenance
Distribution
Bal c/d
Reuben
Sh.000
Levi
Sh.000
30
188
-
20
142
218
Bal b/d
Dividend
income(Capital)
Dividend income
(Accum) (3:2)
Revaluation gain:
ABC: (3:2)
Mapengo:(3:2)
162
Reub
en
Sh.0
00
150
50
3
Levi
Sh.000
9
6
6
4
218
162
100
50
2
Distribution A/c
(iii)
Sh.000
Capital investments:
10,000 ABC shares
15,000 Mapingo shares
Cash
Accumulation investments
600 Mapingo shares
Cash
1,250
1,500
100
Sh.000
2,850
188
Trust capital
Accumulation A/c
60
53
3,028
_____
3,038
Cash A/c
Bal b/d
Dividends (ABC) capital
Dividends (ABC)
200
___
200
Sh.000
50
100
5
105
Maintenance
Reuben distribution
Bal c/d
Sh.000
Assets
Capital investments:
10,000 shares in ABC Ltd @Sh.125
15,000 shares in Mapingo Ltd @ Sh.100
Accumulation Investment
400 ABC shares @Sh.125
400 Mapingo shares @ Sh.100
Cash: Capital
Income
Trust capital
Accumulation a/c
100
100
200
Sh.000
50
53
52
105
Sh.000
1,250
1,500
2,750
50
40
100
52
2,850
142
90
152
2,992
______
2,992
256
Papers
Answers Past
Tutorial note: The last 2 accounts are not required by the examiner, they
are illustrative.
257
JUNE 2004
QUESTION ONE
H Ltd and its subsidiary
Consolidated income statement for the year ended 31 December 2003
Sh000
995,000
378,000
21,000
399,000
(105,000)
294,000
(60,000)
234000
(60,000)
174,000
40,000
214,000
Turnover (600000+400000-5000)
Profit before tax
Share of PAT in A ltd (30%*70,000)
Taxation: group (60000+45000)
Profit after Tax
Profit attribuatable to Minority interest
Profit attributable to H Ltd
Proposed dividends
Retained profit for the year
Retained profit b/f
Retained profit c/f
Year
Sh000
138,000
S ltd
A ltd
Group
0
0
40,000
27,000
9,000
174,000
Working
B/fSh0
00
40,000
-
Year
Sh000
80,000
36,000
c/f
Sh000
120000
36000
12,000
12000
11,000
(1,000)
11,000
(1000)
138,000
45,000
0
178000
105000
(60,00
0)
45,000
27,000
80,000
(50,00
0)
30,000
9,000
H ltd
40,000
60,000
(60,000
)
0
0
50,000
(50,000
)
0
0
45,000
27,000
30,000
0
30,000
9,000
c/f
Sh000
178,00
0
27,000
9,000
214,00
0
258
Papers
Answers Past
Sh000
410,000
82,000
492,000
Current Assets:
Inventory
Debtors (80+65)
Dividends due from minority Interest
Cash at bank (75+50+24.8)
Total Assets
174,0
00
145,0
00
12,00
0
125,0
00
456,000
948,000
Retained profits
300,000
18,000
0
214,000
544,000
112,000
644,000
Minority interest
Shareholders funds
Current liabilities:
Creditors
Taxation
Proposed Dividends (60+(MI40%x60)
115,0
00
105,0
00
304,000
84,00
0
TOTAL EQUITY AND LIABILITIES
948,000
WORKING
COST OF CONTROL ACCOUNT (S ltd)
Shm
105
Inv
Goodwill to P&L
11
116
Shm
OSC(60%*140)
PSC(40%*50)
P&L(60%x(60-40)
116
84
20
12
55
OSC (30%x100)
P&L (30%x50)
15
Premium
10
Sh m
200
FINANCIAL ACCOUNTING III
30
259
180
(1)
11
(12)
378
-Note that under the current IFRS 3 Negative goodwill should be reported
immediately as income when it arises.
-Note also that evevn though the examiner has stated that H Ltd has not yet
accounted for its shate of dividends receivable from S Ltd and A Ltd; we
have assumed that h ltd has already accounted for Preference dividends
which is included in the PBT. This is because the preference dividends are
not shown as a current liability in the books of S Ltd. Which Means that it is
either paid or the question has an error. Therefore the most logical
assumption is that the subsidiary co has already paid the preference
dividend by the balance sheet date.
-The bonus shares in most cases if it is paid out of the pre acquisition profits
then it will not affect the computation of goodwill like in the above case. The
dividend was paid nearly at the beginning of the year so it means that the
pre acquisition profits will reduce by sh40 million and share capital
increases by the same. However if the bonus shares are paid out of post
acquisition retained profits then this will affect the computation of goodwill
because we need the reserves at acquisition.. The approach is to use the
reserves at acquisition but the bonus shares received by the holding
company in the post acquisition period should be shown as a separate
capital reserve paid out of the post acquisition retained profits of the
subsidiary.
Minority interest in the income statement
PAT 135,000
PSC
Div 30,000
MI@60%18000
OSC
(135.000)
105000
@40%42000
Total MI=18+42=60000
Investment in Associate co
shm
55
9
18
260
Papers
Answers Past
82
Net assets in associate co, are same as shareholders funds plus the
revaluation gain.
MINORITY INTEREST (Balance sheet)
OSC(40%x140)
PSC(60%x50)
P&L(40%(105-40))
Shm.
56
30
Shm.
26
Balance c/d
112
261
QUESTION TWO
A & B, C & D REALISATION A/C
A&B
Sh.000
740
180
300
830
80
680
507
480
360
4,157
Property
Fixtures & fittings
Motor vehicles
Stock
Investments
Debtors
ABCD: Creditors
Capital: A
B
C
D
C&D
Sh.000
1,000
140
180
660
580
585
345
230
3,720
Creditors
Bal: investment
ABCD:
Debtors
Stock
Motor vehicles
Fictures
Property
Cash book:
Fixtures
Goodwill
A&B
Sh.000
520
76
C&D
Sh.000
600
-
646
845
280
160
1,000
551
639
130
-
630
4,157
1,350
450
3,720
CAPITAL A/C
Investme
nt
Cash
Bal c/d
A
Sh.0
00
210
B
Sh.0
00
76
-
C
Sh.0
00
275
D
Sh.0
00
70
1,800
1,500
1,200
900
2,010
1,576
1,475
970
Bal b/d
Current A/c
Realisation
Cash
A
Sh.0
00
1,500
30
480
-
B
Sh.0
00
1,050
50
360
116
C
Sh.0
00
1,100
30
345
-
D
Sh.0
00
700
40
230
-
2,010
1,576
1,475
970
CASH BOOK
Sh.00
0
Bal b/d
B: Capital
Realisation:
Fixtures
340
116
456
1,350
1,350
Bal b/d
A
C
D
ABCD
210
246
456
ABC&D
Balance Sheet as at 01.01.2004
Sh.000
Sh.000
1,000
160
410
1,080
2,650
Current Assets
Stock
Debtors
Cash
1,484
1,197
1,161
3,842
6,492
Capital: A
B
C
D
Current Liabilities
Creditors
1,092
1,092
Sh.0
00
90
275
70
915
1,350
262
Papers
TOTAL EQUITY AND
LIABILITIES
Answers Past
6,492
263
QUESTION THREE
MR. MWADAFU
PROFIT & LOSS A/C FOR YEAR ENDED 31.12.03
Head Office
Sh.000 Sh.000
2,800
1,200
4,000
(17.5)
3,982.5
Sales
GSTB
Goods sent and lost
Cost of sales
Opening stock
Purchases
Goods received by
branch
Closing stock
Gross profit
Insurance receivable
519
2,797.9
0
473.7
Expenses
Depreciation:
Furniture
Rent and rates
Wages
Genera expenses
Profit before
commission
10% commission
31.2
80
170
300
(2,843.2
8)
1,139.2
2
10.5
1,149.7
2
Branch
Sh.000
Sh.000
Combined
Sh.000
Sh.000
1,871.66
1,871.66
1,871.66
4,671.66
4,671.66
4,671.66
270.6
1,182.5
126.45
10
40
130
250
(1,326.65)
545.01
545.01
(581.2)
568.52
(56.852
)
511.668
(430)
115.01
(11.501)
103.509
789.6
2,797.9
8
600.1
5
41.2
120
300
550
(2,987.43)
1,684.23
1,694.73
(1,011.2)
683.53
(68.353)
615.177
MR. MWADAFU
BALANCE SHEET AS AT31.12.03
Non Current Assets
Land & buildings
Furniture & equipment
1,400
280.8
1.680.8
129.569
90
90
90
473.7
160
10.5
24
80
728.2
126.45
120
20
266.45
247.8
56.852
-
165.38
11.501
50
2,253.9
17
1,400
370.8
1,770.8
1,770.8
600.15
280
10.5
24
100
1,014.6
5
129.569
413.18
68.353
50
2,253.9
17
129.569
1,788.7
4
(150)
1,638.7
4
615.1
77
2,253.9
17
1,788.7
4
(150)
1,638.7
4
615.1
77
2,253.9
17
264
Papers
Answers Past
Sh.000
1,567.56
103.509
1671.069
Lost goods
Cash in transit
Remittance
Balace c/d
Sh.000
17.5
24
1,500
129.569
1671.06
9
265
Remittance
Balace c/d
Balace b/d
Profit
Sh.000
1,550.06
103.509
1,653.56
9
QUESTION FOUR
(a)
Abatement explained:
When assets are insufficient to pay any class of legacies, all legacies
in that category or class shall be reduced to a fraction of the original
amount. This is known as abatement it enables all legacies to be
partially satisfied with the few assets available.
If assets are insufficient to pay specific legacies, these will abate
rateably and no general or residuary bequests shall be paid.
If assets are sufficient to pay specific legacies but insufficient to pay
general legacies, the general legacies shall abate rateably and no
residuary bequest shall be fulfilled.
(b)
Classifications of Legacies
(ii)
(iii)
(iv)
(v)
(vi)
Specific
General
Demonstrative
Residual
Pecuniary legacy
(i)
(ii)
(iii)
(iv)
266
Papers
Answers Past
Sh.000
Contributions Received:
From employers: Normal
From members: Normal
Members additional voluntary
18,240
4,560
36,48
0
22,80
0
Transfer in:
From other sources (individual
transfers in)
Investment Income
Benefits payable:
Pensions
Computations of pensions and
lumpsum retirement benefits
Payments to and on account of
leavers (individual transfers out)
Sh.0
00
(7,640)
3,150
47,40
0
109,8
30
(4,820)
(1,860)
(14,3
20)
95,51
0
(22,6
40)
72,87
0
(2,84
0)
70,03
0
267
4,38
0
531,5
90
461,5
60
70,0
30
531,5
90
268
Papers
Answers Past
QUESTION FIVE
Liquidators statement of account
Shs.
Proceeds from sale of unpledged
assets:
Land and buildings
Plant and machinery
Patents
Stock
Sundry debtors
Cash
6,000,00
0
10,000,0
00
1,500,00
0
3,000,00
0
4,000,00
0
1,500,00
0
Shs.
Costs and charges:
Expenses of liquidation
Liquidators commission
Preferential creditors
Floating charge
Debenture
5,000,000
Interest
750,000
Unsecured creditors
(6,375,000 760,000)
Preference shareholder
Capital
10,000,000
Dividend (10%x10mx2)
2,000,000
Ordinary shareholder
50,000 equity shares @100
150,000 equity shares @ 100
________
26,000,0
00
545,000
735,000
1,280,000
760,000
5,750,000
5,615,000
12,000,00
0
711,250
(116,250)
595,00
0
26,000,00
0
Issued
Paid up
5,000,00
0
15,000,0
00
20,000,0
00
3,750,00
0
9,000,00
0
12,750,0
00
Calls in
arrears
1,250,000
6,000,000
Gross
repayment
1,961,250
5,883,750
Net
repayment
711,250
(116,250)
7,250,000
595,000
7,845,000
7,845,000
595,000
Workings
Gross repayments Ordinary shares:
1.
5M
x7,845,000
20M
2.
15M
x7,845,000
20M
269
DECEMBER 2004
QUESTION ONE
(a
)
Hapa Ltd
Income statement for year ended 31/10/2004
Sh.
Turnover
000
Cost of sales
Gross profit
Other incomes
Expenses
Distribution costs
Administration costs
Finance costs
Profit before tax
Income tax expense
Profit after tax
Dividends paid
Retained profit for the year
(b
)
Hapa Ltd
Balance sheet as at 31/0ctober
2004
Non current assets
Property /plant equipment
Investments
Current assets
Inventories
Trade & other *
Bank balance
Total assets
Ordinary share capital
Revaluation Reserve
Retained profits
Shareholders funds
87,670
198,64
0
9,000
Sh.
(000)
163,00
0
101,60
0
49,620
Non-current liabilities
10% Debentures
Current liabilities
Trade payables & accounts
Bank overdraft
8% Debentures
Sh.
000
1432,00
0
(967,170
)
464,830
31,500
468,330
(295,310
)
173,020
(53,000)
120,020
(21,000)
99,020
Sh.
(000)
421,500
35,000
456,500
314,220
770,720
300,000
3000
230,020
533,020
45,000
43,400
270
Papers
Answers Past
10% Debentures
Tax payable
Total equity & liabilities
47,000
50,000
5,000
47,300
192,700
770,720
Rates
2 %
15%
20%
Note 2 Profit for the year is arrived at after changing the following
expenses.
Directors emoluments: fees
Others
Depreciation
Addition remuneration
Staff costs
Sh.000
3,000
52,000
Sh. 000
15,000
3,750
18,750
231,250
235,000
40,000
36,750
(12,000)
64,750
18,250
180,000
Note 4 inventory
FINANCIAL ACCOUNTING III
52,000
48,500
3,800
588,270
Motor
Total
vehicles Sh.000
Sh.000
25,000 495,000
45,000
- (20,000
25,000
)
520,000
10,000
5,000
15,000
10,000
15,000
65,000
45,000
(12,000
)
98,500
421,500
430,000
271
Sh.000
50,900
24,875
87,225
163,000
272
Papers
Answers Past
Workings
Expenses
Cost of sales
Distribution costs
Sh.000
Sh.000
927,420
36,750
As per question
Depreciation: plant
Vehicles
Buildings
Loss on sale of plant
Directors salaries
- fees
Audit fees and expenses
82,670
Administration
expenses
Sh.000
136,090
5,000
3,750
3,000
________
967,170
52,000
3,000
3,800
198,640
_______
87,670
QUESTION TWO
(a). Branch Stock Account
Nakuru
From
H/O
Sh.000
Goods sent to
branch
To other
branches
36,000
200
Naku
ru
local
Sh.0
00
750
Kisu
mu
48,00
0
700
36,200
750
Nakuru
From
H/o
Sh.000
Returned to H/O
To other branches
Scrapped goods
Sales of reduced
prices
Sales at normal
prices
Marked down
Abnual loss
(buying)
Bal. c/d
48,70
0
Naku
ru
local
Sh.0
00
400
700
20
900
30,760
100
80
3,240
36,200
Kisum
u
200
200
15
690
60
750
1,080
42,26
0
120
85
4,740
48,70
0
Naku
ru
local
Kisu
mu
Nakuru
From
H/o
Sh.000
Sh.0
00
Returns
Transfer to
other
branches
Scrapped
Mark down
Mark up c/d
Annual loss
Gross pay
100
50
175
20
100
810
20
7,825
230
9,050
250
50
15
120
1,185
21
10,73
4
12,17
5
20
9,000
Naku
ru
local
Sh.0
00
250
Kisum
u
12,00
0
50
175
9,050
250
12,17
5
273
Returns
Goods sent to other
branches
Purchases bought
Nakuru
From
H/O
Sh. 000
300
525
26,325
27,150
Kisumu
Sh.000
150
150
36,225
Nakuru
From
H/o
Sh.000
27,000
150
Kisum
u
27,150
36,52
5
36,525
36,00
0
525
Gross profit
Expenses
Wages & overheads
Sundries
Abnual loss
Service/non office
Receipts of taxation
Net profit
Kisumu
Sh.000
Sh.000
10,734
6,200
400
60
500
350
7,300
340
64
500
420
(7,510)
545
(8,624)
2,110
QUESTION THREE
(a).
Shs. 000
35,760
3,044.25
38,804.25
28,820
67,624.25
28,000
274
Papers
Answers Past
Retained Profits
Proposed dividends
Minority Interest
Shareholders funds
Non current liabilities
5% Debenture Current
Liabilities
Trade credit
Dividends due to Minority
Interest
Debenture Interest due
Total equity and liability
11,563
3,360
42,923
7,941.25
50,864.25
600
15,650
480
30
15,160
67,624.25
275
Workings
(i).
Coc
Investment in C
Sh. 000
16,200
Investment in O
3,840
_______
20,040
(ii).
Sh.
000
9,000
3,975
720
P OSC
P&L
Pre-acquisition dividends
O: OSC
P&L
Balance c/d (Goodwill)
2,700
600.75
3,044.
25
20,040
Minority Interest
Sh. 000
1,280
Investment in O
Balance c/d
7,941.25
9,221.25
(iii)
Sh.
000
3,000
1,580
3,000
1,300
341.25
9,221.25
C: OSC
P&L
PSC
O: OSC
PSL
P&L
Pre-acquisition dividends
Sh.
000
720
Balance c/d
11,563
12,283
P & L: pine
P & L cedan (Post
acquisition)
P & L Oak ((Post
acquisition)
Dividends Receivable
Debenture Interest
Sh.
000
10,460
765
108
900
50
12,283
276
Papers
Answers Past
QUESTION FOUR
(a). Note: The examiner has not indicated whether we should apply the rule
in Garner Vs Murrey, therefore will assume it is applied
Sh.
000
Capital a/c
General Revenue
Cash available
Feb. 10 Bal b/d
Feb. 10 Inventory
Feb. 16 Debtors
Feb. 27 Investment
Less: Creditors
Realization
Maximum possible
loss
Reallocation of loss
based on capital
balances
1 Mar. Distribon of
cash
1 March Balance b/f
Cash available
3 Mar.
Furniture/Fitting
20 Mar. Land & Build.
Debtors
Inventory
Maximum possible
loss
2 Distribution of cash
1 April Bal b/d
Cash available
15 April:
Plant & Machinery
Debtors
Savings on realization
Maximum possible
loss
3rd & final distribution
Total
Sh. 000
N
Sh.
000
10,000
7,000
17,000
K
Sh.
000
17,500
5,250
22,750
(23,258
)
(6,258)
(17,443
.5)
45,000
17,500
62,500
782.5
8,750
7,330
6,050
22,912.
5
(17,307.
5)
(1,250
)
(4,335)
58,145
58,145
5,000
17,500
1,250
6,875
(30,625)
27,520
27,520
16,400
877.5
250
(6,258)
____
17,000
5306.5
(3,129)
2,177.5
20,572.
5
(11,008
)
5,992
11,008
(8,256)
12,316.
5
8,256
L
Sh. 000
10,000
3,500
13,500
(11,620)
1,871
(1,856.8)
14.2
13,485.8
(5,504)
7,981.5
5,504
M
Sh.
000
7,500
1,750
9,250
(5,814.5
)
3,435.5
(1,272.2
)
2,163.3
7,086.7
(2,725)
4,334.7
2,752
(17,527.5)
9,992.5
(1,998.5)
3,505.5
(3,997)
7,011
(3,997)
5,258.2
5
(999.25)
1,752.7
5
(b). Realization
Land & buildings
Plant and Machinery
Furniture & fittings
Investments
Inventory
Debtors
Realization expenses
Sh.000
21,250
19,802.5
7,500
5,000
15,870
9,602.5
1,000
_______
80,025
Sh. 000
8750
7330
6050
5000
17500
1250
6875
16400
877.5
______
80,025
277
278
Papers
Answers Past
Capital Account
N
Sh.000
K
Sh.000
L
Sh.000
M
Sh.000
3997
2997.5
1998.5
999.25
5972
7011
17000
2177.5
12316.5
5258.25
22750
14.2
7981.5
3505.5
13500
2163.3
4334.7
1752.75
9250
Loss
realizati
on
Cash
book
1st Dist
2nd Dist
3rd Dist.
(a)
(b)
Bal b/d
General
Reserv
e
N
Sh.00
0
K
Sh.00
0
L
Sh.00
0
10000
17500
10000
7000
_____
22250
5250
_____
13500
3500
_____
13500
(i)
(ii)
Partial Intestacy
This is where the will does not dispose of all the
properties of the testator.
1.
2.
3.
M
Sh.00
0
7500
1750
_____
9250
(c)
House 1
Atieno
Spouse
Children
Personal effects
Household effects
Motor Vehicle
Residue
House 2
Anyango
Total
1
3
4
0
2
2
1
0
1
2
5
7
_______
800,000
_______
400,000
_______
200,000
400,000
1,000,000
1,400,000
500,000
700,000
500,000
3,000,000
3,500,000
4,900,000
2,000,000
2,800,000
House 1:
House 3
Akinyi
1,000,000
1,400,000
House 2:
House 3:
279
280
Papers
Answers Past
JUNE 2005
QUESTION ONE
(a)
Jembe
Panga
Shs.
000
2,000
6,500
1,500
1,800
1,900
300
14,000
(6,800)
7,200
Shs.
000
1,500
5,500
1,500
350
1,000
150
10,000
4,000
6,000
Partners
hip
Shs.
000
3,500
12,000
3,000
2,150
2,900
450
24,000
10,800
13,200
Jembe
Shs.
000
7,200
Panga
Shs.
000
6,000
2,490
9,690
(2,390)
7,300
1,660
7,660
(610)
7,050
Sh.
000
7,300
Sh.
000
7,050
750
8,050
483
500
7,550
453
Bond to be issued
Capital balance as at 31.5.05
Add Revaluation gain
(6,000 + 5,670 4,000 6,420)1,250
Share in PSR 3:2
Updated capital balances
6% rate of return
Plant &
Equipment
Fixtures
Capital-surplus
281
483
0.15
Revaluation a/c
Jemb
Pan
e
ga
300
100 Freehold
property
100
50
100
350
500
500
3,220
3,020
Jemb
e
500
Pang
a
500
__
500
__
500
282
Papers
Answers Past
Capital A/C
Jembe Panga
Bal c/d
7,200
7,200
Bal b/d
6,000 Revaluation
6,000
Jemb
e
7,100
100
7,200
Pang
a
5,650
350
6,000
Capital employed
Bal b/d
Add: share of profit
Add: revaluation
Less: drawings
Debentures issued
Shares
Shares to be issued:
14,350
13,200
1,150
3,000
4,150
2,490
1,660
Jembe
7,200
2,490
750
(2,390)
8,050
Panga
6,000
1,660
500
(610)
7,550
Total
13,200
4,150
1,250
(3,000)
15,600
3,220
3,900
3,020
2,600
6,240
6,500
Jembe
Sh. 000
Panga
Sh.
000
3,900,000
2,600,00
0
(12 Marks)
(b)
Capital account
P
Sh.
000
J
Sh.
000
P
Sh.
000
2,390
3,220
3,900
930
10,440
610
3,020
2,600
1,930
8,160
283
Balance b/d
Profit
Revaluation
Gain
7,200
2,490
6,000
1,660
750
500
10,440
8,160
(3 marks)
284
Papers
Answers Past
(c)
Shamba Ltd
Balance sheet as at 31 March 2005
Non current assets
Sh. 000
Sh. 000
Freehold property
6,000
Plant and equipment
13,000
Fixtures and fittings
3,000
22,0000
Current assets
Inventory
3,350
Accounts receivable
5,670
Bank
125
9,145
Total assets
31,145
Share capital
6,500
6,240
Current liabilities
Accounts payable
Bank overdraft
9,920
8,485
18,405
31,145
(5 Marks)
(Total: 20 marks)
WORKINGS
(ii)
Bank overdraft
Sh.
000
(5,625)
930
1,930
8,485
285
QUESTION TWO
Lusiola Group
Consolidated Balance Sheet as at 31 March 2004
Sh. 000
Sh. 000
Non current assets:
Property
45,840
Goodwill (4,800 800)
800
Investments
8,800
Current assets:
Inventory (13,500 + 600 100)
Receivables (7,200 + 1,500
2,000)
Cash and Bank
14,000
6,700
300
21,000
76,440
10,000
34,510
1,130
1,000
46,640
Non-current liabilities:
12% debentures
10,000
Current liabilities:
Payables (6,700 + 5,200 1,460)
Overdraft
Tax
10,500
4,500
4,800
19,800
76,440
(Total: 20 marks)
WORKINGS:
(1)
Sh. 000
26,400
16,200
5,400
(2,160)
45,840
Investments
Lusialo
Kacheliba
Revaluation 90% (8,000
6,000)
1,000
6,000
1,800
286
Papers
Answers Past
8,800
(2)
Inventory
Total 9,500 + 4,000
Add: Goods in transit (600 x
287
13,500
500
100
120
14,000
(3)
Cost of control
Sh.
000
30,000 Shares 90%
Profit
Revaluation
Pre-acq div.
_____ Goodwill
30,000 P
Cost
(4)
MI
Ordinary shares
=
Retained earnings =
Sh.
000
4,500
13,500
7,200
3,600
1,200
30,000
5,000 x 10% =
6,300 x 10% =
1,130
500
630
(5)
K-Post-Acq. Loss 8,700 x
90%
UPCS
Dep. Adj
Pre-Acq. Div
Goodwill w/o
P & L (W)
Shs.
7,830 Lusialo bal b/d
100
2,160
3,600
1,466
48,600
Shs.
48,60
0
_____
48,60
0
QUESTION THREE
(a)
JAMILA TRADERS
Income Statements
For the year ended 30 September 2004
NANYUKI
THIKA
Sales
Goods sent to branch
(Less: lost in transit)
Shs.
13,000,000
Shs.
9,202,200
COMBINE
D
Shs.
22,202,200
6,387,330
19,387,330
9,202,200
22,202,200
288
Papers
Answers Past
Opening stock
Purchases/Goods received
2,595,000
13,626,600
16,221,600
82,500
834,900
15,304,200
1,552,500
6,387,330
7,939,830
2,932.5
7,936,897.
5
3,945,000
13,626,600
17,571,600
82,500
837,450
16,651,650
Gross profit
4,083,130
5,550,550
202,117.5
1,265,302.
5
-
Less: Expenses
Goods lost (not claimed)
Rent and rates
Salaries and wages
General expenses
Depreciation
Staff bonus (1,060,072.5 x
12,375
395,400
851,700
1,887,750
77,950
96,370
197,250
487,500
1,258,950
23,050
-
12,375
592,650
1,339,200
3,146,700
101,000
96,370
10
)
100
Net profit
963,702.5
(701,447.5)
262,255
(701,447.5
)
701,447.5
262,255
(12 marks)
(b)
JAMILA TRADERS
Balance Sheet
As at 30 September 2004
ASSETS
COMBINED
Non Current Assets
Shs.
Buildings
Furniture & fittings
Branch current account
Less: prov for unrealized profit
Current Assets
Stock
Accounts receivable
Insurance claim receivable
Cash in Transit
Cash at Bank
Less: Current Liabilities
Accounts payable
3,500,000
909,000
4,409,000
837,450
1,300,500
70,125
71,250
687,050
2,966,375
1,509,200
250,000
96,370
1,855,570
1,110,805
5,519,805
Financed by:
Capital
Net profit
289
6,040,925
262,255
6,303,180
783,375
5,519,805
Less: Drawings
(8 Marks)
(Total: 20 Marks)
Provision for Unrealised Profits
Shs.
P & L (Realised)
202,117. Balance b/d
5
Balance c/d
382.
5
202,500
.0
Balance b/d
Balance b/d
Balance b/d
Remittances
Branch loss
Bal c/d
8,931,55
5
515,232.
5
Head Office Current Account
Shs.
7,620,00 Balance b/d
0.0
701,447.
5
515,23
2.5
8,836,68
STRATHMORE UNIVERSITY REVISION KIT
Shs.
202,500
_____
202,500
382.5
Shs.
7,548,75
0.0
94,875.0
71,250.0
701,447.
5
515,232
.5
8,931,55
5.0
Shs.
8,836,680
.0
________
8,836,680
290
Papers
Answers Past
0.0
.0
515,232.5
Balance b/d
SELECTED WORKINGS
1.
2.
Depreciation
Head office:
Branch:
779,500 x 10%
=
230,500 x 10%
77,950
=
23,050
Insurance claim
Cost of Goods
3.
4.
94,875 x
100
115
82,500
12,375
2,595,000
13,626,600
16,221,600
100
(5,636,700)
115
Sales (13,000,000 x )
Closing stock at cost.
Branch:
Opening Stock
Goods received
(9,750,000)
834,900
1,552,500
6,387,330
7,939,830
115
100
3 x
9,202,200x
4
(7,936,897.5)
Combined stock::
Head office
2,932.5
Shs.
834,900
100
115
Branch: 2,932.5x
2,550
837,450
291
QUESTION FOUR
Medsan Traders
Statement of affairs as at 31/12/04
Jani Hamed
estate
Shs.
Shs.
000
000
Unsecured creditors
17,900
400
Fully secured
6,000
5,000
creditors
Less value of security
12,000
10,000
Surplus to
6,000
5,000
below/contra
Partly secured
7,000
7,000
creditors
Less value of security
(6,000)
(2,400)
Deficiency ranking as
unsecured
Preferential creditors
deducted as per
contra
Surplus to
partnership
Surplus as per surplus
a/c
1,000
4,600
1,100
300
300
600
18,900
5,900
Hassan
Hamed
Hassan
Shs.
000
1,900 Plant & machinery
- Furniture & fixtures
Jani
estate
Shs.
000
1,500
800
Shs.
000
1,200
Shs.
000
1,500
- Inventory
- Accounts receivable
6,500
10,000
1,900
5,000
18,800
6,200
3,400
(1,100)
(300)
(1,800)
17,700
5,900
2,900
5,900
2,900
- Investments
- Surplus from fully
secured creditors
- Available to preferred
unsecured credit
500 Less: preferential
creditors deducted per
contra
900 Available to unsecured
creditors.
100 Surplus from partners
H
Hasan
2,900
300
900
18,900
292
Papers
Answers Past
Deficiency/Surplus
Hassan
Shs.
000
Medsa
n
Shs.
000
3,000
Hamed
Shs.
000
5,050
3,650
1,000
3,000
900
300
900
5,200
8,950
Unrecorded liability-loss
on guarantee of overdraft
Estimated loss on
realization
- Plant & machine
- Furniture & fittings
- Inventory
- Receivables (12-10)
- Other investments
Loss of partnership
capital
Surplus and partnership
Surplus as per SOA
3,650
Workings:
1. Unsecured creditors
Accounts payable
Less: preferential creditors
2. Fully secured creditors
Mortgage on freehold property
Less: value of security
Medsan
Shs. 000
19,000
(1,100)
17,900
Medsan
6,000
(12,000)
6,000
To partly
secured
Hamed
Shs. 000
700
(300)
400
Hamed
5,000
(10,000)
5,000
To assets
estimated
Hassan
Shs. 000
2,400
(500)
1,900
Hassan
-
Medsan
Shs.
000
Hamed
Shs.
000
Hassan
Shs.
000
7,000
1,500
200
1,500
2,000
-
300
750
300
100
2,250
5,200
300
600
8,950
900
100
3,650
293
Creditors
Medsan
7,000
(6,000)
1,000
To realize
Hamed
7,000
(2,400)
4,600
Hassan
-
A/C receivables
Good debtors
Bad debtors =
294
=
9M
1M
10M
(expected to be paid)
100
=
1M
Total debtors expected = 9M + 1M = 10M
5.
Joint
Def
(1,200
)
300
900
-
Hamed
Surp
900
PSR
(300)
600
Surp
(900)
100
Hassan (Double
proof)
1,000
Hamed
Hassan
11,000
3,000
1,000
8,000
12,000
35,000
Shs.
000
7,000
1,500
150
1,500
10,750
Shs.
000
1,800
2,250
2,000
6,050
(6,000)
(7,000)
(19,000)
3,000
(5,000)
(700)
5,050
(2,400)
3,650
NOTE:
The excess of assets over liabilities in the partnership of Shs. 3 represents the
combined capital of Hamed and Hassan. The example does not give the
breakdown of how much has been contributed by each partner and thus we will
assume that the capital has been contributed in their profit sharing ratio.
Hamed
x 3,000 = 750
Hassan
x 3,000 = 2,250
QUESTION FIVE
(a)
(i)
Life tenant: the person, normally the wife, who will receive the
benefits of the trust fund
295
(2
(ii)
(iii)
Shs.
Shs.
Shs.
512,000
2,000
514,000
11,000
5,000
16,000
26,000
310,000
9,000
319,00
0
Total credits
Estate principal
ESTATE PRINCIPAL
Cash (see working below)
Investments:
Stocks
Bonds
Land
Estate principal
(361,000
)
153,00
0
23,000
21,000
44,000
65,000
153,000
296
Papers
Answers Past
CASH BALANCE
Beginning balance
Sale of antique
Collection of receivables
(dividends 1,000 interest 2,000 and
rent 4,000)
(Funeral expenses 17,000, executor
charges
9,000 medical expenses 11,000 and
debts 5,000)
Legacy distribution (Yacobo
Matalanza)
Cash balance
46,000
21,000
7,000
(42,000)
(9,000)
23,000
AS TO INCOME
I CHARGE MYSELF WITH:
Dividend income
(2,000 collection less 1,000 receivable
at death)
Interest income (3,000 less 2,000)
Rent income (7,000 less 4,000)
Balance as to income
Balance as to income:
Cash
Shs.
1,000
1,000
3,000
5,000
5,000
297
DECEMBER 2005
QUESTION ONE
Soma Ltd
Income Statement for the year ended 31 October
2005
Sh.
Sh. 000
000
Revenue
Cost of Sales
1,574,500
Gross Profit
(886,478)
(688,022)
Expenses
Distribution costs
127,062
Administration expenses
246,086
Finance costs
92,460
(465,608)
Profit before tax
222,414
Income tax expense (85,000
(82,500)
2,500)
Profit for the year
139,914
Soma Ltd
Statement of changes in equity (extract)
Retained
Profits
Sh. 000
119,046
(27,000)
Balance as at 1.1.2004
Correction of error (additional
depreciation)
Balance as restated
Profit for the period
Purposed dividend
Balance as at 31.10.2005
92,046
139,014
(21,000)
210,960
Soma Ltd
Balance sheet as at 31 October 2005
Non current assets
Sh. 000
Property, plant and equipment
Intangible assets
Current assets
Inventory
Accounts receivables
Cash
Total assets
111,100
159,714
100
Sh. 000
715,750
96,000
811,750
270,914
1,082,664
60,000
210,960
270,960
200,000
240,000
440,000
Current liabilities
298
Papers
Answers Past
80,754
139,950
130,000
21,000
371,704
1,082,664
Rate
Nil
2% on cost
15% on cost
10% on reducing
balance
(iii)
Inventory is stated in the accounts at the lower of cost and net realizable
value.
NOTE 2:
PROFIT FOR THE PERIOD
The profit for the period is arrived at after charging the following expenses;
Depreciation
Amortisation
Director remuneration
Employee benefits
Sh. 000
56,972
24,000
714
238,006
NOTE 3:
PROPERTY PLANT AND EQUIPMENT
Cost/valuation
Land
Buildi
Plant
ngs
Balance at 1.11.2004
Additions
Balance at 31.10.2005
Depreciation
Balance as at 1.11.2004
Provisions for previous
years
Charge for the year
Sh.
000
350,000
Office
Equipme
nt
Sh. 000
Total
Sh.
000
150,00
0
-
Sh.
000
200,000
100,000
350,000
150,00
0
300,000
107,722
90,000
18,000
27,000
108,00
0
27,000
3,000
45,000
8,972
56,972
107,722
Sh.
000
807,72
2
100,00
0
907,72
2
299
30,000
135,000
26,972
191,97
2
As at 31.10.2005
350,000
165,000
80,750
As at 31.10.2004
350,000
120,00
0
150,00
0
110,000
89,722
715,75
0
699,72
2
300
Papers
Answers Past
Workings:
(i)
Cost of sales
Shs.
000
670,396
3,000
45,000
24,000
8,972
9,600
125,510
886,478
(iv)
(v)
Sh. 000
79,960
12,500
92,460
Shs.
000
86,560
7,786
32,716
127,06
2
Administration expenses
Per trial balance
Office salaries
Directors
remuneration
Sh. 000
45,000
85,000
130,000
Distribution costs
Shs.
000
165,59
2
79,780
714
246,08
6
(vi)
Sh.
000
85,000
(2,500)
82,500
301
QUESTION TWO
Hipa Group
Cash Flow Statement for the year ended 30.9.2005
Cash flows from operating activities
Sh. million
Profit before tax
870
Adjustments
Amortisation of other intangibles
Goodwill (200 180)
Depreciation of property, plant and
equipment
Finance costs
Loss on sale of plant
Changes in working capital
Increase in inventory (1420 940)
Increase in receivables (990 780)
Increase in accounts payable (875 730)
Cash generated from operations
Interest paid (30 (15 + 5))
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and
equipment
Additional intangible assets
Proceeds on sale of plant
Dividends from associates (80 + 20 95)
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares at a
provision
Issue of loan notes (300 100)
Repayment of loan
Dividends: Holding Co. 2004 Final + 2005
interim)
Minority Interest (100 + 40
135)
Net cash received from financing
activities
Net increase in cash and cash equivalent
Cash and cash equivalent b/f
Cash and cash equivalent c/f
Sh. million
130
20
320
30
50
1,420
(480)
(310)
145
775
(20)
(130)
625
(250)
(500)
20
5
(725)
Shm
450
Shm
200
(40)
(320)
(5)
285
185
(115)
70
B/f
Shm
C/f
Shm
302
Papers
Cash
Bank overdraft
Answers Past
(115)
(115)
70
70
303
Workings:
(i)
Amortisation of intangibles
Bal B/f
Addition
Bal. c/d
Amortisation
Shm
100
500
(470)
130
Tax paid
Shm
160
140
270
(130)
(310)
(130)
(ii)
Shm
1,830
200
250
(320)
(1,890)
70
70
(50)
20
(iv)
Share capital
Bal b/d
Bonus issue
Bal. c/d
Cash received
Plus share premium (350
100)
Shm
(500)
(50)
750
200
250
450
304
Papers
Answers Past
QUESTION THREE
(a)
Cash at bank
Accounts receivable
Ush
000
130,00
0
260,00
0
Ush.
000
Rat
e
13
Ksh.
000
10,000
13
20,000
Kshs.
000
7,160
65,000
96,000
1,600,00
0
930,00
0
360,00
0
Exchange loss
1,761,0
00
13
10
5,000
50,000
160,000
10
93,000
10
36,000
_______
48,840
_____
1,761,00
0
215,000
215,000
Workings
Ush.
000
24,600
Purchase locally
56,400
81,000
Head office current a/c
Balance per head office
records
Add debtors received by
branch
Rate
10
Ush/Ksh.
12
Ush/Ksh.
Kshs.
000
2,460
4,700
7,160
15,000
35,000
50,000
Unrealised profit
Goods from head office
Cost =
2,460
2,460
1.25
(1,968)
UPCS
492
(492)
(492)
139,508
67,000
206,508
Expenses
Exchange loss
Operating expenses
67,000
48,840
39,000
48,840
106,000
Depreciation
Plant and equipment
Motor vehicles
Net profit
10,000
10,000
52,508
5,000
(25,840)
15,000
10,000
(26,668)
306
Papers
Answers Past
Accounts payable
49,000
267,668
QUESTION FOUR
Bank overdraft
Creditors
Loan
Purchase
consideration
Shares in Kuni
Ltd
Shares in Moto
Ltd
_____ Goodwill
130,25
0
103,50
0
KUNI
LTD
Sh.
000
93,250
MOTO
LTD
Sh.
000
-
2,500
250
32,000
54,000
115,00
0
25,00
0
268,00
0
56,250
KUNI
LTD
Sh.
000
131,500
MOTO
LTD
Sh.
000
81,00
22,500
22,50
0
103,50
0
154,000
Vendors Account
Sh.
000
142,650 Business Purchases
A/C
114,850 Kuni Ltd.
_____ Moto Ltd.
257,500
Bank Account
KUNI
MOTO
20,00
0
130,25
0
Shs.
000
142,650
114,850
257,500
KUNI
MOTO
12% Debentures
Issue of shares B Ltd & C
Ltd
(Share application)
LTD
Sh.
000
50,000
5,000
_____
55,000
LTD
Sh.
000
Balance b/d
7,500 Debenture
expense
Preliminary
exp
____ Balance c/d
7,500
LTD
Sh.
000
44,750
1,750
LTD
Sh.
000
3,250
2,000
_5,250
55,000
5,500
7,500
308
Papers
Answers Past
Kuni Ltd.
Shs.
Shs.
93,250
2,500
95,750
Intangible assets
Goodwill
Establishment costs
Debenture expenses
Current assets
Cash
Bank
Debtors
Stock
25,000
3,250
1,750
30,000
250
5,250
32,000
115,000
152,500
Moto Ltd.
Shs.
Shs.
77,000
20,000
2,000
22,000
5,500
54,000
56,250
115,750
75,500
201,250
13,000
102,750
124,750
147,650
122,350
50,000
3,600
201,250
2,400
124,750
QUESTION FIVE
(a)
(i)
Defined contribution plans are post-employment benefits
plans under
which an enterprise pays fixed contribution into a separate
entity (a fund) and will have no legal or constructive
obligation to pay further contributions if the fund does not
hold sufficient assets to pay all employees benefits relating
to employee services in the current and prior periods.
(ii)
(2)
310
Papers
Answers Past
(b)
(i)
Treasure Motors Retirement Benefits Scheme
Statement of change in net assets for the year ended
30th June 2005
Kshs.
Kshs.
Members contributions
250,200
Employers contributions
630,600
Total contributions
880,800
Pensions and commutations
(209,000
)
Withdrawals from scheme
(15,000)
Net additions by members
656,800
Return on investments:
Interest on investments
Other expenses:
Management expenses
Net change in net assets
Opening accumulated fund as at
(July 2004)
Net assets at 30 June 2005
640,000
640,000
(7,000)
1,289,80
0
7,640,00
0
8,929,80
0
Kshs.
800,000
3,000,000
2,500,000
590,000
1,040,000
260,000
32,200
635,600
80,000
(8,000)
8,929,800
7,640,000
1,289,800
8,929,800
JUNE 2006
SUGGESTED SOLUTIONS
QUESTION ONE
Boulder Limited
Consolidated Balance sheet as at 31 March 2006
Non current assets
Sh Million
Million
Property, Plant and equipment
Goodwill
Other intangible assets (patents and copyrights)
9
Sh
2,957
30
2,996
Current assets
Inventory
Accounts receivable
Cash
Total assets
5,852
Ordinary share capital
600
Revaluation reserves
156
Retained earnings
1,074
1,542
240
2,856
2,390
3,146
1,244
Minority interest
Shareholders funds
4,390
Current Liabilities
Accounts payable
912
Current tax
70
Proposed dividends
1,462
Total equity and liabilities
5,852
Workings: (figures in sh Million)
PPE
copying rights
480
Patents &
312
Papers
Answers Past
Boulder
1,280 Depre FV adj.
Coc (36%x10)
3.6
Armortisation
Rock
920
-P&L 1.08
MT (64%x10) 6.4
-P&L
0.36
Stone
700
-MI
1.92
M
0.64
Coc: FV adj
21.6
MI FV adj
38.4 Bal c/d
2,957
__
Bal
c/d
9_
2,960
2,960
10
10_
Cost of control
retained profit
Inv in Rock 840 Rock: OSC
1,970
(900-60)
P&L
Rock
1,300
Stone
480
Group
300
CoC: (Rock)
480 Boulder
Coc:P&L (stone)
Dividends:
Inv in stone 450
Rock 150
(60%x750)
MI P&L (stone)
165.6
307.2
P&L
165.6
Fv adj PPE 21.6
Invent.
7.2
Dep. Fv adj
PPE
Patents
Patents
Inventory sold
From
1.08
0.36
3.6
5.76
Pre-acquisition
Dividend
36
G/will
G/will stone
Impaired
6
Balance c/d
2,390
3,936
P$C (1/6x36)
Bal c/d
1,290
1,290
6
30
3,986
MI
Inv Stone
Sold
Depreciation
(64)x16)10.24
Inventory____________________________
300
Rock: OSC 200 Boulder
420
5.76
P&L 520 Rock
410 MI
P&L-
FV adj: PPE
1.92
Rev Reserve 104 Stone
240 Bal c/d
1074
Patents
0.64
Stone OSC 320 Fv adj: COC 7.2
Inventory sold 10.24
PL
307.2
MI
12.8
Fv adj:
1,090
1,090
PPE
38.4
Inventory
12.8
Payables
Patents
6.4
Due to stone Hand
390
Dividends from
Boulder
36
Rock
380
Balance c/d 1,244
Stone
48 Rock
32
Stone
210
1,556.8
1,556.8 Balance c/d
912
980
980
Revaluation Reserve
____________________________________
MI (40%)
104
Balance c/d 260
Bal c/d
156
260
260
Account Receivables____________________
Boulder 680
Due from Boulder 36
Retained profit in Stone at
acquisition
Rock
540
Rock
32
Sh Million
Stone
390
Bal c/d
1,542
Bal c/d
(1.4.06)
480
1,610
1,610
Add bank dividends
200
680
Proposed dividends___________________
MI
48 Boulder
300
Less: Profits
for year
(240)
P&L
150 Rock
250
Balance B/d (1.4.05)
440
CoC: Pre-acq. 3.6 Stone
200
Profits for year (240200) 20
2
Retained profits
P& L; Postage 480
750
Acquisition
460
750
Share of
Boulder at
36%- COC
165.6
314
Papers
Answers Past
K
410
150
(106)
454
L
247
150
397
236
150
386
(58)
1063
58
1050
292
1050
(58)
396
58
(58)
339
58
292
350
292
350 350
(6marks)
(1,786.5
450
1,130
1,792
522.5
1,063
J
bal b/d
Interest on capital 26
12
Bal c/d 410
376
Realization
Bank
Bank
410
124
670
247
124
397
106
247
396
150
350
292
852
236
339
150
350
292
889
236
376
670
Bal c/d
328
K
520
13
124
397
410
328
250
Realization gain
678
292
852
889
678
(10
Marks)
c) Realization Account_______________________________
Fixed assets
980 15/4/2006 Bank 1,130
Raw materials
815 30/4/2006 Bank 1,792
Work in progress 457 Capital a/c - Jipcho 106
Accounts receivable
950 15/5/2006 Bank 1,050
Realization gain
876
4,078
4,078
(2
marks)
d) Bank Account____________________________________________
Debtors
2,250
Bal b/d
600
Payables
450
Wages
780
General expenses
1,596.5
Drawings (260+150+140)
550
Joint life assurance
Bal c/d
1,786.5
Policies premium
60
4,036.5
4,036.5
Joint life assurance
Policies
450
1/4/2006 bal b/d
1,786.5
Realization
1,130
Accounts payable
522.5
Realization
1,792
Capital account
1,063
Realization
1,050
Capital account
1,050
4,422
4,422
(2 marks)
(Total: 20 Marks)
Workings:
W1)
Bal b/d
Sales
W2)
Bank
Bal c/d
W3)
Bal c/d
Purchases
Receivables Account
400
Bank
2,800
Bal c/d
3,200
Payables Account
450
Bal b/d
522.5
Purchases
972.5
2,250
950
3,200
770
202.5
972.5
W4)
Joint Life Assurance policies
Bal c/d
300
Bank
Bank
60
Joint assurance fund
450
450
450
316
Papers
Answers Past
2,000
3,000
Price
17,922
126
11,948
84
market down
11,948
17,922
7marks)
b) Branch mark up accounts
Msa
Ksm
Ksm
Sh000
sh000
Markup returns to HO
Msa
sh000
sh000
Bal b/d
(25/100xS.P)
905
1,357.5
6
9
36
3,090
-debtors
Markup on goods
-branch
54
From head office
2,060
Transfer to other
Branch
100
150
Stock loss
30
45
Mark down in spoilt
Units
32
48
Gross profit (bal)
2,252
3,378
Bal c/d
-selling price
500
750
-on marked down
Goals
9__
13.5
2,965
4,447.5
2.965
4,447.5
Bal c/d = 25/100x2024 = 506
= 25/100x3036 = 759
Marks)
(7
370
555
490
Msa
sh000
sh,000
Cash
735
306
return to branch 88
132
(Bal)
Return to H/O
36
24
318
Papers
Answers Past
Bad debts
64
96
Balance c/d
378
567
1290
(2 marks)
(d) Goods sent to branch accounts
Msa
Ksm
sh 000
sh000
Return to HO-debtors
18
-branch
Purchase (bal)
108
6,054
6,180
162
9,081
9,270
Msa
sh 000
Ksm
sh 000
27
Goods sent by HO
75/100x
6,180
9,270
6,180
9,270
(2
marks)
d) Lost stock account
Sh 000
sh000
Branch stock a/c-Msa
150
Ksm
75
90
135
225
Insurance/cashbook
P& L (balance loss)
225
QUESTION FOUR
Sundry creditors in order of priority
Preferential Unsecured Deferred
Total
Sh. 000
sh000
sh000
sh000
1. Assessed income taxes
120
185
305
2. Government rent
250
50
300
3. Wages to 5 employees
20
105
125
4. Salary to uncle
4
20
24
5. Employees NSSF
12
24
36
6. NCC taxes
20
20
7. Loan + interest from Kopesha
107.5
107.5
8. Other sundry creditors
1,640
1,640
426
2024
107.5
2,557.5
Deficiency Account
sh 000
Sh000
320
Papers
Liabilities as at 1 April 2005 (W3)
year
830
Freehold land
fittings
210
Private assets
150
Deficiency
1,781.5
400
Answers Past
230
550
Furniture and
28
Motor vehicle
Stock
Bad debts
220
Drawings
560
Private obligations
12
Interest on mortgage
200
Interest on-Kopesha
7.5
2,589.5
2,589.5
W1 Unsecured creditors
W2 (secured by floating charge)
Sundry creditors 2,024
Loan from KCB
1,000
Deferred creditors 107.5
Bank overdraft
1,100
Personal obligations
12
2,100
SACCO Loan
500
2,643.5
W3: Excess of assets over liabilities 1/4/2005
Net assets on 31 March 2006 5550-6150 =
(600)
And losses to 31 March 2006
(830)
230
QUESTION FIVE
a) For an oral will to be valid:
i)
The testator must have died within 3 months of the date
of making the will.
ii)
It must have been made before at least two persons of
sound mind and full age.
iii)
Where a written will existed such a will has to be
revoked otherwise the oral will be invalid to the extent
of the contradiction of the written will.
iv)
Members of armed forces/marine who have proceeded
for active field of military operation oral will is valid
provided the testator dies in the same period of active
service.
.
v)
There must be no conflict in the evidence of witness
otherwise the oral will not be valid until by competent
independent witness.
b) Types of legacies
i)
Special legacy- a testamentary gift of a particular
property of a testator, identified by sufficient
description.
ii)
iii)
iv)
marks)
c) Distribution statement as at 30 May 2006
Kadenge
Mulamba
Anunda
Nasimiyu
Total
sh000
sh000
sh000
sh000
Balance
Add back
Advance
Allocated
Equally
Less advance
---Distribution
sh000
9,000
1,000
10,000
2,500
(1,000)
9,000
2,500
2,500
2,500
(500)
(500)
2,000
2,000
Total
Sh000
Due to Nasimiyu
Misati
As per stripes rule
2,500
Add back advance
400
Allocated equally
2,900
Less advance
(400)
Distribution to grand children 2,500
1,450
DECEMBER 2006
SOLUTIONS
QUESTION ONE
2,500
---2,500
sh000
Nafula
sh000
1,450
(400)
1,450
---1,050
SUGGESTED
322
Papers
Answers Past
Sh,000
66,000
46,100
19,900
3,575
2,775
75
(6,425)
13,475
(3,450)
10,025
(330)
9,695
(1,000)
8,695
17,125
25,820
b) Habari Ltd
Consolidated Balance Sheet as at 30 September 2006
Sh,000
Sh,000
Non current assets
Property, plant and equipment
29,920
Goodwill (800- 200)
600
30,520
Current assets
Inventory
7,500
Trade receivables
6,850
Cash at bank
7,400
21,750
Total assets
52,270
Ordinary share capital
10,000
Retained profits
25,820
35,820
Minority interest
2,600
Shareholders funds
38,420
Non current liabilities
10% debentures
1,000
Current liabilities
Trade payables
9,950
Current tax
2,900
12,850
52,270
Workings
1. Income statement
Revenue : Habari
Salama (9/12)
Inter co.sales
Depr on plant
Unrealised profit
Goodwill impaired
(800 x 25%)
Interco. Interest
( x 150)
46,100
3,575
2,775
75
75
3,450
2. Goodwill
COC
Sh,000
Cost of inv
10,280
Sh,000
OSC (80% X 2000)
1,600
RP (80% X 5900+625)
5,220
FV(80 X (3.2m)
2,560
Div (80% x 3/12 x 500)
100
Goodwill
800
19,300
8,000
3,200
(600)
INVENTORY
Sh,000
RECEIVABLE PAYABLES
S
Sh,000
Sh,000
5,000
4,200
7,500
3,000
3,400
3,200
(500)
324
Papers
Answers Past
Interco.
Balance
29,920
7,500
(750)
750
6,850
9,950
Sh,000
OSC (20% X 2000)
400
RP (20% x 8400)
1,680
FV(80 X (3.2m)
640
2,720
QUESTION TWO
a) Bara Ltd
Income statement for the year ended 31 October 2006
Sh,000
Sh,000
Revenue
Cost of sales
Gross profit
Other incomes: investment
income
278,400
(115,700)
162,700
4,500
167,200
Expenses
Distribution costs
Administrative expenses
Finance costs
Profit before tax
Income tax expense
Profit for the period
10,000
5,500
10,000
(25,000)
141,700
(29,900)
111,800
b) Bara Ltd
Statement of changes in equity for the year ended 31 October 2006
Balance as at 1.11.05
Profit for the period
Ordinary
Revaluation
Shares
reserve
150,000
Retained
Total
profit
119,500
269,500
111,800
111,800
Revaluation of PPE
Dividends paid
Balance as at 31.10.06
45,000
150,000
45,000
15,000
216,300
c) Bara Ltd
Balance Sheet as at 31 October
Sh,000
Non current assets
Property, plant and equipment
Investments
434,100
90,000
524,100
Current assets
Inventory
Accounts receivables
Total assets
Equities and liabilities
Ordinary share capital
Reserves
Revaluation reserve
Retained profit
Shareholder funds
43,200
53,200
96,400
620,500
150.000
45,000
216,300
411,300
50,000
14,100
55,000
Current liabilities
Accounts/payables
Bank overdraft
Accrued loan interest
Obligation under finance lease
Current tax
Total equity and liabilities
33,400
5,400
1,000
22,000
28,300
Workings:
i. Cost of sales
Sh,000
Opening inventory
37,800
Purchases
78,200
Depreciation: buildings
5,000
Plant: owned
19, 500
Leased
18,400
Closing inventory
43,000
115,700
ii) Finance lease
Net obligation at start (92-22)
Accrued interest at 10%
Sh,000
Sh,000
70,000
7,000
119,000
90,100
620,500
45,000
15,000
411,300
326
Papers
Total outstanding at year end
Current liability (next inst.)
Non current: balance
Answers Past
77,000
22,000
55,000
Sh 000
250,000
110,500
73,600
434,100
QUESTION THREE
a) i) Financial information is said to be relevant if it would influence
economic
decisions. This is achieved if the information has predictive or
confirmatory
value. Reliable financial information is achieved when
information provided is
free from material error and bias and can be depended upon by
users to
represent or could reasonably be expected to represent.
ii) Five attributes of reliable information:
1. Faithful representation the information must represent
faithfully the transaction and other events it either purports to
represent or could reasonably be expected to represent.
Motor vehicles
A&B
Advocat
es
Sh,000
10,000
M and
NAssocia
tes
Sh 000
9,000 Motor
vehicles
4,000
3,000 Office equip
Office
equipment
Goodwill
Investments
Accounts
receivable
6,000
7,500
20,000
5,000 Goodwill
Accounts
13,000 Receivables
Cash
Investment
Loss
A3
B2
M2
N1
47,500
A
Sh
000
Realisation
account
Cash
Transfer to Able
and mine
Advocates
300
B
Sh
000
200
30,000
M
Sh
000
1,100
N
Sh
000
Balance
550 b/f
1,950 Cash
A& B
Advocat
es
Sh 000
9,000
M and
Associat
es
Sh 000
8,000
3,500
3,000
7,500
5,000
19,000
12,350
39,000
28,350
8,000
47,000
28,350
300
200
1,100
550
47,500
30,000
( 4 marks)
A
B
M
N
Sh
Sh
Sh
Sh
000 000 000 000
25,00 15,00 15,0
0
0
00 10,000
1,10
5,300 7,700
0
30,30
22,70
16,1
10,000
328
Papers
Answers Past
iii)
Balance b/d
Realisation a/c
Investment
Capital - A
B
M
00
Cash Accounts
A&B
Advocat
es
Sh,000
2,500
8,000
5,300
7,700
M and N
Advocat
es
Sh 000
A& B
Advocat
es
Sh 000
Balance
Accounts
Payable
Client a/c
Capital N
1,100 Able and
Mine
Advocates
5,850
6,950
5,000
5,000
M and N
Advocat
es
Sh 000
1,500
3,500
1,950
13,500
23,500
A& B
Advocat
es
Sh 000
6,950
M and N
Associat
es
Sh 000
5,850
52,500
15,000
7,500
28,350
QUESTION FOUR
a) Journal entries
Dr
Cr
Dr Equipment
900,000
Dr branch current account
100,000
Dr good will
500,000
Cr. Cost of investment in branch
1,500,000
To eliminate the cost of investment in branch from head office books
Dr inventories
100,000
Cr head office current account
100,000
To records the inventories acquired in the branch
( 2 marks)
b) Fast Lane Ltd
Trading and profit and loss accounts for the year ended 31/10/2006
Head office
Kitui branch
Total Sh 000
Sh,000
Sh 000
Sales
5,406
3,180
8,586
Goods sent to branch
2,280
7,686
3,180
8,586
Less cost of sales
Opening inventory
1,420
100
1,520
Purchases
6,380
810
7,190
Goods from head office
2,280
Closing inventory
(1,820)
(492)
(2,230)
5,980
2,698
Gross profit
1,706
2,106
Expenses
Provision for Un real.
(82)
profit
Operating expenses
(1,138)
(365)
(1,503)
Depreciation
(140)
(180)
(320)
Net profit
346
63
283
Computation of closing stock
Head office
1,420
6,380
(1,900)
5,900
Opening inventory
Purchases
Goods sent/received
Goods available
Cost of goods
Sold 5406/1.325 (x 1.2)
(4080)
(100 + 810) +
(1974.25/1.325 x 1.2
Closing inventory
1,820
(3180 (100 x1.325 + 810 x 1.325)= 1974.25
Unrealised profit on branch closing stock 492 x 0.2 = 8.2
1.2
Fast lane Ltd
Balance sheet as at 31/10/2006
Non current assets
Sh.000 Sh,000
Property plant and equipment (950 + 900 = 250-320)
1,280
Good will
500
1,780
Current assets
Inventory
2,230
Branch
100
810
2,280
3,190
2,698
492
330
Papers
Balance at bank
Cash in transit
Answers Past
410
140 2,780
4,560
Share capital
Retained profit (3600 + 283)
330
3,883
4,213
Current liabilities
Accounts payable 182+165
347
4,560
QUESTION FIVE
a)
Moses Waigwa (Deceased)
Distribution statement
Assets
Freehold house
Furniture & personal effects
Ornamental Collection
12,000 Ordinary shares in Kenya Company
Sh. 100,000 nominal 10% Treasury stock 2008
Due from insurance company
Cash in hand and bank balance
Specific legacies
To wife Grace, Freehold house
Furniture & other personal
effects
To daughter Zippo rah, 10% Treasury stock
To niece Sarah, Shares of Kenya company
To grandson Jonathan, Ornamental collection
General legacies
To son Maina
To Kamaus estate
To friend, Peter Mwaro
To nephew Richard
Sh 000
900
120
92
210
12
200
200
30
40
470
Sh.000
900
120
12
210
92
114
262
1,710
160
(1,334)
376
160
24
32
(376)
0
i)
Peter Mwaro : where two legacies are given to the same person
in the same will, there is a presumption that both legacies are
payable where they are of unequal amounts, they are given for
different reasons or they are different in nature, ie a pecuniary
legacy and a gift of residue. Thus Peter Mwaro is entitled to
both the Sh 20,000 and the Sh. 10,000 legacy, although both
abate proportionately with the other general legacies due to
insufficiency of assets.
ii)
Zipporah: An error made in the will does not negate the gift.
The gidt to Zipporah will therefore pass and the correction can
be made in the will.
iii)
iv)
v)
Kenneth: where in the same accident the testator dies and the
asset which is the subject matter of a gift is destroyed, the
asset is deemed to have perished before the testator. Thus, the
specific gift of my motor car will adeem and Kenneth is not
entitled to the proceeds of the insurance claim.
332
Mocks
Questions-
TOPICAL ANALYSIS
2
3
4
5
Partnerships - basic
(Total: 20 marks)
Branch accounting
(Total: 20 marks)
Bankruptcy accounts of a partnership (Total: 20 marks)
Trust accounts for Minors
(Total:15 marks)
PAPER 2
Question 1 Published Financial Statements
(Total: 25 marks)
Question 2 Partnership accounts:
Question 3 Branch Accounting
Question 4 Liquidation accounts.
Question 5 Executorships
(Total:20
(Total: 20
(Total: 20
Total: 15
marks)
marks)
marks)
marks)
PAPER 3
Question
Question
Question
Question
Question
marks)
1
2
3
4
5
PAPER 4
Question 1 Published financial statements
(Total: 20 marks)
Question 2 Partnerships
Question 3 Branch Accounts:
Question 4 Consolidated cash flow statement.
Question 5 Executorships
(Total: 20 marks)
(Total: 20 marks)
(Total: 20marks)
(Total: 20 marks
PAPER 5
Question 1 Consolidated Financial statements
Question 2 Partnerships.
(Total: 25 marks)
(Total: 20 marks)
333
(Total: 20 marks)
(Total: 20 marks)
(Total: 15 marks)
334
Mocks
Questions-
PAPER 1
QUESTION ONE
Mtito Limited purchased 80% of the ordinary shares of Andei
Limited on 1 May 1996. On 30 September 1996, the trial balances
of the two companies were as follows:
Mtito Ltd.
Andei Ltd.
Sh.000
Sh.000
Cash at bank
11,500
Debtors
62,300
51,600
Dividend: Interim paid
4,500
3,000
Expenses (including depreciation of fixed assets) 184,700
123,600
Freehold land and buildings (net book value) 25,500
18,900
Investment in Andei Limited
94,260
Motor vehicles (net book value)
6,700
4,900
Purchases
375,400
335,200
Plant and machinery (net book value)
28,900
21,600
Stock
22,100
17,600
Taxation: instalment tax paid
9,100
6,380
813,460
594,280
Bank overdraft (secured on land and buildings)
6,700
Creditors
38,200
17,100
Sales
586,600
480,000
Share capital: Authorised, issued and fully paid
Ordinary shares of Sh.10
60,000
20,000
Profit and loss account
121,960
77,180
813,460
594,280
Additional information:
335
1.
Closing stock was Sh.24, 200,000 in Mtito and Sh.19,200,000
in Andei.
2.
The turnover and expenses in Andei accrued evenly over the
year; the rate of gross profit was constant throughout the
year.
3.
Mtito paid its interim dividend on 15th May 1996; Andei paid
its interim dividend on 31 March 1996. Mtito has not yet
accounted for any dividend receivable from Andei.
4.
Between 1 May 1996 and 30 September 1996, Mtito sold
gods to Andei. These goods had cost Mtito Sh.30 million.
Mtito earned a gross profit of 37.5% on the selling price of
these goods. At 30 September 1996, one sixth of these goods
were included in the stock of Andei. Included in the debtors
figure for Mtito was Sh.7,200,000 from Andei: Mtitos
account in Andeis books agreed with this figure.
5.
The self assessment tax returns of Mtito and Andei show the
corporation tax charge for the year at Sh.10,020,000 and
Sh.7,980,000 respectively; both companies have paid
instalment tax on the preceding year basis.
6.
The directors have proposed that Mtito should pay a final
dividend of Sh.6 million and Andei Sh.3 million.
7.
Mtitos accounting policy with regard to goodwill is to carry
it as an asset and amortise it over 60 months, on a straight
line basis.
Mtito removes the whole amount of any
unrealised profit on closing stock from the stock and from the
company which made the profit, in the latter case adjusting
the minority interest, if appropriate. Mtito incorporates the
results of operations of Andei as from the date of acquisition,
and carries any dividends to minority interests as a current
liability.
Required:
A consolidated profit and loss account for the year ended 30
September 1996 (including reconciliations of the retained profit for
the year and carried forward) and a consolidated balance sheet as
at 30 September 1996.
(Total: 25
marks)
QUESTION TWO
K. Kimeu and M. Maingi are in partnership as manufacturers
of Tick Toys, Kimeu
being responsible for the factory and Maingi for the sales. All
completed toys are
transferred from the factory to sales department at agreed
price. Profits are shared'
on the following basis:
Factory
Sales Department
336
Mocks
Kimeu
Maingi
Questions80%
20%
40%
60%
The following trial balance has been extracted from the books at 31
March 1992:
Sh.
Sh.
Freehold factory at cost
1,053,750
Factory plant, at cost
843,750
Provision for depreciation 1 April 1991
151,250
Delivery van, at cost
401,250
Provision for depreciation 1 April 1991
86,250
Stocks at 1 April 1991
Raw materials
100,700
Work-in-progress
85,000
Toys completed (30,000 at Sh.40)
1,200,000
Sales (45,500 toys)
2,775,500
Purchases of raw materials
716,250
Factory wages
375,500
Sales Department wages
150,750
Expenses:
Factory
301,750
Sales Department
250,500
Provision for doubtful debts 1 April 1991
40,000
Trade debtors and creditors
450,000
150,000
Bank overdraft
176,200
Capital accounts:
Kimeu
1,400,000
Maingi
1,425,000
Drawings:
Kimeu
150,000
Maingi
125,000
_______
6,204,200
6,204,200
Additional information:
(i) 38,000 toys at Sh.45 each were manufactured and transferred
to Sales Department during the year. Toys in stock at the end
of the year were to be valued at Sh.45 each. Stock of raw
materials was Sh 79,500 and work-in-progress was valued at
prime cost of Sh.126,250 at 31 March 1992.
(ii)
Accrued expenses outstanding at 31 March 1992:
Factory
337
Sales
Department
(iii)
(iv)
Sh.
Sh
Expenses
52,250
27,000
Factory wages
7,000
Provision for depreciation is to be made as follows:
- Factory plant
10% p.a. on cost
- Delivery van
20% p.a. on cost.
The general provision for bad debts is to be maintained at
10% of the trade debtors.
Required:
Manufacturing, trading and profit and loss accounts for the year
ended 31March 1992 and a balance sheet as at that date.
(Total: 20 marks)
QUESTION THREE
Car Mart Kenya (Kenya) Limited has a Head Office in Nairobi and
branches in all the main towns in Kenya. Each branch maintains its
own account; all accounts are maintained on a computerised
system. The current accounts between the Head Office and the
Nakuru branch are not in agreement at the companys year end, 30
November 1994. The following information is available:
1. The Head Office current account balance as per the Nakuru
branch accounts is a credit balance of Sh.8,946,000 after
debiting the Nakuru branch loss for the year of Sh.1,680,000.
2. All fixed assets (belonging to the Head Office and all branches)
are carried in the Head Office books. The Nakuru branch had
purchased wheel-balancing equipment for Sh.2.5 million on 14
December 1993; this figure has erroneously been debited into
the branch stock account. Although this had been done, the
branch accountant had correctly accounted for the depreciation
charge for the year in the amount of Sh.250,000. It was only
when the Head Office accountant stated I cannot provide
depreciation where there is no asset that the matter came to
light. Neither the asset nor the depreciation has been entered in
the Head Office books.
3. A Nakuru farmer had paid to the Nakuru branch the amount he
owed the Head Office, namely, Sh.180,000.
The branch
accountant had credited the branch debtors control account
with this figure. The Head Office had been unaware that this
amount had been paid.
4. The Head Office had paid the branchs insurance premiums on 1
June 1994 in the amount of Sh.240,000. The Head Office
accounted for this item correctly; the only entry in respect of
338
Mocks
5.
6.
7.
8.
Questions-
Required:
a) Journal entries to enable the Nakuru Branch accounts and the
Head Office accounts to be corrected in respect of these facts.
(16 marks)
b) Compute the correct Nakuru Branch Profit or loss.
(4 marks)
(Total: 20
marks)
339
QUESTION FOUR
Akili and Bidii trade in a partnership under the name of Jaribio Enterprises. One of the creditors of the partnership
presented a petition in bankruptcy against the partnership and the High Court made out a Receiving Order on 31
October 1996.
The assets and liabilities of the joint and separate estates on that date were as follows:
Book Value
Estimated Realisable Values
Jaribio
Akili
Bidii
Jaribio
Akili
Bidii
Sh. 000
Sh. 000
Sh. '000
Sh.000
Sh.000
Sh. 000
Land and buildings 11,750
3,000
4,500
13,500
4,800
Plant and equipment
13,640
8,500
Furniture & household
Goods
600
850
200
420
Stock
16,300
9,700
Debtors
10,790
4,750
Partnership capital
4,000
6,000
Investments
2,000
1,000
3,350
800
Cash
200
100
300
Motor car
900
1,500
300
500
52,680
10,600
14,150
Capital accounts: A 4,000
B
6,000
Creditors
24,320
Bank overdraft
8,360
Loans secured on land
And buildings
10,000
Loans secured on cars
Personal surpluses
260
180
2,500
600
7,240
3,000
1,000
9,970
5,000
340
Mocks
Questions-
52,680 10,600
14,150
341
Additional information:
1. Of Jaribios creditors, Sh.700, 000 are preferential.
2. Jaribios bank overdraft was secured by a second mortgage on
the partnership, land and buildings and by
the personal guarantee of Akili together with the deposit of his
investments.
3. Akili and Bidii share profits or losses equally.
Required:
Statements of Affairs and Deficiency or Surplus Accounts for the
firm and for the separate personal estates of the partners, using the
format laid down in the Bankruptcy Act and showing the legal
position in relation to the double proof
.
QUESTION FIVE
Kena, Limo and Mara had been orphaned when both their parents
died in a bus accident in April 1992. Their uncle, Mr. Barua, a
stockbroker on the Nairobi Stock Exchange, organised a harambee
for them in June 1992 and raised Sh.1, 980,000. He invested this
amount as follows:
Sh.
9,600 Sh.10 Ordinary Shares in KAB Ltd.
432,000
12,600 Sh.10 Ordinary Shares in BBB Ltd.
756,000
13,200 Sh.10 Ordinary Shares in TEA Ltd.
792,000
1,980,000
He established an accumulation and maintenance trust to hold
these investments on behalf of the children. The trust had a wide
investment clause. He ruled that accounts be made up to 31 May
each year. When each child reached the age of 21, the trustees
were to transfer to him his share of the fund at that date. Kena
turned 21 years on 31 May 1996.
The balances on the Accumulation Accounts of Kena, Limo and
Mara at 1 June 1995 were Sh.207, 900, Sh.103,950 and Sh.34,650.
To this date, the trustees had used accumulated income to purchase
5,775 Sh.10 Ordinary Shares in TEA Ltd. On 1 June 1995, there
was no cash in the income account in the bank.
In the year to 31 May 1996, Sh.222, 750 was received from Capital
Investment and Sh.62,370 from Accumulation Investments and
maintenance payments made on behalf of Kena, Limo and Mara
were Sh.77, 000, Sh.81, 000 and Sh.94,000, respectively. On 31
May 1996, the market values of the shares in KAB Ltd., BBB Ltd
and TEA Ltd, were Sh.60, Sh.80, and Sh.70 respectively.
342
Mocks
Questions-
Kena was to receive 10,000 Sh.10 Ordinary Shares in BBB Ltd. and
the balance due to him on capital would be made up of shares in
KAB Ltd. Out of the accumulation assets, Kena was to receive
Sh.32, 222 in cash and the balance in shares in TEA Ltd.
Required:
The beneficiaries accumulation accounts for the year ended 31
May 1996 and distribution statements for the capital and
accumulation assets as at 31 May 1996. (15 marks)
343
PAPER 2
QUESTION ONE
The year end of Veneering Manufacturers Ltd is 30 June. The trial
balance at 30 June 19X9 was as follows:
100,000
400,000
414,900
20,000
120,000
22,000
93,200
12,700
9,200
107,600
150,000
3,000
700
3,000
136,400
32,000
60,200
30,900
182,920
78,580
791,000
319,600
16,000
2,900
137,900
1,300
5,000
600
61,300
100,000
1,800
400
800
1,700
600
100
5,200
6,700
7,200
400
8,500
2,800
900
1,759,42
0
30,240
38,600
1,759,42
0
344
Mocks
1. Accruals:
Power and lighting
Salesmens commissions
Auditors remuneration, including expenses
Questions
2,400
1,600
1,000
2.
345
2,500
3.
Depreciation
Plant and equipment
10% straight-line on cost
Office furniture
10% on reducing balance
4.
Corporation tax on profits for the year estimated at 67,000.
5.
A final ordinary dividend of 5% (payable 31.7.19X9) is to be
provided for.
6.
Closing Inventory
Raw materials
76,400
Work-in-progress
12,800
Finished goods
40,100
7. Prepayments:
Factory insurances
1,100
Rates
1,200
8.The income tax position is:
INCOME TAX ACCOUNT
19X9
346
Mocks
Questions-
Shs.
720,000
Studio
450,000
360,000
Motor cars
Equipment
Net current assets
_______
1,530,000
720,000
180,000
180,000
_______
1,530,000
347
348
Mocks
Questions-
QUESTION THREE
Sir Charles' is a fashionable men's clothing store with a Head
Office in Mombasa and branches all over Kenya. Books are not
maintained in the branches: data is sent by Kenpack Services Ltd.
from the branches to a head office computer in Mombasa. A
computer program has been developed by Sir Charles' to write up
the traditional accounts of each branch in the usual way. The
following data relates to the Kisumu branch. All prices quoted are
selling prices.
1 July 1995
Transactions
Goods received by branch from Head Office (at cost plus
to
50%) returned to Head Office (including one fifth of the
Goods
opening
Cash sales (these include the remainder of the opening
stock of
marked down goods and one half of goods received in the
year at a
selling
marked down by 50% to clear
Credit price
sales of
(toSh.720,000
other retailers)
Retailer customer returned goods to Kisumu branch
Goods received from Kisii branch during the year
Goods sent to Kitale branch during the year
Retailer customer returned goods to Head Office in
Cash stolen in transit to the bank on 21 June 1996
Goods stolen on the night of 9 March 1996
Sh.'
6,210
71,040
1,470
38,592
27,990
186
246
321
522
129
420
349
350
Mocks
Questions-
PAPER 3
QUESTION ONE
Below are the summarized Balance Sheets of Rich Ltd. Its
subsidiary Preston Ltd and its associate Guise Ltd at 30 th November
2002.
Rich Ltd
Assets
Freehold Land cost or
valuation
Freehold Buildings NBV)
Machinery NBV)
Inv. in subsidiary (cost)
Inv. in associated company
(cost)
Inventories
Accounts Receivable
Amounts owed by Subsidiary
Bank and cash balances
Equity and liabilities
Share Capital
15% cumulative preference
20 share)
Ordinary 20 share)
Share Premium Account
Fixed assets revaluation
reserve
Retained earnings
12% Debenture
Deferred taxation
Corporation tax
Accounts payable
Proposed dividend
Bank overdraft
Amount due to holding
company
Preston Ltd
Guise Ltd
600,000
1,000,000
1,200,000
2,800,000
720,000
480,000
1,200,000
600,000
20,000
100,000
5,920,000
200,000
400,000
360,000
960,000
440,000
200,000
1,600,000
400,000
640,000
640,000
1,680,000
880,000
480,000
160,000
3,200,000
400,000
2,400,000
320,000
400,000
3,520,000
1,200,000
240,000
160,000
560,000
240,000
5,920,000
600,000
244,000
844,000
400,000
94,000
48,000
136,000
30,000
40,000
8,000
1,600,000
800,000
200,000
400,000
340,000
1,740,000
800,000
160,000
100,000
320,000
80,000
3,200,000
351
ii) Rich Ltd purchased 16,000 ordinary shares in Guise Ltd for cash
at a time when the latter had retained earnings totalling 80,000
and no outstanding dividends. Guise Ltd has not issued any
shares then, but has subsequently revalued its fixed assets.
iii) 100,000 of Rich Ltds inventory had been purchased from
Preston Ltd cost to latter 80,000.
iv) Cash remitted by Preston Ltd 12,000 was not received by Rich
until December 2002 and had not been recorded in Rich Ltds
books prior to the year end.
v) Rate of corporation tax 50%.
Required:
(Total: 22
marks)
QUESTION TWO
Cat and mouse were in partnership as retail traders sharing profits
and losses: cat three-quarters, mouse one-quarter. The partners
were credited annually with interest at the rate of 6% per annum on
their fixed capitals; no interest was charged on their drawings.
Mouse was responsible for the buying department of the business.
Cat managed the head office shop and kitten was employed as the
branch manager. Cat and Kitten were each entitled to a commission
of 10% of the net profits after charging such commission) of the
shop managed by him. All goods were purchased by head office
and goods sent to the branch were invoiced at cost.
The following was the trial balance as on 31st December 2001.
Dr
2,500
1,200
1,500
Cr
Dr
14,000
4,000
1,100
500
13,000
37,000
350
4,400
18,000
39,000
600
6,800
4,500
Cr
17,200
26,000
200
3,600
3,200
240
352
Mocks
Sales
Provision for doubtful
debts
Branch and Head
Office Current A/cs
Salaries and wages
Kitten, on account of
commission
Carriage and travelling
expenses
Administrative
expenses
Trade and general
expenses
Sundry debtors
Sundry creditors
Bank balances
Questions2,200
2,400
3,200
7,000
960
1,800
3,000
5,800
400
1,350
600
81,900
81,900
31,900
31,900
353
Ted Safari has had a bankruptcy petition filed against him in the
High Court. A receiving order was made on 31 October 1995. He
has not kept accounts for 10 months to 31 October 1995. His
financial position as at 31 December 1993 (the Official Receiver has
accepted that the Deficiency Account cover the period from this
date) was as follows:Business Balance Sheet
As at 31 Decmber 1994
1994
Fixed assets
(Net Book Value)
Plant and
Machinery
Motor vehicles
Current Assets:
Stock
Debtors
Sh.00
0
Sh.
000
4,000
5,0
00
9,000
3,0
00
7,000
10,000
Current Liabilities
Bank overdraft
(secured on plant)
Creditors
Capital
Finance lease on
vehicles
Assets at cost:
Sh.0
00
House
Furniture and
contents
Motor car
4,000
300
Mortgage
on
house
Car loan (secured
on car)
3,000
700
5,000
500
3,500
1,500
3,000
5,000
8,000
2,00
0
11,00
0
7,500
3,500
11,00
0
354
Mocks
Questions-
fixed assets, either for his business or his personal use. He had
obtained a short-term loan from his uncle on 29 October 1995 for
Sh.5 million which
he had banked in his business bank account on the same day.
Overdraft interest for the period had been charged in the amount of
Sh.750, 000. On 31 October 1995, stock at cost was Sh.2 million.
Liabilities of Sh.6 million for purchases and Sh.1 million for
expenses (including Sh.300, 000 to his 25 employees for months of
September and October all earn in excess of Sh.3, 000 per month,
and Sh.260, 000 PAYE deductions not yet paid across to the Income
Tax Department) need to be accounted for: The realisable value of
assets are: Plant Sh.1.8 million, Motor vehicles Sh.2.5 million, Stock
Sh.1.6 million, Debtors Sh.5.5 million, House Sh.4.2 million,
Furniture and contents Sh.0.1 million, Motor Car Sh.0.4 million. He
had drawn Sh.500, 000 from his business bank account in respect
of personal expenses.
Required:
Statement of Affairs and a Deficiency Account in accordance with
the format contained in the Bankruptcy Act. Show all your
workings.
(Total: 20 marks)
QUESTION FOUR
Kena, Limo and Mara had been orphaned when both their parents
died in a bus accident in April 1992. Their uncle, Mr. Barua, a
stockbroker on the Nairobi Stock Exchange, organised a harambee
for them in June 1992 and raised Sh.1, 980,000. He invested this
amount as follows:
Sh.
9,600 Sh.10 Ordinary Shares in KAB Ltd.
432,000
12,600 Sh.10 Ordinary Shares in BBB Ltd.
756,000
13,200 Sh.10 Ordinary Shares in TEA Ltd.
792,000
1,980,000
He established an accumulation and maintenance trust to hold
these investments on behalf of the children. The trust had a wide
investment clause. He ruled that accounts be made up to 31 May
each year. When each child reached the age of 21, the trustees
were to transfer to him his share of the fund at that date. Kena
turned 21 years on 31 May 1996.
The balances on the Accumulation Accounts of Kena, Limo and
Mara at 1 June 1995 were Sh.207, 900, Sh.103,950 and Sh.34,650.
To this date, the trustees had used accumulated income to purchase
5,775 Sh.10 Ordinary Shares in TEA Ltd. On 1 June 1995, there
was no cash in the income account in the bank.
355
In the year to 31 May 1996, Sh.222, 750 was received from Capital
Investment and Sh.62,370 from Accumulation Investments and
maintenance payments made on behalf of Kena, Limo and Mara
were Sh.77, 000, Sh.81, 000 and Sh.94,000, respectively. On 31
May 1996, the market values of the shares in KAB Ltd., BBB Ltd
and TEA Ltd, were Sh.60, Sh.80, and Sh.70 respectively.
Kena was to receive 10,000 Sh.10 Ordinary Shares in BBB Ltd. and
the balance due to him on capital would be made up of shares in
KAB Ltd. Out of the accumulation assets, Kena was to receive
Sh.32, 222 in cash and the balance in shares in TEA Ltd.
Required:
The beneficiaries accumulation accounts for the year ended 31
May 1996 and distribution statements for the capital and
accumulation assets as at 31 May 1996.
(Total: 18 marks)
QUESTION FIVE
The following is the trial balance of Civil Servants Pension Fund as
at 31 October 2001:
Sh. 000
Sh. 000
356
Mocks
Questions-
2.
Required:
i) Statement of change in net assets for the year to 31 October
2001.
(10 marks)
ii) Statement of net assets as at 31 October 2001.
(10 marks)
(Total:
20marks)
357
PAPER 4
QUESTION ONE
PREPARATION OF PUBLISHED FINANCIAL STATEMENTS
The accountant of Wislon Co. has prepared the following list of
account balances as at 31 December 20X7
50c ordinary shares (fully paid)
7% Sh.1 preferred shares (full paid)
10% debentures (secured)
Retained earnings 1.1 x 7
General reserve 1.1 x 7
Land and buildings 1.1 x 7 (cost)
Plant and machinery 1.1 x 7 (cost)
Aggregate depreciation
Building 1.1 x 7
Plant and machinery 1.1 x 7
Inventory 1.1 x 7
Sales
Purchases
Preferred dividend
Ordinary dividend (interim)
Debenture interest
Wages and salaries
Light and heat
Sundry expenses
Suspense account
Trade accounts receivable
Trade accounts payable
cash
Sh 000
350
100
200
242
171
430
830
20
222
190
2,695
2,152
7
8
10
254
31
113
135
179
195
126
Notes
(a) Sundry expenses include Shs. 9 million paid in respect of
insurance for the year ending 1 September 20X8. Light and
heat does not include an invoice of Shs. 3,000 for electricity
for the three months ending 2 January 20X8, which was paid
in February 20X8. Light and heat also includes Shs. 20
million relating to salesmens commission.
(b) The suspense account is in respect of the following items.
Shs. million
Proceeds from the issue of 100,000 ordinary shares
120
Proceeds from the sale of plant
300
420
Less consideration for the acquisition of Mary & Co.
285
135
358
Mocks
Questions-
(c) The net assets of Mary & Co. were purchased on 3 March
20X7. Assets were valued as follows.
Shs. Million
Investments
231
Inventory
34
265
All the inventory acquired was sold during 20X7. The
investments were still held by Wislon at 31.12.X7. Wislon
amortises goodwill over 5 years, with a full charge made in
the year of acquisition.
(d) The property was acquired some years ago. The buildings
element of the cost was estimated at Shs.100,000 and the
estimated useful life of the assets was fifty years at the time
of purchase. As at 31 December 20X7 the property is to be
revalued at Shs.800 million.
(e) The plant which was sold had cost Shs350,000 and has a net
book value of Shs. 274,000 on 1.1 x 7. Shs.36,000
depreciation is to be charged on plant and machinery for
20X7.
(f) The debentures have been in issue for some years. The 50p
ordinary shares all rank for dividends at the end of the year.
(g) The Management to provide for:
i)
Debenture interest due
ii)
A final dividend of 2c per share
iii)
A transfer of general reserve of Shs. 16,000
iv)
Audit fees of Kshs.4,000.
(h) Inventory as at 31 December 20X7 was valued at
Shs.220,000 (cost).
(i) Taxation is to be provided as at Shs.30,000. Assume tax rate
of 30%.
Required
Prepare the financial statements of Wislon Co. as at 31
December 20X7 to produce notes to the statements.
QUESTION TWO
X, Y, Z and M are in partnership sharing profits in the ratio 3:2:1:4
respectively. It is decided to dissolve this small size partnership on
1 January 1994 on which date the balance sheet was as below:
Sh.
Sh.
42,500
39,605
15,000
19,000
107,105
31,740
Debtors
Cash at bank
359
19,205
1,565
52,510
34.615
Less creditors
Capital Accounts:
X
Y
Z
M
Leasehold redemption fund
General reserve
17 895
125,000
35,000
20,000
15,000
20,000
10,000
25,000
125,000
Stock (Part)
Debtors (Part)
Investments
Goodwill
Land and buildings
Debtors (Part)
Stock (balance)
Plant and machinery
Debtors (balance)
Sh.
17,500
14,660
12,100
10,000
35,000
2,500
13,750
32,800
1,755
360
Mocks
Questions-
Capital
Fixtures
Purchase of toys
Purchase of packaging
material
Sales
Goods sent to branch
General expenses
Debtors
Creditors
Head office current
Branch current
Bank balances
361
Head office
.
50,000
8,000
200,000
22,000
140,000
79,900
20,000
14,000
20,000
Branch
.
.
75,000
78,452
2,000
7,500
2,000
14,052
18,000
7,900
_____
3,100
_____
28,900
28,900
91,052
91,052
362
Mocks
Questions-
QUESTION FOUR
Bigcom Investments Ltd has prepared the following draft group accounts for the
year ended 30 September 19 6.
Shs. 000
Shs. 000
Shs.
000
Profit and Loss Account
16,866
Operating profit before taxation
(8,334)
Taxation
8,532
(684)
Less: Minority shareholders interest
7,848
Add: Share of results of associates
954
Profit before taxation
(504)
450
Less: Taxation
____
8,298
Holding
Share of
Extraordinary items:
company
Associates
Shs. 000
Shs. 000
498
Before taxation
510
138
Less: taxation
150
360
720
360
____
9,018
Group profit for the year
(2,100)
Less: Dividends
(1,860)
Transfer to general reserve
(3,960)
5,058
Retained in the accounts of:
Bigcom Investment Ltd
Subsidiaries
Associates
Balance Sheet at 30 September
Leasehold premises net)
Plant, machinery and equipment net)
Goodwill on consolidation
Associated companies at cost
Attributable
profits
Stock
Debtors
Bank
19 6
Shs. 000
19,800
15,120
5,040
5,760
1,458
8,640
7,758
_____
63,576
6,840
6,336
5,460
23,166
3,738
7,296
3,720
2,106
3,078
666
936
Shs.
000
3,024
1,440
594
____
5,058
19 5
Shs.
000
17,100
11,340
5,040
5,760
864
5,958
5,976
1,728
_____
53,766
5,400
5,400
3,600
18,108
3,474
8,028
5,400
1,548
2,106
576
Ltd
- Minority
363
234
_____
63,576
126
_____
53,766
Car, Fiat
9,000
Car, Toyota
5,000
Boat
2,500
Furniture, Jewellery etc.
9,500
364
Mocks
Farm
Beach plot
150,000 6%Government stock
Balance at bank
Questions4,000
1,200
120,000
68,800
(3 marks)
(3 marks)
365
PAPER 5
QUESTION ONE
The draft Balance Sheets of UNA Limited, KMN Limited and LLE
Limited are as follows: UNA Limited and KMN Limited are both
listed on the Nairobi Stock Exchange:
Balance sheets as at 30
September 1996
PPE (Net book value)
Investments:
At cost:: Shares in KMN
Ltd
At Valuation: Shares in
LLE Ltd
Current assets
Inventory
Receivables
Cash at bank
Current liabilities
Bank overdraft
Payables
Current Tax
Proposed dividends
Net current assets
Financed by:
Sh.10 Ordinary shares
10% Preference shares
Revaluation reserve
Profit and loss account
UNA Ltd
KMN Ltd
LLE Ltd
Sh. million
Sh.
million
430
Sh.
million
330
684
600
360
484
180
0
664
320
150
80
550
270
90
40
400
60
170
60
100
390
274
1,558
120
50
100
270
280
1,070
90
40
50
180
220
550
500
0
0
1058
1,558
500
80
30
460
1,070
250
0
0
300
550,
Notes
1.
2.
366
Mocks
Questions-
Ltd. and LLE Ltd. were Sh.856 million, Sh.330 million and
Sh. 130 million respectively. The investment was revalued
upwards by Sh.30 million on 30 September 1995. The
directors of KMN Ltd. had decided to revalue the investment
at Sh.378 million at 30 September 1996, but this has not yet
been reflected in the books.
3.
KMN Ltd. makes sales to both UNA Ltd. and LLE Ltd. at
normal selling price (cost plus a mark-up of 33'/ 3%). At 30
September 1996, items purchased by UNA Ltd. and LLE Ltd.
from KMN Ltd. remaining unsold had cost Sh.24 million and
Sh. 16 million respectively. Group policy on unrealised intragroup profits is in line with current international practice i.e.
unrealised profits are eliminated in full from the book value
of assets, and from the interests held by the group and the
minority interest in respective proportion to their holdings
in the company which had made the profit.
4,
UNA Ltd. and KMN Ltd. have not yet accounted for the
dividends receivable.
5.
Intra-group balances are included in Receivables and
payables as follows:
UNA Ltd.:
KMN Ltd.:
LLE Ltd.:
.
6.
7.
payables
Receivables
Payables
Receivables
LLE Ltd.
KMN Ltd
LLE Ltd.
UNA Ltd.
KMN Ltd
Sh. 18 million
Sh.8 million
Sh.6 million
Sh.18 million
Sh.6 million
Required:
Consolidated Balance Sheet of UNA Ltd. and its subsidiaries as at
30 September 1996
complying, so far as the information will allow, with the accounting
requirements of the Companies Act and International financial
reporting standards.
(Total: 25 marks)
QUESTION TWO
Kwale, Ndiu and Riuki were in partnership sharing profits in the
ratio 3:3:2 after charging interest on capital at 5 per cent per
annum.
367
Represented by:
Life assurance policies
Net assets
Sh.
300,000
600
300
300
1,200
15,000
78,000
394,200
Sh.
78,000
316,200
394,200
368
Mocks
Questions-
Required:
The following ledger accounts necessary for all the closing entries
including final payments to the partners:
(a) Capital accounts:
(5
marks)
(b) Current accounts
(4
marks)
(c) Loan account;
(1 mark)
(d) Life assurance fund account;
(1
mark)
(e) Cash book;
(3
marks)
(f) Life assurance policy account:
(2
marks)
(g) Net assets account.
(4
marks)
(Total:
20
marks)
QUESTION THREE
Antiquarius Ltd is a company which deals in antiques. The Company
is based in London and operates in the UK, but also has a profitable
outlet in San Francisco, California, which is managed by one of the
directors on his frequent trips to the States. Separate records are
kept of the outlets transactions b the American staff.
The following trial balances were extracted from the books of
Antiquarius Ltd at 31 December 2003
369
London
Share capital
Retained Profits as at1
January 2003
Lease hold premises
Amortization of lease
Delivery vans, at cost
Provision for depn on
delivery vans
Opening inventory, at
cost
Accounts receivable
San Francisco current
account
London current account
20,200
15,00
0
40,000
7,000
12,00
0
6,000
5,000
8,620
12,460
3,869
22,60
0
6,293
78,318
Transfers to San
Francisco
Purchases
21,600
8,000
10,000
Sales
San Francisco
$
$
20,000
70,06
6
44,40
0
116,3
08
21,800
38,620
3142
2,386
17,42
0
5,485
23,500
8,940
500
6,923
______
164,3
69
_10,75
1
164,36
9
13,879
______
178,63
4
__4,9
26
178,6
34
370
Mocks
(d)
(e)
(f)
(g)
(h)
Questions-
London
12,470
San Francisco (including $9,180
$15,240
of goods sent from London
when the rate of exchange was
$1.70)
Salaries and wages for London include directors emoluments
of 8,000 of which 3,200 is to be charged to the US outlet at
the rate of exchange of $1.60 to the 1.
Administration expenses accrued but not yet taken into
account amount to:
London
800
San Francisco
$760
When the leasehold premises and delivery vans were
acquired in San Francisco the rate of exchange was $2.20 to
the .
Depreciation is to be provided for the year on the vans at
25% of cost, and the leases are to be amortized by equal
amounts written off over the periods of the leases, which are:
London
15 years
San Francisco
10 years
On 31 December 2003 London office had shipped a regency
bureau to San Francisco at a value of 900. Although they
recorded as a transfer in the London books no entry was
made in the books in San Francisco until it was received on
20 January 2004.
You are required to prepare for the year ended 31 December 2003
(a) The trial balance of the San Francisco outlet, converted at
historic rate, after making the year end adjustments, and
indicating clearly the rates of the conversion used.
(3 marks)
(b) The trading and profit and loss account of London, San
Francisco and the combined business in columnar form.
(10
marks)
(c) The balance sheet of the combined business
(7 marks)
(Total: 20 marks)
QUESTION FOUR
(a)
Sh.
Sundry Assets
Buildings
800,000
Preliminary expenses
800,000
371
4,980,000
372
Mocks
Questions-
Required:
i) Receivers Receipts and Payments Account.
(5 marks)
ii) Liquidators Fund Statement of Account
(11 marks)
b) State the circumstances in which a company may be voluntarily
liquidated in Kenya.
(4
marks)
(Total:
20 marks)
QUESTION FIVE
a) State two main ways of constituting a trust.
Give appropriate examples
(4 marks)
b)
i) Five years ago Otieno bought a house in the name of his
friend Odhiambo in order to conceal the ownership of the
house. Odhiambo is now claiming the house as his own.
Required:
What is the position on ownership of the house? Would the position
be the same if Odhiambo was Otienos son?
(4 marks)
ii) An aircraft went out of control and crashed on Kimanis villa
in Tena estate. Kimani and his members of the family
perished in the accident.. The Utopian ambassador being a
kind man immediately raised a fund for the benefit of the
dependants of Kimanis family.
It now appears that there are no dependants and the
ambassador wishes to know how he should distribute the
money he had raised for late Kimanis dependants. Explain
to the ambassador the alternatives opened to him. (7 marks)
(Total: 15
marks)
Answers - Mocks
373
ANSWERS - MOCKS
PAPER ONE
Loita and its subsidiary
Consolidated profit and loss account for the year ended 30
September 1999
Turnover
Cost of sales
Opening stock
Purchases
Less closing stock
Gross profit
Investment income:
dividends
Distribution costs
Administration costs
Finance cost: Debenture
interest
Goodwill amortised
Profit before tax
Income tax expense
Profit after tax
Profit attributable to
Minority Int.
Dividends: Interim paid
Final proposed
Retained profit: Year
B/f
C/f
Loita
Sh.000
642,500
Leserni
Sh.000
372,000
Group
Sh.000
853,500
51,250
320,650
371,900
51,300
(320,600)
321,900
18,000
(112,350)
(94,550)
(10,000)
123,500
(31,000)
92,000
92,000
(20,000)
(40,000)
32,000
64,950
96,950
28,240
187,500
215,740
29,740
(186,000)
186,000
(392,100)
461,400
(64,600)
(36,400)
85,000
(25,000)
60,000
60,000
(20,000)
(20,000)
20,000
31,800
51,800
(160,800)
(121,850)
(10,000)
(1,500)
167,250
(49,750)
117,500
(18,000)
99,500
(20,000)
(40,000)
39,500
64,950
104,450
374
Mock Examinations
Comprehensive
196,950
91,800
36,720
241,170
50,000
246,950
91,800
50,000
291,170
31,800
2,900
40,000
74,700
321650
18,100
2,100
20,000
40,200
132000
43900
5000
20,000
8,000
96,900
388070
Workings
1.
Dividends
Holding: Interim (paid)
Final (proposed) (40% x
100,000)
Subsidiary: Interim (paid)
Final proposed (50%
x 40,000)
Preacquisition (3/12 x 60% x
40,000)
Sh.000
20,000
40,000
60,000
20,000
20,000
40,000
6,000 To Cost of control
18,000 to Profit & Loss
Answers - Mocks
375
Post-acquisition (9/12 x 60 x
40,000)
8,441
2.
Cost of Control
Investment in
subsidiary
3.
4.
Sh.00
0
62,080 Pre-acquisition dividend
Ordinary share capital
Profit & Loss
Goodwill written off
- 1,500
C/d
8,500
62,080
Sh.0
00
6,000
24,000
22,080
10,000
62,080
Sh.0
00
96,950
9,00
0
105,59
0
Minority Interest
Sh.00
0
Bal c/d
Sh.0
00
16,000
20,720
36,720
Reserves (Subsidiary)
Reserves b/f
Pre-acquisition reserves for
year (3/12 x 20,000)
Total pre-acquisition reserves
Group share (60%) to COC
6
.
Loita
Lesern
i
(372,000 x
9/12)
Sales
Sh.00
0
642,50
0
279,00
Sh.000
31,800
5,000
36,800
22,080
Cost of
sales
Sh.000
320,600
139,500
(186,000 x
9/12)
376
Mock Examinations
Comprehensive
0
921,50
0
460,100
Loita
Sh.000
Distribution costs
Administrative
expenses
Tax
Leserni
(9 months)
Sh.000
48,450
27,300
18,750
112,350
94,550
31,000
Total
Sh.000
160,800
121,850
49,750
LOT
A
6020
0
1127
0
7045
0
1419
20
LESERI
N
38100
GROU
P
98300
4400
15670
20300
90750
62800
20472
0
Note 2
WORKINGS FOR INVESTMENTS
Shs
Investment
62,080
Less: Pre acquisition dividend
6,000
56080
QUESTION TWO
Kimeu and Maingi
Trading profit and loss account for the year ended 31 March 1992
Sh.000
Sh.000
Raw materials
100,700
Opening inventory
716,250
Purchases
816,950
(71,500)
Less closing inventory
737,450
Raw materials consumed
382,500
Factory wages (375,500 +
1,119,950
7,000)
PRIME COST
Factory overhead
84,375
Depreciation: Plant (843,750 x
354,000
458,375
10%)
1,558,325
Factory expenses (301,750 +
85,000
52,250)
(126,250)
Answers - Mocks
377
1,517,075
192,925
1,710,000
2,775,500
1,200,000
1,710,000
2,910,000
(1,012,500)
(1,897,500)
878,000
192,925
1,070,925
80,250
150,750
277,500
5,000
112,500
255,140
189,785
626,000
444,925
444,925
WORKINGS
1.
Units
30,000
38,000
68,000
(45,500)
22,500
@ Sh.45
2.
UPCS:
1,517,075
= 39.92 = 40
38,000
Share of profit
1,012,500
378
Mock Examinations
Kimeu
Maingi
4.
80%
20%
Comprehensive
Factory Profit
154,340
38,585
192,925
40%
60%
Sales Profit
100,800
151,200
252,000
Total
255,140
189,785
444,925
Accruals
Expenses
Factory
Factory
52,250
7,000
Sales
27,000
-
Sh.
1,053,750
843,750
401,250
2,298,750
Sh.
235,625
172,500
408,125
Total
79,250
7,000
86,250
Sh.
1,053,750
608,125
228,750
1,896,625
79,500
126,250
1,012,500
(112,500)
450,000
(45,000)
900,000
405,000
1,510,750
3407375
86,250
150,000
176,200
1,505,140
1,489,785
2,994,925
86,250
150,000
176,200
412,450
3407925
Answers - Mocks
Drawings
Bal c/d
379
Kimeu
Sh.000
CAPITAL A/C
Maingi
Sh.000
150,000
1,505,14
0
125,000
1,489,78
5
1,655,14
0
1,614,78
5
Bal b/d
Profit share
Kimeu
Sh.000
Maingi
Sh.000
1,400,00
0
255,14
0
1,655,14
0
1,425,0
00
189,78
5
1,614,7
85
QUESTION THREE
Car Mart Kenya) Ltd
1. Head Office Journal
Journal
Branch
Dr.
Cr.
DR
CR
Shs.
Shs.
Nakuru Br F.A a/c
2,500,000
Nakuru Br Depreciation a/c
Nakuru Br. Current a/c
Shs.
2,500,000
Shs.
H.O current a/c
250,000
2,250,000
180,000
control
a/c
328,000
Br.Currrent
328,000
Bungoma br. Current a/c
Nakuru br. Current a/c
Being correction of mispostings made to other
Branches while awaiting a cheque to be traced in order
To eliminate cash-in-transit.
212,000
212,000
a/c
380
Mock Examinations
Comprehensive
Dr.
Cr
Shs
Shs
5. Goods in transit
800,000
Nakuru Br. Current a/c
800,000
Being recording of goods in transit to the Nakuru
Branch from Head office
Dr.
Cr.
Shs
Shs
6. Goods sent to branches
Nakuru
Branch
Current
606,000
Being correction of overstated invoices on goods
Sent to Nakuru branch
606000
a/c
240,000
c/a
Correction
of
Nakuru
branch
profit:
Shs.
Loss
for
Nakuru
branch
as
per
draft
a/cs
(1,680,000)
Opening
stock
overstated
by
Sh25m
2,500,000
Goods
from
H.O
overstated
by
606000
606,000
Revised Nakuru br. Profit for the year to 30.11.94
1,426,000
BranchJournal
1.
H.O Current a/c
Br. Trading a/c
500, 000
Being correction of the impact of showing
Purchased fixed assets as part of the opening
Stock instead of head office property.
Dr.
Shs.
Cr.
Shs.
2, 500,000
2,
Answers - Mocks
381
Dr
Cr
Shs
Shs
2.
Nakuru Br. Debtors control
H.O
180,000
180,000
Current
a/c
120,000
660,0000
Branch trading
660,000
Akili
Bidii
Estate
Estate
Sh000
000
Shs000
Unsecured creditors
200 100
300
Bidii
260
180
Sh. 000.
Shs
Cash
382
Mock Examinations
Comprehensive
Answers - Mocks
383
Deficiency a/c
Excess of
assets over
liabilities
Estimated
surplus on
Realisation
of assets:
Land and
buildings
Joint
Estate
Sh.
000
10,000
Deficiency
as per SOA
Bidii
Sh.00
0
7,240
Sh.00
0
9,970
1,750
1,800
500
1,350
Investments
Surplus
from Bs
estate
Akili
2,840
3,190
_____
17,780
2,970
_____
13,360
_____
10,470
Joint
Estate
Sh.000
Loss on o/d
guarantee
Loss of P.ship
capital
Est. loss on
realisation of
assets:
Motor car
Investmen
t
Debtors
Stock
Plant
Furniture
Surplus as per
SOA
Akili
Bidii
Sh.000
8,360
Sh.00
0
4,000
6,000
600
400
-
1,000
200
430
2,840
_____
17,780
_____
13,360
_____
10,470
Trade creditors
180
Less pref. Creditors
(-)
Unsecured creditors
180
Sh. 000
Joint Estate
24,320
Sh. 000
Akili
Sh 000
Bidii
260
_(700)
(-)
23,620
260
Sh. 000
Liability
10,000
Sh. 000
Security
Sh. 000
13,500
4,800
3,000
2,300
5,000
2,000
Sh.000
3,500
4,860
384
Mock Examinations
Akili: Bank o/d
: Car Loan
Comprehensive
8,360
600
8,960
Bidii: Car Loan
3,350
300
3,650
1,000
5,010
300
5,310
500
500
Answers - Mocks
385
QUESTION FIVE
NB: The fact that the trust had a wide investment clause means there is no
need to divide the fund into fixed interest, wider range or special range
sections.
June 1992:
31 May 1996
1 June 1995
Fund is established
Accumulation investments
K turned
Made = 5775 Shares
21 years
in TEA
207900
=L
=M
103950
34650
Value
Shs.
Distribution To K
Nominal/
Value
No
Shs.
To remain in Trust
Nominal/
Value
No
Shs.
576,000
600
36,000
9,000
540,000
1,008,0
00
10,000
800,000
2,600
208,000
______836,000
13,200
924,000
1,672,000
__924,0
00
2,508,0
00
386
Mock Examinations
Comprehensive
Maintenance payment
Distribution a/c
Bal c/d
K(sh)
L(sh)
77,000
277,22
2
81,000
-_____
354,22
2
133,23
6
214,23
6
M(s
h)
94,000
26,912
120,91
2
Bal b/d
Incom
e
(Caps)
Incom
e (Acc)
Reval
gain
(TEA)
K(sh)
L(Sh)
M(sh)
207,90
0
74,250
37,42
2
34,650
354,22
2
103,95
0
74,250
18,711
17,325
214,23
6
34,650
74,250
6,237
5,775
120,91
2
836,000
Bal. b/d
1,980,000
Reval gain: (KAB)
144,000
: (BBB)
252,000
1,672,000
: (TEA)
2,508,000
2,508,000
132,000
2,508,000
Shs.
Sh
Capital
Capital
Accumulation
Accum. a/c K
222750 62370
L
M
222750
74250
74250
74250
Accumulation
37422
18711
6237
222750
Investment a/c
_____
____
62370
62370
Trust Cashbook
Shs.
Shs
Capital
Income
Inv.a/c:Income
252,000
Inv a/c:Income
32,222
Shs.
Shs.
Income
222,750
62,370
Capital
Accum a/c: Maint.
Distribution a/c
Bal. c/d
898
285,120
285,120
388
Mock Examinations
Comprehensive
PAPER 2
QUESTION ONE
Format I
Veneering Manufacturing PLC
Income statement for the year ended 30 June 19X9
Turnover
Cost of sales
Gross profit
Operating expenses
Distribution
Administration
Operating profit
Investment Income
791,000
(507,000)
284,000
111,000
74,300
(185,300)
98,700
42,300
141,000
(8,900)
132,100
(66,500)
65,600
Finance costs
Profit before tax
Tax
Profit after tax
Format II
Veneering Manufacturing PLC
Income statement for the year ended 30 June 19X9
Turnover
Other operating income
Expenses
Change in finished goods and W.I.P.
Raw materials consumed
Depreciation & Ammortisation
Staff costs
Other operating expenses
Operating profit
791,000
_____791,000
(31,000)
352,400
26,200
306,600
38,100
(692,300)
42,300
141,000
(8,900)
132,100
(60,500)
65,600
Finance costs
Tax
Profit after tax
Ordinary
Share
capital
Share
Premiu
m
100,000
400,000
136,400
Propose
d
Dividen
ds
Retaine
d Profitt
_____-
______-
_____-
_____-
_____-
100,000
400,000
136,400
30,900
______-
_____-
_____-
_____-
_____65,600
30,900
Total
667,3
00
_____667,3
00
_____65,60
Dividends:
Interim
Final
proposed
PSC
OS
C
(2,800)
2,800
(2,800)
20,000
(20,000
)
Bal as at 30 June
19X9
100,000
400,000
136,400
22,800
70,900
0
(2,80
0)
-
730,1
00
390
Mock Examinations
Comprehensive
Veneering Manufacturing
Balance Sheet as at 30 June 19X9
Non current assets
Property plant and equipment
Intangible Assets
Investments Quoted
Unquoted
Current Assets
Stock
Debtors
Prepayments
Bank Balance & Cash in hand
Total assets
Equity and Liabilities
Authorised Share Capital
10,000 5.6% preference shares
@ 1 each
500,000 1 ordinary shares
Issued and full paid
5.6% preference shares @ 1
each
400,000 1 ordinary shares
Capital Reserves
Share premium
Revenue Reserve
Proposed Dividends
Retained profit
Share holders funds
Non-current Assets
Debenture
Current liabilities
Creditors
Accruals
Tax payable
Total equity and liabilities
550,700
32,000
60,200
129,300
105,100
2,300
182,920
419620
1,062,520
100,000
500,000
600,000
100,000
400,000
136,400
22,800
70,900
93,700
730,100
150,000
78,580
8,000
95,840
182,420
1,062,520
Accounting policies
Rate
Freehold
and Building
Plant and Equipment 10% on cost
Office Furniture
10% on reducing
balance
Inventory comprises of raw materials, work in progress and finished
goods and is stated at the lower of cost and net releasable value.
2.
Operating Profit
The operating profit for the year is aimed allowing expenses:
26,200
Depreciation
Directors
emoluments:
Fees
Salaries
Staff costs
Auditors
remuneration
600
56,690
249,310
1,000
3. Taxation
The corporation tax for the yaer is based on the adjusted profits for
tax pupsoe at a corporation tax rate of 30%
4. Property plant & equipment
Land &
Building
Cost/Valuation
Bal as at 1 July 19X8
Additions
Disposals
Bal as at 30 June
19X6
Depreciation
Balance as at 1 July
19X8
Transfer
to
Revaluation R
Charge for tea
Eliminated
or
Disposal
Bal as at 30 June
19X9
Bal as at 1 July 19X8
Office
Furniture
Total
414,900
20,000
_____-_
434,900
Plant &
Equipmen
t
235,000
10,000
(5,000)
240,000
301,000
____30,000
689900
30,000
(5,000)
704,900
124,000
8,000
132,000
______-
24,000
(4,000)
2,200
_____-
26,200
(4,000)
434,900
144,000
96,000
102,000
19,800
154,200
550,700
414,900
111,000
22,000
547,900
Raw Materials
Opening Stock
Purchases
Carriage Inwards
Raw materials available for consumption
319,600
16,000
93,200
335,600
428,800
392
Mock Examinations
Less: closing stock of raw materials
Raw materials consumed
Factory wages
PRIME COST
Factory overheads
Plant and equipment Depn (10% x 240,000)
Power and lighting
Insurance
Repairs to plant
Total cost of production
Add: Work in progress b/f
Less: Closing W.I.P.
Cost of finished goods
Comprehensive
(76,400)
352,400
137,900
490,300
24,000
9,100
6,100
8,500
47,700
538,000
9,200
547,200
(12,800)
534,400
Cost of sales
Expenses
Depreciation Office furniture
Provision for bad debts
Plant hired (kn
Rates
Repairs to premises
Admn salaries
Salesmen salaries
Postage & Telephone
Printing and stationery
Legal and professional charges
Advertising
Directors fees
Distn.
2,500
100,000
1,700
-
12,700
534,400
547,100
(40,100)
507,000
Adm
2,200
1,300
3,800
600
61,300
1,800
400
800
600
394
Comprehensive Mock Examinations
QUESTION TWO
Banjo, Harpa and Viola
Assumptions/Notes
1.
2.
3.
4.
Equipment and motor cars are depreciated at 5% and 10%, for the second half of the year, on book
values on 1st September 19 7 and not on book values on 1st March 19 8.
The loss on the disposal of the motor car to Banjo was charged to the P&L a/c for the 6 months ____
to 28th February 19 8.
It is assumed that depreciation is not already included in the operating expenses.
In the solution below, rent payable to Harpa) is deducted from net current assets. An alternative
would be to include this in Harpas current account.
Banjo
Motor
207
car
Goodw 1,347,
ill
938
CB
360
Loan
_______
a/c
Bal c/d _______
1,914,
938
Capital Accounts
Har Viol
Banjo
pa
a
- Bal b/f
720
540 540 Goodw
450
- ill
- Studio
225
___ ___ Prof.
519,93
450 225 Curr
8
___ ___ A/c
990 765
_______
1,914,
938
Bal b/d
Current Accounts
Viol
Banjo Harp Viola P&L Banjo
a
a
360 Drawin
720
675 Pol.I
54
270 gs
519,9
- nt
135 Cap.
38 139,2 67,42 Shar 465,9
a/c
37
5e
38
Bal c/d ______ ______ ______ ofPro
519,9 859,2 742,4 f.
519,9
___ ___
38
37
25
38
990 765
Bal
450 225
b/d
Har
pa
450
360
180
Harp Viola
a
67.5 43,87
5
791,7
57 698,5
51
859,2
37 742,4
139,2
25
37 67,42
5
Answers - Mocks
395
Profit and Loss Account for the year ended 31st August 19 8
Fees
Operating Exps
Deprec: Motor cars
Equipment
Loss on disposal of car
Studio rent
Loan interest
Net profit
Interest on capital
B
H
V
Share of Profit
B 5/12)
465.937
H 4/12)
372.75
V 3/12)
279.563
Min.279.5)
6 mts to 28 Feb
Shs.000
1,800
450
72
9
36
___567
____
1,233
6 mts to 31 Aug
Shs.000
1,400
350
45
9
75
_32.4
511.4
____
888.6
Year to 31 Aug
Shs.000
3,200
800
117
18
36
75
__32.4
1,078.4
_____
2,121.6
54
33.75
27
_____
114.75
33.75
16.875
_____
50.625
54
67.5
43.875
______
165.375
1,118.25
1,233
(1/2) 418,987
(1/2) 418.988
837.975
888.6
465.937
791.737
698.551
1,956,225
2,121,600
Harpa
450
139,257
Viola
225
67,425
Shs. 000
360
162
522
719,662
1,241,662
675
206,662
881,662
360
_______
1,241,662
QUESTION THREE
BRANCH STOCK A/C
Bal b/d
GSTB
Branch mark up
Debtors: Returns
Kisii Br. GSTB
Branch mark up
Sh.000
6,210
47,360
23,680
71,040
186
164
82
GSTB: Returns
Branch mark-up: Returns
Branch mark-up: reduction in
Selling price
Branch debtors: Sales
Kitale BR. Stock: Stock transfer
Profit & Loss: Stolen goods
Markup stolen goods
Cash sales ( cash stolen)
Branch cash sales
Sh.000
992
478
1,470
360
27,990
321
280
140
420
129
38,592
396
Mock Examinations
Comprehensive
______
77,682
Bal c/d
8,400
77,682
Bal b/d
Branch stock a/c
Kisii branch markup: S
Stock transfer
Sh.0
00
2,010
23,680
82
____
25,772
25,772
WORKINGS:
OPENING STOCK
Cost
Profit
Selling
Price
Norm
al
Sh00
0
3,800
1,900
5,700
Markdo
wn
Sh.000
Total
Sh.0
00
400
110
510
4,200
2,010
6,120
RETURNS TO HEAD
OFF
Norm
Markdo
Total
al
wn
Sh.0
Sh00 Sh.000
00
0
912
80
992
456
22
478
1,368
102
1,470
CLOSING STOCK
Norm
al
Sh00
0
5,480
2,740
8,220
Markdo
wn
Sh.000
Total
Sh.0
00
180
(0)
180
5,660
2,740
8,400
Sh.000
992
348
46,020
47,360
Branch stock
SIR CHARLES
MEMORANDUM TRADING, PROFIT AND LOSS ACCOUNT
FOR THE YEAR TO 30.06.96
Sh.000
Sh.000
Cash sales( including cash
38,721
stolen)
27,990
Credit sales
66,711
186
Less returns: By debtors to
522
(708)
Kisumu
66,003
By debtors to Head
office
4,200
Cost of sales
47,360
Opening stock at cost
164
Goods from head office
(992)
Goods from Kisii
(214)
Less: Returns to Head office by
(280)
branch
(348)
Transferred to Kitale
(5,660)
44,230
Stolen goods
21,773
Returns to Head office by
19,200
Sh.000
47,360
____
47,360
Answers - Mocks
397
debtors
Less opening stock (8,529
2,603)
Gross profit
Expenses: Sundry expenses
Stolen cash
Stolen stock
129
280
(19,609)
2,164
QUESTION FOUR
The duties of the interim liquidator are:
1. To carry on the business of the company, so far as may be necessary for
the beneficial winding-up thereof;
2. To bring or defend any legal proceedings in then name and on behalf of
the company;
3. To pay any class of creditors in full;
4. To make any compromise or arrangement with creditors or persons
claiming to be creditors;
5. To compromise all calls, and liabilities to calls, debts and liabilities
capable of resulting indebts and ll claims and all questions affecting the
assets or the winding up of the company, with power to take security and
give complete discharges;
6. To employ an advocate to assist him in the performance of his duties;
7. To rectify the register of members;
8. To sell all the property of the company by public auction or private
contract;
9. To do all such other acts and things as may be necessary for winding up
the affairs of the company and distributing its assets;
(b)
The duties of a Receiver and Manager are:
1. To observe the directions given in the order appointing him ( if appointed
by the court) give the security required;
2. To give notice of his appointment to all debtors;
3. To collect any rent in arrears and all sums due and to give receipts;
4. To insure real property against fire;
5. To receive proposals and make arrangements as regards the leasing of
any property over which he is the receiver;
6. To execute necessary repairs;
7. To pass accounts as directed;
8. To apply the monies received by him to pay rents and outgoings of the
mortgaged property, to pay his commission, to pay interest and principal
to mortgage and paying the residue to the person who would otherwise
have been entitled.
Ngaki Stores Ltd
Liquidators Statement of Receipts and Payments
Receipts
Amount realized from all
the assets
Not specifically pledged
Amount realized from
Shs
Payments
1,697,5
00
Liquidation Expenses
To preferential
Creditors
To Unsecured
(a)
Shs
(b)
Shs
75,000
25,000
75,000
25,000
445,000
412,00
398
Mock Examinations
realization of assets
Specifically
Pledged
Deduct:: Paid to
Secured creditors
Comprehensive
Creditors
402,5
00
250,0
00
152,500
_______
1,850,0
00
545,000
512,000
To shareholders
Preference
635,714
645,143
Class A Ordinary
Class B Ordinary
385,714
188,572
395,143
196,114
Class C Ordinary
95,000
1,305,0
00
1,850,0
00
101,600
1,338,0
00
1,850,0
00
Answers - Mocks
399
Outstanding wages:
Assumed not in the books at 1st May 1992:
Total
Shs.
24,000
9,000
33,000
Preferential
Shs.
16,000
9,000
25,000
(a)
Shs
437,000
(b)
Shs
404,000
8,000
445,000
8,000
412,000
Shareholders:
Issued
Paid
Shs
1,000,000
1,000,000
800,000
700,000
3,500,000
Shs
1,000,000
750,000
480,000
350,000
2,580,000
1.
2.
3.
4.
1.
2.
3.
4.
Repayable if
Total Capital paid:
(a)
635,714
535,714
508,572
445,000
2,225,000
Due from
Shareholders
(b)
645,143
645,143
516,143
451,600
2,258,000
Unsecured
Shs.
8,000
8,000
Due from
Shareholders
shs
Nil
250,000
320,000
350,000
920,000
Repaid
NIL
250,000
320,000
350,000
920,000
(a)
635,714
385,714
188,572
95,000
1,305,000
(b)
645,143
395,143
196,114
101,600
1,38,000
(a)
Shs
(b)
Shs
1,305,000
920,000
2,225,000
3,580,000
Shs.12.71
1,338,000
920,000
2,258,000
3,580,000
Shs.12.90
QUESTION FIVE
a) (i) A will is a legal declaration by a person of his wishes and intentions
regarding the disposition of his property after his death duly made
and executed according to the provisions of the law of Succession Act.
(ii)
Reasons for failure of legacies:
Ademption
When the gift specifically bequested does not exist within the testators
property at the time of death, the gift is said to have adeemed. However, if
the gift had been converted into property of a different kind, and such new
property falls into the category traceable such new property will replace
the original gift and be handed over to the beneficiary.
Lapse
400
Mock Examinations
Comprehensive
Where the beneficiary (legatee) predeceases the testator (legator) the gift is
said to fail due to lapse. There are two exceptions to the rule:
If the legatee is an issue of the testator; and the legatee, although deceased,
left surviving issue of their own, the gift will pass to such surviving issue
form the testators estate).
The testator felt a moral need (or recognised a moral obligation) towards the
legatee.
Uncertainty
A gift not expressive of any definite intention shall be void for uncertainty;
such uncertainty arising as to:
What is being given
To whom it is being given
The quantity of the interest being given.
Disclaimer
A beneficiary can always disclaim a legacy and will probably do so if the
gift is subject to unfair or unreasonable conditions.
Gifts subject to illegal conditions
A gift will fail if it has an illegal condition attached to it, eg I leave
Sh.20,000 to my gardener Mwangi provided he murders my wife. However
if the gift is only subject to a condition contrary to public policy (repugnant
to equity and justice) the gift will pass whether the condition was fulfilled or
not.
(b)
Mr Ruare:
House
A
1 unit
3 units
House
B
1 unit
House
C
-
Total
2 units
2 units
Answers - Mocks
401
7 units
Property division
Fractions
4/7
1/7
2/7
402
Mock Examinations
Comprehensive
Household C:
Beatys children short and Tall will each obtain property worth:
X 2/7 X 3,150,000 absolutely.
This amounts to Sh. 450,000 per person.
Househ
old
&
persona
l
Net
estate
Luky
200,00
0
(absolu
te)
1,800,0
00 (Life
interest
)
Chity
50,000
(absolu
te)
Peter
-
Lowe
-
Ricci
-
450,00
0 (Life
interest
)
Short
50,000
(absolu
te)
Tall
50,000
(absolut
e)
450,00
0
(Absolu
te)
450,00
0
(Absolu
te)
Answers - Mocks
403
PAPER 3
QUESTION ONE
Rich Limited and its subsidiary
Consolidated Balance Sheet as at 30th November 1988
Non current assets
Freehold land cost or valuation
Freehold Buildings (NBV)
Machinery (NBV)
Goodwill on consolidation
Investment in associated co.
Group share of net assets of assoc.
company
Premium paid on the acquisition
Current assets
Inventories
Accounts Receivable
Dividend Receivable
Cash in Transit
Bank and Cash Balances
Total Assets
696,000
48,000
1,620,000
800,000
32,000
12,000
100,000
800,000
1,400,000
1,560,000
3,760,000
144,000
744,000
4,648,000
2,564,000
7,212,000
400,000
2,400,000
2,800,000
320,000
160,000
480,000
639,200
3,919,200
168,800
Minority interest
Non-Current Liabilities
12% debentures
Deferred taxation
Current liabilities
Bank overdraft
Accounts payable
Corporation tax
Dividend to minority
Proposed dividend
1,600,000
334,000
40,000
696,000
208,000
6,000
240,000
1,934,000
1,190,000
7,212,000
404
Mock Examinations
Comprehensive
Workings
M.Inv in N.
N: OSC
COC
720,000
120,000
POL
GW c/d
720,000
N: OSC
MIN.INT
480,000
96,000
P&L
144,000
720,000
48,000
_____
168,000
Investment in Associated Co.
P&L working)
Cost
480,000
Stock
20,000 M:
400,000
Share capital & Reserves
1,080,000
N:
99,200
Y:
104,000
40%
432,000
M:N.Div
24,000
Premium on Acquisition
48,000
Bal c/d
632,000 M:Y.Div
32,000
Group share of net
assets at present:
659,200
659,200
40% x 1,740,000
=
696,000
Notes:
It is assumed that the dividends proposed by Prestin Ltd and Guise Ltd had
not yet been accounted for by Rich Ltd.
It is assumed that the price of30 per share applies to the 24,000 shares in
Preston Ltd and not to the 20,000 shares in Rich Ltd).
QUESTION TWO
Cat and Mouse
(a)
Trading and Profit and Loss Account for the year ended 31 st
December 2001
HO
Sales
Opening Stock
Purchases/GDS from HO
Goods sent to Branch
Closing stock
Cost of sales
Gross profit
Salaries & wages
Carriage & traveling
Administrative expenses
Increase/(Decrease) Bad Debt
Prov.
39,000
13,000
37,000
50,000
(18,000)
32,000
(14,440)
17,560
21,440
4,500
2,200
1,440
50
150
BRANCH
26,000
4,400
17,200
21,600
(6,570)
15,030
10,970
3,200
960
960
20)
110
COMB.
65,000
17,400
37,000
54,400
21,810
32,590
32,410
7,700
3,160
2,400
30
260
Answers - Mocks
405
3,200
_____
11,540
9,900
1,800
360
____
7,370
3,600
Net Profit
900
840
240
Commission to cat
Interest on Fixed Capital: Cat
8,640
2,880
Mouse
Share of profits:
()
Cat
Mouse()
Workings:
GP
21,440
EXPS.
11,540
9,900
Comm1/11)
900
NP
9,000
HO Bks.
B/f
Admin.Exps
HO P & L A/c
B/d
10,970
7,010
3,960
360
BR.Curr. A/c
6,800
960
3,600
11,360
8,160
3,600
CIT A/c
GIT A/c
c/d
2,400
800
8,160
11,360
CIT
Br.Curr A/c 2,400
GIT
Br.Curr A/c
5,000
360
_____
18,910
13,500
800
Branch Books
HO Current A/c
B/f
3,600
Pol. Admin.
960
Pol. Profit
3,600
8,160
(b)
Cat and mouse
Balance Sheet as at 31st December 2001
1,080
11,520
13,500
406
Mock Examinations
Non Current Assets:
Furniture & Fittings
Current Assets:
Stock on hand
In transit
Debtors:
Deduct: Prov.
Cash in Transit
Cash at Bank HO)
Comprehensive
Cost
2,600
Accum.Deprec.
1,110
21,010
800
21,810
10,000
830
Current Liabilities:
Bank Overdraft BR)
Creditors
Accruals Managers
Comm)
Current Accounts
Commission
Interest
Share of profits
Drawings
BRANCH
Furniture &
Fittings
Depreciation
1,490
9,170
2,400
__600
33,980
1,350
6,200
120
_7,670
Fixed Capital
Accounts
26,310
27,800
Cat
14,000
Mouse
4,000
18,000
900
840
8,640
10,380
(2,500)
7,880
240
2,880
3,120
(1,200)
1,920
9,800
27,800
1,100
460
640
6,570
Stock
Debtors
Less: Provision
Creditors
Bank Overdraft
Commission
QUESTION THREE
TED SAFARI
3,000
180
2,820
9,390
(400)
(1,350)
_(120)
(1,870)
7,520
8,160
Answers - Mocks
407
Motor
Sh. 000
Bal b/d
Debtors a/c
Sh.000
3,000
Sales
c/d
5,000
Bal
30,000
Bal
8,000
37,000
37,000
Bank a/c
Sh. 000
Cash
28,000
Loan from Uncle 5,000
Bal c/d
Secured
Sh. 000
Bal b/d
3,000
Drawings (Mortg.)
600
Drawings (car loan)
225
Lessor a/c
2,550
Creditors
22,000
Expenses
5,000
1,625
O/draft interest
Drawings
500
34,625
34,625
750
Cash a/c
Debtors
Sh. 000
29,000
Drawings
29,000
Sh. 000
Bank
28,000
1,000
29,000
Creditors a/c
Bank
Sh. 000
22,000
Sh. 000
Bal b/d
5,000
408
Mock Examinations
Bal c/d
6,000
28,000
*missing entry
Comprehensive
Purchases* 23,000
28,000
Unsecured
Expenses a/c
Sh. 000
Bank
5,000
Bal.c/d-(accruals) 1,000
6,000
Sh. 000
P&L* 6,000
6,000
*missing entry
Analysed:
Unpaid wages
200 (preferential)
PAYE
260 (preferential)
Unpaid wages
100 (Unsecured)
Sundry Accruals 440 (Unsecured)
1,000
Lessor a/c (Vehicles)
Bank
Bal c/d
Sh. 000
Sh.000
2,550
Bal b/d
3,500
1,550 Finance cgs
4,100
4,100
600
secured
Cash
Bank
Bank
Bank
Drawings a/c
Sh. 000
Sh. 000
1,000
(Mortgage)
600
(Car loan)
225
(pers.Exps) 500
Bal c/d
2,325
2,325
2,325
3000
Answers - Mocks
409
Purchases
23,000
26,000
(2,000)
(24,000)
6,000
Gross Profit
Expenses
General expenses
Finance cgs on leases
Bank overdraft interest
Net Loss
6,000
600
750
(7,350)
(1,350)
Sh. 000
4,000
5,000
9,000
2,000
8,000
10,000
(6,000)
(1,000)
(1,625)
(8,625)
1,375
10,375
Capital
Less Loss
Less drawings
7,500
(1,350)
(2,325)
3,825
5,000
1,550
6,550
10,375
Sh. 000
600
2,900
3,500
Sh. 000
Bal b/d
3,000
Int. charged 500
3,500
410
Mock Examinations
Comprehensive
Payments made
Bal c/d
Sh.
Bal b/d
Int. charged 100
600
600
500
Sh.000
Sh.000
Bank o/draft
1,625
House mortgage
2,900
1,300
Business fin. Lease 1,550
Private-car loan
375
25
6,450
1,800
2,500
89,00
to rank
toproduce
ties
Expected
950
400
Gross
Expected
Liabili-
175
4,200
Assets
2,450
Answers - Mocks
411
Sh.000
Sh. 000
Sh.000
11,540
Unsecured creditors
11,540
Stocks
(cost Sh2m)
1,600
6,450
Creditors fully secured
6,450
House
furniture and contents
100
Less value of security
(8,900)
Debtors:
5,500
Surplus to contra
2,450
Surplus from creditors
Fully secured per contra
2,450
_____
460Preferential creditors
9,650
deducted per contra
preferential
460
Deduct
creditors per contra
(460)
9,190
Deficiency as per deficiency
Account
2,350
18,450
11,540
11,540
Deficiency a/c
Sh. 000
7,500
1,500
200
2,350
_____
11,550
Trading loss
Drawings
Personal costs:
Mortgage interest
Car-loan interest
Estimated
loss
on
realisation
- Plant and Machinery
- Motor vehicles
- Stock
- Debtors
- House furniture
- Motor car
Sh. 000
1,350
1,500
500
100
2,200
2,500
400
2,500
200
__300
11,550
412
Mock Examinations
Comprehensive
QUESTION FOUR
Kena, Limo and Mara
NB: The fact that the trust had a wide investment clause means there is no
need to divide the fund into fixed interest, wider range or special
range sections.
June 1992:
1 June 1995
31 May 1996
Fund is established
Accumulation investments
balance K turned
Accumulation a/cs
= K
= L
=M
34650
Distribution To K
Nominal/N
Value
o
Shs.
To remain in Trust
Nominal/N
Value
o
Shs.
600
36,000
9,000
540,000
10,000
800,000
2,600
208,000
______836,000
13,200
924,000
1,672,000
Total
To K
To remain
in trust
Nominal/No. Value
Value
Nominal/No
Value
Nominal/No.
Answers - Mocks
Ord. shares in
Shs.
TEA
159,250
Cash
898
413
Shs.
5,775
404,250
Shs.
3,500
245,00
2,275
33,120
32,222
437,370
277,222
160,148
* (222750 + 62370 77000 81000 94000) = 33,120
414
Mock Examinations
Comprehensive
Maintenance
payment
Distribution a/c
K(sh)
L(sh)
77,00
0
277,2
22
81,00
0
Bal c/d
-_____
354,2
22
M(
sh)
94,00 Bal
0
b/d
Inco
me
26,91 (Caps
2
)
120,9 Inco
12
me
(Acc)
Reval
gain
(TEA)
133,2
36
214,2
36
K(sh)
L(Sh)
M(sh)
207,9
00
74,25
0
37,4
22
34,65
0
354,2
22
103,9
50
74,25
0
18,71
1
17,32
5
214,2
36
34,65
0
74,25
0
6,237
5,775
120,9
12
836,000
Bal. b/d
Reval gain: (KAB)
144,000
: (BBB)
252,000
Bal c/d
132,000
1,672,000
2,508,000
: (TEA)
2,508,000
Shs.
Shs.
Shs.
Capital
Accumulation
Accum. a/c K 74250
62370
L 74250
M 74250
222750
62370
Trust Cashbook
Shs.
Shs.
Capital
Income
Accumulation
37422
Capital
Investment a/c
18711
6237
62370
222750
____
222750
Shs.
Income
Shs.
Capital
Answers - Mocks
Inv.a/c:Income
252,000
Inv a/c:Income
32,222
415
222,750
62,370
Distribution a/c
Bal. c/d
898
285,120
285,120
416
Mock Examinations
Comprehensive
QUESTION FIVE
Civil Servants Pension Fund
Statement of changes in net assets for the year to 31 October 2001
Sh. 000
Sh. 000
Contributions received:
From employees: Normal
980
From employers: Additional
25
1005
From employees: Normal
300
From employers: Additional voluntary 200
500
Transfers in:
Group transfers in from other schemes
Individual transfers in from other
Schemes
14
75
89
Investment income:
Income from fixed interest securities 580
Dividends from equities
400
Income from unit trusts
70
Rents from properties
45
1095
(5)
(493)
2217
2
(5)
(49)
(199)
2025
Taxation on income
Net change for the year
(460)
1565
Answers - Mocks
417
Sh. 000
400
210
610
350
2200
35
400
(6)
3784
Fixed Assets
Leasehold property in Nairobi CBD
2000
5784
56
( 30)
26
4,810
Net Assets
Accumulated Fund at 1 Nov.2000
Net new money invested per revenue a/c
including changes in market value of investments
1565
Accumulated
Fund
at
31
4810
3245
October
2001
418
Mock Examinations
Comprehensive
PAPER 4
QUESTION ONE
WILSON COMPANY
INCOME STATEMENT FOR YEAR ENDED 31.12.20X7
Shs. Million
Shs. Million
Revenue
2,695
Cost of sales
2,194
GROSS PROFIT
501
Other incomes:
26
Less Expenses
527
Distribution costs
20
Administration
276
expenses
107
Other expenses
Finance cost
20
(423)
Profit by tax
104
Income tax expense
(30.0)
Profit for the period
74
Answers - Mocks
419
Opening Inventory
Purchases
Inventory for M and Co.
392
-
Total
Shs. M
242
Shs.
M
863
171
242
863
392
-
70
-
392
392
-
171
16
-
74
316
(16)
(15)
392
74
1329
120
(15)
70
392
187
285
1434
1. Cost of sales:
Shs. M
Retained
Profits
Shs. M
190
2,152
2186
420
34
Less: Closing Inventory
Add: depr. Bldg.
Plant n
machinery
Cost of Sales
2376
(220)
2
36
38
2194
Answers - Mocks
421
2. Expenses:
Interest on
debentures
Wages and
salaries
Light and Heat
Sundry expenses
(113-6)
Goodwill amorsed
Audit fees
Distributi
on Costs
Shs. M
20
-
Administrati
on expenses
Shs. M
254
14
4
4
Other
expenses
Shs. M
107
-
Finance
costs
Shs. M
20
-
20
276
107
20
298
1098
Shs. M
Bal b/d
430
Rev. Revenue
370
Land n Bldg.
Shs. M
Bal c/d
800
Shs. M
Bal c/d
392
Revaluation Revenue
Shs. M
Land
370
L & B Dep 22
392
392
Shs. M
R.R
22
__
Depr
Shs. M
Bal b/d
20
P/L
2
800
800
422
Mock Examinations
22
Shs. M
Bal b/d
830
____
Comprehensive
22
Plant n Machinery
Shs. M
Disposal
350
Bal c/d
480
830
Shs. M
Disp.
76
Bal c/d
182
258
Shs. M
P & Machinery
350
Profit
26
376
830
Depr A/C
Shs. M
Bal b/d
222
P&L
36
258
Disposal
Shs. M
..
Depr
76
Susp.
300
376
220
179
6
126
Shs. M
1098
16
231
1345
531
1876
100
Answers - Mocks
423
capital
Ordinary share capital
400
500
70
392
187
Share premium
Revaluation Reserve
General reserve
Retained profits
Shareholders fund
285
1434
Non current
liabilities
10% Debenture
195
17
Current Liabilities:
Trade n other payable
Acruals
Current tax
Total Equity n Liability
200
30
242
1876
____
285
424
Mock Examinations
Comprehensive
5.
Shs. M
Disc
50
Share Prem.
70
Disposal p & m
300
Suspense A/C
Shs. M
Bal b/d
135
Investment M & co
285
420
___
420
6. Accruals
Light n Heat
Debenture Interest
Audit fees
Shs.M
3
10
4
17
Y
Sh.
20,000
2,000
5,000
27,000
Z
Sh.
15,000
1,000
2,500
18,500
M
Sh.
20,000
4,000
10,000
34,000
(23,258)
3,742
(3,576)
166
26,834
(11,629)
6,871
(2,682)
4,189
14,311
(46,516)
(12,516)
12,516
34,000
(11,008)
15,826
11,008
(5,504)
8,307
5,504
(22,016)
11,984
22,016
(3,997)
7,011
(1,988.5)
3,505.5
(7,994)
14,022
426
Mock Examinations
Comprehensive
Cash distributed
Total distributed
140,065
39,504.5
23,003
16,501.5
26,006
Land Buildings
Plant &Machinery
Goodwill
Investments
Stocks
Debtors
Realization
Expenses
Sh.000
Cashbook:
Jan: Stock
Debtors
Investments
Feb: Goodwill
Land & Buildings
Debtors
Stock
Mach: Plant & Machinery
Debtors
Capital: X
Y
Z
M
______
17,500
14,660
12,100
10,000
35,000
2,500
13,750
32,800
1,755
5,995.5
3,997
1,988.5
7,994
19,98
5
BANK A/C
Sh.000
1,565
140,065
Balance b/d
Realization (Total)
Creditors
Dissolution expenses
Capital: X
Y
Z
M
______
141,630
395,045
23,003
16,501.5
26,006
Sh.000
34,615
2,000
105,015
141,630
CAPITAL A/C
Realisat
ion
Realisat
ion
X
Sh.0
00
395,0
45
5,995
.5
Y
Sh.0
00
23,00
3
3,997
Z
Sh.00
0
16,50
1.5
1,998.
5
M
Sh.0
00
26,00
6
799.4
45,50
0
27,00
0
18,50
0
34,00
0
X
Sh.000
Balance
b/d
LRR
GR
35,000
3,000
7,500
45,500
Y
Sh.0
00
20,00
0
2,000
5,000
Z
Sh.0
00
15,00
0
1,000
2,500
27,00
0
18,50
0
M
Sh.0
00
20,00
0
4,000
10,00
0
34,00
0
X
Sh.
45,500
3
15,167
(25,500)
20,000
Y
Sh.
27,000
2
13,500
(17,000)
10,000
Z
Sh.
18,500
1
18,500
(8,500)
10,000
20,000
3
6,667
15,000
5,000
10,000
2
5,000
10,000
-
10,000
1
10,000
5,000
5,000
M
Sh.
34,000
4
8,500
(34,000
)
-
TOTAL
Sh.
125,000
10
N/A
(85,000
)
40,000
40,000
6
N/A
30,000
10,000
PSR
Capital/Unit of profit
Capitals in PSR
5,000
3
1,667
(5,000)
5,000
5,000
1
5,00
(1,667)
3,333
10,000
4
N/A
(6,667)
3,333
428
Mock Examinations
Comprehensive
Y
Sh.
Z
Sh.
M
Sh.
2,903
2,903
7,097
10,00
0
5,99
2
15,99
2
6,911
3,333
1,344
4,677
323
1,452
6,452
3,548
10,00
0
2,996
12,99
6
3,455
4,033
4,033
967
4,355
9,355
10,64
5
20,00
0
8,98
8
28,98
8
10,36
7
11,9
84
11,98
4
13,82
2
Realisation
expenses
Total cash paid
150
39,50
5
January: Part
realization (8,710)
Balance
February 4: Part
Balance
February 22: Part
Balance
100
23,00
3
50
1,650
1
20
0
26,00
6
QUESTION THREE
a) Computation of closing inventory at Head Office
Selling Price to coustomers by Head Office is 100%
and the G.P thereof is 12%. This means the cost of
packed toys is 88% (100 12). If packaging materials is
10% of the cost of unpacked toys then , cost of
unpacked toys and packaging materials will be
determined as follows
Let x be cost of unpacked toys
Therefore packaging materials = 10% of x
x + 10% x = 88%
x = 88%
1.1
Therefore x = 80%
Therefore cost of unpacked toys is 80% and cost
packaging materials is 8%
The various margins will now be computed as follows
depending on whether it is sales to customers or goods
sent tot eh branch.
TOTA
L
Sh.
3,333
5,377
8,710
1,290
8,710
18,710
21,290
40,000
29,960
69,960
34,555
500
105,01
5
Sales
G.P
Cost of packed toys
Cost of packing
materials
Cost of unpacked
toys
Sales to
customers %
100
12
88
(8)
Goods sent to
branch
94
6
88
(8)
80
80
Purchases
Unpacked
toys
Sh.
4,000,000
Packaging
materials
Sh.
440,000
Less cos.
3,600,000
360,000
400,000
80,000
(10,000)
Spoilt
Closing inventory
_____390,000
C.O.S
Sales
G.P
Cost of packed toys
Cost of packing
materials
Cost of unpacked
toys
(5,000)
75,000
Total
Sh.
4,440,0
00
3,960,0
00
480,00
0
(10,000
)
(5,000)
465,00
0
Sales to
customers %
2,800,000
(336,000)
2,464,000
(224,000)
Goods sent to
branch
1,598,000
(102,000)
1,496,000
(136,000)
2,240,000
1,360,000
430
Mock Examinations
Comprehensive
Sh.
1,569,040
1,410,000
159,040
(12,220)
1,461,820
9,371
Sales to
customers %
100%
6
94%
Ksh.
1,500,000
90,000
1,410,000
Less: closing
inventory
Inventory at
warehouse
G.I..T
Gross profit
Expenses
Depreciation of
fixtures
General and
operating expenses
Unrealised profit inv
@ branch
G.I.T.
Obsolete toys
Spoilt materials
Goods shown
Managers
commission
Net profit
Sh
Sh
2,800,00
1,598,000
Sh
4,398,000
Sh
1,500,000
_______1,500,000
4,000,0
00
440,000
_______
1,569,0
40
1,569,0
40
-
4,425,0
00
(12,220
)
1,556,8
20
(465,00
0)
______-
(146,82
0)
______-
(3,960,00
0)
438,00
4,300,000
4,440,0
00
4,440,0
00
(10,000
)
(5,000)
(11,440
)
4,413,5
60
(1,410,00
0)
90,000
(602,44
9)
(27,111
)
20,000
20,000
400,000
40,000
440,000
9,371
1,249
10,000
5,000
______-
12,220
_3435__
______-
10,000
5,000
11,440
_3435
446,220
(8,220)
Workings
Commission for the manager
%
Net profit before commission 110
Sh
4,300,000
_______-
4,000,0
00
440,000
4,440,0
00
(10,000
)
(5,000)
_______-
Sh
__55,655_
__3435
Shs.
37780
(3,784,00
0)
516,000
48,9875
(26125)
432
Mock Examinations
Commission
Profit after commission
Comprehensive
10
100
(3435)
34345
Kamau
Balance Sheet as at 31 March 1994
Non current Assets
Fixtures
Depreciation
Branch Curent A/c
Less: UPC at
Branch
Current Assets
Inventory at
warehouse
G.I.T.
A/c Receivables
Cash: at bank
In transit
Current Liabilities
A/C payables
Managers
Commission
Sh
160,000
(60,000
)
315,385
(9,371)
Sh
140,000
Sh
-
306,014
Sh
160,000
(20,000
)
140,000
146,820
602,449
27,111
280,000
158,000
50,000
980,111
150,000
62,000
_____358,820
27,111
430,000
220,000
50,000
1,329,5
60
(400,00
0)
_____-
(40,000
)
(3,435)
(440,00
0)
3,435
Net profit
Head office Current
a/c
315,385
886,125
1,026,1
25
315,385
1,026,1
25
1,000,0
00
26,125
________
1,000,0
00
26,125
_______
1,025,1
25
140,000
______
465,000
580,111
Sh
______-
446,014
Capital
Bal b/d
Branch profit
Sh
%
110
10
100
315,385
315,385
1,026,1
25
Sh.
37,780 (90,000 40,000
+ 2,220)
3,435 (10/110 x 37,780)
34,345
360,000 G.I.T.
34,345 G.I..T.
_______ Bal c/d
394,345
Bal b/d.
Bal b/d
315,345 Branch profit
315,345
28,960
50,000
315,385
394,345
281,040
34,345
315,345
434
Mock Examinations
Comprehensive
QUESTION FOUR
Bigcom Investment Ltd
Consolidated Cash Flow Statement for the year ended
30th September 19 6
Cash Flows from Operating Activities
Shs.
Shs.
Shs.
000
000
000
Operating Profit for the year
16,866
Adjustments for: Depreciation
4,092
Loss on Disposal of Plant
324
Transfer to provision for repairs
558
_____
4,974
_____
21,840
Adjustments for changes in
working capital
(1,782)
Increase in debtors
(2,682)
Increase in stock
(972)
Increase in creditors
_____
(3,492)
_____
18,348
510
(9,216)
Extraordinary item
_____
Taxation paid
9,642
Investing Activities
Purchase of fixed assets
Proceeds from the sale of plant
Dividend
received
from
associates
Financing Activities
Proceeds from issue of shares
Debentures
redeemed
at
premium
Dividends paid:
To members of Bigcom
To minority shareholders
Net decrease in cash and cash
equivalent
Cash: At 1 October 19 5
At 30 September 19 5
(11,400
)
504
216
______
(1,740)
(312)
______
(10,680
)
2,544
(1,848)
(2,052)
______
(1,356)
(2,394)
1,728
(666)
QUESTION FIVE
Re: Tantu(Deceased)
Statement of distribution as at 30th April 1993
Assets:
Car, Fiat
Car, Toyota
Boat
Furniture, jewellery etc
9,500
Farm
Beach plot
150,000 6% Govt stock
120,000
Bank balances
68,800
9,000
5,000
2,500
4,000
1,200
220,000
Specific legacies
To
(1,200)
cousin
Mwamba:
Beach
plot
218,800
General Legacies
To Mwanda (grandson) through Magas estate
(10,000)
To Awa (Housekeeper)
(20,000)
To Charles (pastor of church)
(5,000)
To Weru (Neighbour)
(1,000)
(36,000)
Gift of residue (To grandson Mwanda)
182,800
Notes:
436
Mock Examinations
(a)
Comprehensive
(ii)
Abatement
When assets are insufficient to pay any class of legacies all
legacies in that category/class shall be reduced to a
fraction of the original amount.
This is known as
abatement it enables all legatees to be partially satisfied
with the few assets available.
If assets are insufficient to pay specific legacies, these will
abate rateably and no general or residuary bequests shall
be paid.
If assets are sufficient to pay specific legacies but
insufficient to pay general legacies, the general legacies
shall abate rateably and no residuary bequest shall be
fulfilled.
PAPER 5
QUESTION ONE
Simple Group Structure
UN
A
60%
osu
KN
M
M1
Direct
40%
10
%
M1 Direct
=
30%
M1 indirect 40% x 70% =
28%
LLE
58%
30/9/92
30/9/95
i)
30/9/92
30/9/96
30/9/93
60% OSC
30% RSC
k)
P&L 360m
OSC 70%
L)
P&L 130
P&L 150m
P&L at aquisition
30/9/94
438
Mock Examinations
Comprehensive
Effective control
Holding company
Subsidiary : Direct
Indirect (60%
x 10%)
Minority Interest
Direct
Indirect
K
%
60
_-
L
%
42
60
42
40
_40
30
28
58
Cost of control
Invest in L
Invest in K 60% x
330
Sh
60 K: OSC 60% x 500
0
PSC 30% x 80
At Aquis P&L 60%
x 360
19 L: OSC 42% x 250
8
P&L 42% x 150
Goodwill
Amortised
90/5 x 4
___ Bal c/d
79
8
Sh.
300
24
216
105
63
72
18
798
Group retained
profits
C.O.C. P&L at aquis.
MI P&L in K
C.O.C. P&L at aquis. in L
42% x 150
MI share in L 58% x 300
Group inventory
C.O.C goodwill amortised
Bal c/d
Shs.
216 U
184 K
63 L
174 Dividends Receivable
6 In K (60% x 100)
72 In L (60% x 70% x 30%)
Preference cash in xxxx
30% x 8
1,18
6.4
1,90
1.4
Minority Interest
Shs.
1058
460
300
60
21
2.4
____
1,901
.4
40% x 350
Group inventory
Bal c/d
Sh
s.
Shs.
200
56
184
145
174
14
____
773
440
Mock Examinations
U
K
L
Comprehensive
Group Inventory
Sh
m
484 Group retained profit
320 Minority interest
270
____ Bal c/d
1,074
Sh.
m
6,000
4,000
1,064
1,074
Group A/cs
Receivable
U
L
L
Shs.
m
180 Due from UNA
150 Group a/c payable
90 Group cash in transit
Due from IC
Group a/c payable
___ Bal c/d
420
Shs.
m
18
8
6
388
420
Groups P&L
Group a/c receivable
Bal c/d
Sh
s.
18 U
6 K
Shs.
90
___
35
6
38
0
170
120
380
Bank Overdraft
Sh
s.
2.4 U
8
49.
6
60
Shs.
60
____
60
Group proposed
dividends
Group Retained profit
Group P&L
Min
Sh
s.
60 U
21 K
14 L
Shs.
100
100
50
Bal c/d
15
5
25
0
___
250
40,000
100
Group profits 33%
30,000
10,000
60% x 10,000 =
40% x 10,000 =
10,000
21 + 14
21
14
Sh
m
Sh m
1,444
18
1,462
1,064
442
Mock Examinations
Accounts receivable
Cash at bank
Total assets
Equity and Liabilities
Ordinary share capital
Retained profits
Shareholders funds
Minority interest
Current liabilities
Bank overdraft
Account payable
Taxation
Proposed dividends
Comprehensive
388
120
1,572
3,034
500
1186.4
1686.4
637
2323.4
49.6
356
150
155
710.6
3034
QUESTION TWO
Since one year has elapsed since the balance sheet that
has been provided, a balance sheet as at August 1997 will
aid in arriving at the required accounts which should be
drawn up at 31 August 1997). The balance sheet will be
after recording profits and policy proceeds after the death
of Ndiu:
Balance Sheet after the death of Ndiu
Shs
Shs
Shs
Shs
Capitals
Life
assurance policy
87,000
K: 120000+40500 160,500
Bank
110,400
N: 120000+40500 160,500
Sundry net
assets
323,400
R: 60000+27000
87,000
(Missing figure)
408,000
Current a/cs:
K:600+41850-37800
4,650
N: 300+41850-40500
1,650
R: 300+27900-23700
4,500
10,800
Life assurance fund
87,000
8% Loan
15,000
______
520,800
520,800
Net Assets
Life Policy
Cash
Book:
Sh000
78,000 Life
assurance
fund
9,000 Realisation
87,000
Realisation a/c
Sh000
323,400 Cash Book
42,000 Capitals:
reassigned
Legal
960 Policies
Sh.000
45,000
42,000
87,000
Sh.000
372,000
45,000
444
Mock Examinations
Comprehensive
expsenses
Capitals: Profit
K 18990
N 18990
R 12660
50,640
417,000
______
417,000
Life
Policy
Capitals
Sh.000
78,000
42,000 P & L
87,000
9,000
87,000
Capital a/cs
K
R
N
Shs
Shs
Shs
Shs
Realisation a/c
120,000
120,000
Life policies 27,000
40,500
40,500
Shs
Shs
Bal b/d
60,000
18,000
27,000
Life :b)
CB:
15,750
10,500
Cash Book: final
18,990
18,990
12,660
Settlement 172,890
196,890
96,660
Current a/cs 4,650 1,650
4,500
199,890
196,890
114,660
199,890
196,890
114,660
a)
15,750
Reali:c)
Current a/cs
K
Shs
Drawing 37,80
s
0
Bal
to
4,65
capitals
0
42,45
0
N
Shs
40,50
0
1,65
0
42,15
0
R
Shs
23,70
Bal b/d
0
4,50 Profit
0
share
28,20
0
K
Shs
600
N
Shs
300
R
Shs
300
41,85
0
42,45
0
41,85
0
42,15
0
27,90
0
28,20
0
446
Mock Examinations
Cash Book
Comprehensive
8% Loan a/c
Sh000
15,000 Bal b/d
Sh.000
15,000
Bal b/d
Realisation
st
Cash Book
Sh000
110,400 Realisation
expenses
372,000 8% Loan a/c
Capitals: K
N
R
482,400
Sh.000
960
15,000
172,890
196,890
96,660
482,400
Net Assets
Sh000
316,200 Drawings
111,600 Life
Policy
premium
9,000 Bal c/d Bank
108,000
Others
544,800
323400
Sh.000
102,000
9,000
110,400
323,400
544,800
Realisation
323400
QUESTION THREE
San Francisco
Trial balance as at 31 December 19X7
Leasehold premises
Amortisation of lease
Amortisation for the year: (B/S)
(P/L)
Delivery vans, at cost
Provision for depreciation on
vans
Depreciaiton for the year: (B/S)
(P/L)
Opening stock
Debtors
Sales
Purchases
Goods from London
Administration expenses
Administration expenses accrued:
(P/L)
(B/S)
Salaries and wages
London current account (W)
Directors remuneration
Selling and delivery costs
Cash at bank
$
Dr
40,000
4,000
10,000
$
Cr
8,000
4,000
5,000
Rate
2.2
2.2
$
Dr
18,182
1.8
2.2
2.2
2,222
4,545
1.8
1.8
1.6
1.8
1.8
Actual
1.8
1,389
6,922
3,933
$
Cr
5,455
3,409
2,500
2,500
12,460
6,293
116,308
21,800
38,620
3,142
760
760
23,500
5,120
8,940
13,789
49,520
1.6
1.8
Actual
1.6
1.8
1.6
64,616
12,111
20,700
2,1
475
13,056
3,200
4,967
8,674
24,900
448
Mock Examinations
Creditors
Closing stock: local (P/L)
(B/S)
London (P/L)
(B/S)
Profit on exchange
Comprehensive
4,926
6,060
6,060
1.6
1.8
1.6
1.7
1.7
9,180
9,180
______
206,254
______
206,254
3,079
3,367
3,788
5,400
_____
110,701
___556
111,257
5,400
111,257
______
111,257
b) Trading and profit and loss accounts for the year ended
31 December 19X7
London
Sales
Transfers to San Francisco
Opening stocks
Purchases
Transfers from London
Closing stocks
Gross profit
Administration expenses
Salaries and wages
Directors remuneration
Selling and delivery costs
Amortisation of lease
Depreciation on vans
Provision for unrealized
profits
Net profit
Profit on exchange
Combined
78,318
21,600
99,918
8,620
70,066
_____
78,686
12,470
66,216
33,702
3,186
9,420
4,800
5,485
1,000
3,000
550
San
Francisco
64,616
_____
64,616
6,922
12,111
20,700
39,733
8,767
30,966
33,650
2,168
13,056
3,200
4,967
2,222
1,389
_____
27,441
6,261
_____
6,261
27,002
6,648
556
7,204
53,893
12,909
556
13,465
Fixed assets
Leasehold
33,182
premises
Less: Amortisation
13,455
Motor vehicles
Less: Depreciation
16,545
12,409
Current assets
Stocks at cost
Debtors
Cash at bank
Current liabilities
Creditors
Accrued charges
Representing:
Share capital
142,934
______
142,934
15,042
82,177
_____
97,219
21,087
76,132
66,802
5,354
22,476
8,000
10,452
3,222
4,389
_____
19,727
4,136
23,863
21,508
7,802
15,597
44,907
13,830
1,275
15,105
29,802
53,665
20,000
33,665
53,665
Workings:
Balance b/d
Salaries and wages
Balance b/d
Profit and loss
account
450
Mock Examinations
Balance c/d
Comprehensive
500
1,050
550
London
San Francisco: from London
Less: provsion
Local
Goods in transit
Less: provision
Closing stocks for combined
balance sheet:
London
San Francisco: from London
Less: provision
Local
Goods in transit
Less: provision
5,400
900
4,500
3,367
900
150
12,470
7,867
750
21,087
12,470
5,400
900
4,500
3,788
900
150
8,288
750
21,508
$
44,40
0
5,120
_____
$49,5
20
QUESTION FOUR
RE: Bahati mbaya
Receivers Receipts and Payments Account
Shs.
Shs.
Proceeds from the sale
expenses
12,000
Of sundry assets
2,360,000
remuneration
16,000
Receivership
Receivers
28,000
Preferential
creditors:
Tax paid
160,000
188,000
Secured creditors:
11%
Debentures
paid
1,600,000
liquidator 572000
2,360,000
ii)
Surplus transferred to
2,360,000
Shs.
Shs.
Surplus from Receiver
572,000 Costs
of
liquidation
24,000
Proceeds from building sale
720,000 Liquidators
remuneration 10,000
Less: paid to mortgage holder
(640,000)
80,000 Unsecured
creditors:
Proceeds from other asset sales 1,160,000 Trade
creditors paid
440,000
Guarantee received from
Balance
of
overdraft
24,000
Directors
176,000 Return176,000
Part o/draft paid off
(176,000) of
guarantee
amts to director
640,000
Paid to shareholders
479,200
Ordinary
shareholders
658,800
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Mock Examinations
Comprehensive
1,138,000
1,812,000
1,812,000
NB: The payments to shareholders schedule is as follows:
Issued
Paid up
Callable
Gross
Net
Repayment
Repayment
Shs
Shs
Shs
Shs
Shs
Prefshares 800,000
800,000
479,200
479,200
Osc 1,200,000 1,140,000
60,000
718,800
658,800
2,000,000 1,940,000
1,198,000
1,128,000
Available cash
1,138,000
Total repayable
1,198,000
Gross
repayments
Preference
shareholders
=
800000/2000000 X 1198000
- Ordinary shareholders = 1200000/2000000
X1198000
Net repayments:
Preference shareholders = Gross repayments 0
Ordinary shareholders = Gross repayments 60000
b)
If the directors of a company are of the opinion that
the company should be liquidated voluntarily, then
they would call an extraordinary general meeting of
the company to pass a special resolution to have the
company liquidated. If the company is able to pay
all its creditors in full, then a members voluntary
liquidation can proceed in this case, at the latest
practicable date.
They must also make out a
declaration of solvency which has been sworn before
a Commissioner of Oaths and delivered to the
Registrar of Companies within 30 days preceding
the date of meeting.
If the directors are of the opinion that all creditors
may not be paid in full, they must call a meeting of
creditors after the meeting of members (to pass the
resolution to wind up the company) in order to
appoint a liquidator. This is called a creditors
voluntary liquidation.
QUESTION FIVE
(b) A trust may be constituted in the following ways:
By declaration:
The settler (person holding on to property) makes a
declaration stating that henceforth he holds property in
trust for specified persons or for persons to be decided at
his discretion (discretionary trust).
Eg, upon the death of Mr P, Mr Q (his brother) decided to
transfer some of his (Mr Qs) property to a trust whose
beneficiaries are X and Y children of Mr P; Mr Q making
himself the trustee.
By transfer:
The settler (owner of property) transfers property to
trustees for them to hold, maintain and manage such
property on behalf of beneficiaries. The transfer may be
accompanied by terms and conditions on which the trust
property is to be held and managed.
Eg, upon the death of Mr P, Mr Q (his brother) decides to
transfer some of his (Mr Qs) property to Mrs P on trust for
the benefit of X and Y children of Mr and Mrs P. The
transfer to Mrs P may include directives on how the
property should be used to benefit X and Y; and on the
transfer of such property absolutely to X and Y (say when
they turn 18 years or 21 years).
By Will:
Trusts may be created by means of testamentary gifts, i.e a
testator may leave his property to be held by trustees on
behalf of named beneficiaries. Eg, a person may have the
following stipulation in his will: I leave my house in Buru
Buru to my wife; upon her death it should be absolutely
transferred to and owned by my sister.. The person who
is to manage the house may also be named. In this case,
the named person will be the trustee who will then manage
the property on behalf of the beneficiary (wife). Upon the
wifes death, the trustee should transfer the property to
the sister.
By operation of the law:
Here a number of situations may arise:
Where a person dies intestate and operation of the
law decrees the children to be his beneficiaries, and
such beneficiaries are infants, the law provides that
the property be held on trust until the beneficiaries
attain majority age.
454
Mock Examinations
Comprehensive
Resulting trusts:
These exist where equity regards the property which is
held by the trustee as belonging to the person who
transferred it to the trustee. This may arise in 4 situations:
(i)
(iii)
(i)
456
Mock Examinations
Comprehensive