Attempt four of the five questions Question 1 Beta Shoes Ltd manufactures a shoe brand with a trade name 'Beta Shoe' and also imports a brand 'Marie Claire' for elegant ladies. For the year ended 30 June, 2017 the accountant has prepared the following trial balance: Threading equipment at cost Accumulated depreciation -threading equipment Inventories 1 July, 2016: Raw materials Finished goods -Beta Shoe Work in progress -Beta Shoe Marie Claire Purchases of raw materials Carriage on raw materials Factory wages Royalties Rent Salaries Office stationery Advertising Commission expenses Purchases of Marie Claire Share premium Share capital Cash &bank Trade receivables & payables Office equipment at cost Buildings at cost Land Electricity 20% loan Sales of manufactured goods - Beta Shoe Sales - Marie Claire Cr Shs '000' 90,000 Dr Shs '000' 450,000 20,000 75,500 13,500 35,450 354,500 12,500 45,500 35,500 65,000 57,500 25,400 23,500 24,500 234,700 75,500 161,450 45,400 54,500 75,400 155,000 100,000 65,400 24,500 340,500 1,927,850 765,000 430,000 1,927,850 28May, 20182 of 10

Additional information: 1. Closing inventory at cost as at 30 June, 2017 was made up of: Shs '000' Raw materials Finished goods - Beta Shoe Work in progress Marie Claire 12,500 25,670 23,540 22,560 2. Of the finished goods (Beta Shoe), items costing Shs 5 million had a net realisable value of Shs 3 million. 3. Factory wages Shs 32.5million relate to Beta Shoe designers and threading machine operators. The remainder relates to the factory cleaners and shoe packers. 4. Depreciation of non-current assets, on cost, is at the following rates: Asset % Threading equipment 10 Office equipment 20 Buildings 2 5. The interest on the loan as well as rent Shs 3.5 million were accrued on 30 June, 2017. 6. The tax for the year to be provided for at 30%. 7. A specific bad debt relating to a wholesaler in Mubende town Shs 7.6 million should be written off as irrecoverable. 8. The following expenses are to be apportioned as follows: Selling & Manufacturing distribution Administration Depreciation of buildings 12 14 14 Rent 141214 Salaries 14 12 14 Electricity 34 - 14 Required: Prepare, for Beta Shoes Ltd for the year ended 30 June, 2017, a: (a) (b) (c) manufacturing cost statement. statement of profit or loss. statement of financial position as at 30 June. (7 marks) 10 marks) (8 marks) (Total 25 marks) Page 3 of 10

Question 2 (a) Precious and Brilliant are in a partnership sharing profits and losses equally. The following is their summarised statement of profit or loss for the year ended 31 December, 2017. Sales Cost of goods sold Gross profit Administration costs Selling and distribution costs Net profit Additional information: Shs '000' 86,500 (45,500) 41,000 (7,500) (8,560) 24,940 1. 2. 3. 4. 5. 6. The capital and current account balances as at 1 January, 2017 are as follows: Precious Brilliant Capital 123,500 75,500 Current 45,500 (4,500) Each partner drew Shs 3 million on 1 January, 2017 and Shs 4 million on 1 July, 2017. Interest on drawings is 10% per annum. Interest on capital is 20% per annum. Precious and Brilliant are entitled to salary Shs 300,000 and Shs 350,000 per month respectively. In arriving at the net profit, closing inventory Shs 2 million had not been included. Included in the administration expenses is rent Shs 3 million for 15 months ending 31 March, 2018. Required: Prepare for the partnership for the year ended 31 December, 2017: (i) (ii) an appropriation account. partner's current accounts (columnar format). (8 marks) (7 marks) 28May, 2018 Page 4 of 10

(b) The trial balance extract of Murugi Ltd showed the following balances as at 31 March, 2018. Share capital (Shs 1,000 nominal) 1 April, 2017 Share premium 1 April, 2017 Cash at bank Retained earnings 1 April, 2017 Revaluation reserve 1 April, 2017 Proceeds from issue of shares Additional information: Cr Shs '000' 586,500 1. 2. 3. 4. 5. 6. The net profit for the year ended 31 March, 2018 was Shs 42.8 million. In arriving at the net profit, goods returned inwards Shs 354,000 were incorrectly deducted from purchases and return outwards Shs 450,000 were incorrectly deducted from sales. On 1 July, 2017, 400,000 shares were issued each at Shs 1,500. The proceeds were included in the trial balance as 'proceeds from issue of shares' because the bookkeeper was not sure of where to post the amount. There was a transfer of Shs 15.5million from retained earnings to the general reserve during the period under review. Interim dividends Shs 100 per share were paid on 31 December, 2017. Land which was acquired at a cost of Shs 5 million had a fair value of Shs 20 million on 31 March, 2018. The directors have decided to recognise land at its fair value as at 31 March, 2018 in the financial statement. The directors proposed a dividend of Shs 150 per share for the last half of the year in a board meeting held on 31 March, 2018. Required: Prepare statement of changes in equity for Murugi Ltd for the year ended 31 March, 2018. (10 marks) (Total 25 marks) Dr Shs '000' 124,500 45,500 87,500 42,400 600,000 28May, 2018 Page 5 of 10

Question 3 AB & Co, a tax service consultancy firm had the following trial balance for the year ended 31 December, 2017: Motor vehicle Furniture & fittings Earned consultancy fees Unearned consultancy fees (Kiboko Traders) Consultancy fees receivable Cash balance Bank balance Drawings Capital Rent Utilities Provision for depreciation: Motor vehicle Furniture & fittings Insurance Salaries & wages Office supplies 22% bank loan Additional information: 35,000 40,000 37,380 15,600 112,930 35,250 900 44,630 4,000 500 5,250 2,200 Principles of Accounting - Paper 1 Dr Shs '000' 40,000 Cr Shs '000' 6,500 880 - 218,510 50,000 218,510 6,000 1. Loan interest for the period was accrued. 2. Utilities Shs 2 million remained outstanding and rent Shs 800,000 was prepaid. 3. Supplies at hand on 31 December, 2017 were worth Shs 500,000. 4. AB & Co provided consultancy services during the year to Kiboko Traders Shs 5,250,000, but this information was not included in the trial balance. 5. Consultancy services worth Shs 3.5 million were provided to clients but not invoiced. This needs to be adjusted for in the books. 6. The company policy is to charge depreciation on depreciable assets at 15% per annum using the reducing balance method. 7. A client owing consultancy fees Shs 1,120,500 was declared bankrupt on 29 December, 2017. 8. Provision to be made for doubtful debts of 6% of net consultancy fees receivable and corporation tax Shs 3,250,000. 6 of 10

Required: Prepare, for AB & Co for the year ended 31 December, 2017: (a) Journal entries for the additional information only. (11marks) (b) An adjusted trial balance. Question 4 (14 marks) (Total 25 marks) (a) A packaging machine was acquired by Rena Manufactures Ltd with an expected useful life of 10 years at a purchase price Shs 167 million on 1 July, 2015. The import duty paid amounted to Shs 34 million; freight charges Shs 2.7million and installation costs Shs 4.5million. It is expected that the machine will require annual servicing at Shs 2.5million and annual repairs Shs 5.4million. On 3 January, 2017 the condition of the machine was assessed by engineers who estimated the remaining useful to be 5 years. It is the company's policy to provide for depreciation using the sum of years' digits method and the depreciation expense is time apportioned. Required: (i) (ii) make for Rena Manufacturers Ltd, extracts of the statement of profit or loss and statement of financial position as at 31 December, 2015, 2016 and 2017. (11 marks) Explain two factors that may necessitate a change in the method of depreciation. (2 marks) (b) The following is a summary of the cashbook for MEM Ltd for the month of April, 2018. Dr Shs '000' Balance b/f 25,500 Receipts 76,500 102,000 Payments Balance c/ f Cr Shs '000' 43,400 58,600 102,000 Principles of Accounting - Paper 1 28May, 2018

Their summarised bank statement for the month of April, 2018 was as follows: Dr Shs '000' Deposits/ credits Withdrawals/charges 26,541 Cr Shs '000' 1. 2. 3. 4. 5. 6. 7. 8. 9. Receipt No. 0002 0003 0004 Shs 430,000 354,000 536,000 Balance Shs '000' 25,500 80,000 53,459 Cheque number 0012 drawn in favour of NEC Enterprises Ltd Shs 3.4 million had been correctly recorded in the bank statement but included in the cash book as 4.3million. Excise duty and bank charges Shs 256,000 and Shs 450,000 respectively were recorded in the bank statement but not included in the cashbook. The bank statement showed that cheques 0004 and 0145 received from Jena Investments Ltd and Quality Suppliers Ltd Shs 543,000 and 1,200,000 respectively were dishonoured by the bank. Cheque number 0015 Shs 345,000 which was payment to Nasser Investments Ltd (a supplier) was entered in the wrong side of the cash book. A standing order for electricity and bank interest earned Shs 234,000 and Shs 65,000 respectively were not recorded in the cashbook. Cheque number 0430 received from a customer Shs 765,000 was entered twice in the cashbook. Cheques received in the last days of April, 2018 totalling to Shs 765,000 were not included in the bank statement until 5 May, 2018. The following cash receipts recorded in the cash book have not been banked: 54,500 Subsequently, the following were observed: The following cheques were drawn by MEM Ltd to the following suppliers but are not reflected in the bank statement: Receipt No. 0037 0040 0050 Supplier Joshua Honest Suppliers Mabirizi Suppliers Ltd Owino Investments Shs 875,000 243,000 589,000 Principles of Accounting - Paper 1 28May,

10. There was a transfer of Shs 1.5 million by the bank to MEM Ltd's current account in another bank. This is not yet recorded in the cash book. Required: for MEM Ltd for the month of April, 2018: (i) an adjusted cash book. (6 marks) (ii) a bank reconciliation statement. (6 marks) (Total 25 marks) Question 5 (a) Explain the reasons why the accounts receivable control account may not agree with the ledger accounts. (8 marks) (b) The trial balance of Obonyo failed to balance on 31 December, 2017. Obonyo does not have enough knowledge to indentify the mistakes and therefore has come to you to assist him locate the errors. He has provided the following information: Sales ledger debit balance 1 January, 2017 Sales ledger credit balance 1 January, 2017 Purchases ledger debit balance 1 January, 2017 Purchases ledger credit balance 1 January, 2017 Credit purchases Credit sales Return outwards Return inwards Carriage outwards Carriage inwards Discounts received Discounts allowed Irrecoverable debts written off Increase in provision for bad debts Receipts from debtors Payments to creditors Refunds for overpayments: To debtors From creditors Debtors' cheques dishonoured Discounts allowed on dishonoured cheques Cheques written to creditors dishonoured Interest charged by creditors Interest charged to customers Contra settlement Shs 50,150,980 5,140,200 6,540,000 15,250,100 32,110,000 45,780,150 550,000 113,000 95,500 87,600 584,100 320,000 97,400 750,000 38,640,000 28,500,000 2,500,000 630,000 2,250,000 50,000 1,650,000 1,050,000 800,000 1,400,000

The following list of balances was extracted from the personal ledgers as at 31 December, 2017: Debtors: Debit balance Credit balance Creditors: Debit balance Credit balance Required: Shs 68,500 55,009,000 11,000,000 112,050 Do the following for Obonyo: (i) (i) (iii) Prepare trade receivables control account. Prepare a trade payables control account. Determine the amount of error, if any, and the ledger in which it occurred. (4 marks) (Total 25 marks)