BAC 200: ACCOUNTING FOR ASSETS

Q.4

Abel received the bank statement for the month of December 2016 and noted that the bank balance was sh. 163,900 whereas the cash book balance was sh. 244,000. He investigated the matter and discovered the following discrepancies: i ) Bank charges of sh.2,600 had not been entered in the cash book. Cheques drawn by Abel totaling sh.37,000 had not yet been presented to the bank. Hi) Abel had not recorded receipts from cash customers on 31st December 2016 amounting to sh. 18,000 in the cash book. The receipts were banked the same day in the ATM and were credited to his account on 15t January 2017. iv ) A standing order payment amounting to sh. 102,400 had gone through on 27th December 2016. The standing order was for a loan and the interest amount was 22, 400. V) In the cash book Abel had entered a payment for computers of sh. 74,000 as sh. 47,000 in error. vi) A cheque for sh. 37,000 from a debtor had been returned by the bank marked " no sufficient funds". vii) A receipt of sh. 1,800 on 315t December 2016 from a customer who pays in advance was recorded in the cashbook as sh. 1,000 in error. vili) The bank had recorded a deposit of sh. 25,400 as sh.24,500 in error. ix ) The bank had recorded a cheque payment of sh. 63,000 as sh. 36,000 in error. Required: a) Updated cash account as at 31" December 2016. Use a "T" account.(10 marks) by A bank reconciliation statement as at 31" December 2016 reconciling the bank statement balance to the adjusted cash balance. (1 1 marks) c) Prepare compound journal entries to update the cashbook.(9 marks)A. Bunson Ltd purchased equipment at a cost of sh. 6,400,000 on Ist August 2015. The equipment has an estimated useful life of four years and a salvage value of sh. 400,000. The company's policy is to provide for full years depreciation in the year of purchase and no depreciation in the year of disposal. Required: a) Compute depreciation for the years 2015 and 2016 under i. Sum of years digits method. ii. Double declining balance method. (10 marks) b) Assuming the equipment was disposed on Ist January 2017 for sh. 1,900,000 show the journal to record the disposal under of the two methods above. (6 marks) (Total 16 marks)