BOMBADIER TRADING COMPANY LIMITED

Komakech is a new accounting recruit at Bombardier Trading & Co Certified Public Accountants. He has been undergoing a rigorous training and orientation exercise at the firm. A client of the firm, Kimpe Industries whose Accountant left abruptly for greener pastures, has brought a list of account balances to aid in the preparation of the final accounts of the Company. This assignment has been referred to Komakech to test his financial accounting skills.

The list of account balances as at 31^st December 2020 is shown below.

DrCr

Shs'000shs'000

Revenue28,600

Purchases18,000

Opening inventory (1^st January 2020)4,500

Storage costs850

Sales persons Salaries and commissions200

Administrative Salaries3,070

General Administrative expenses580

General distribution expenses490

Directors remuneration870

Loan interest paid100

Dividends: interim dividend paid40

Non current assets: cost18,000

Accumulated Depreciation 1 Jan. 20203,900

Trade accounts Receivable and Payable6,9003,800

Provision for doubtful debts as at 1^st Jan. 2020200

Balance at bank2,080

10% loan (repayable 2025)1,000

Issued share capital(4million ordinary shares4,000

Share premium account1,300

Retained profit 1^st Jan. 2020 8,720

53,60053,600

The following information is also available

(i)Inventory as at 31^st December 2020 amounted to shs 3,000,000.

A review of the trade accounts receivable total of shs. 6,900,000 shows that debts totaling 400,000/= should be written as bad debts. A provision for doubtful debts should be adjusted to 2% of the remaining balance for receivables.

Depreciation should be charged at 10% per annum on the cost at the year end.

The directors propose a final dividend of 0.04/= per share on the shares in issue at the end of the year.

Required:

Q.1.

(a)Prepare Kimpe Industries' SOCE for the year ended 31^st Dec. 2020.

(8marks)

(b)Discuss the reasons various stakeholders may be interested in the accounts of

Kimpe Industries showing, for each of them, their information needs.

(8marks)

Explain, how in your view 'you would treat a bad debt that had been written off

and the debtor resurfaces and pays towards the end of accounting period?

(6marks)

(d)Evaluate four major ways through which a company like Kimpe Industries can

raise capital for expansion purposes(6 marks)

(e)Prepare Kimpe Industries' SOFP as at 31^st December 2020.

(8marks)

(f)Identify areas in the published accounts that need improvement and your suggestions

for better presentation of financial statements. (6 marks)

(g)What relationship exist among the Full set of Financial statements as per IAS 1?

(6 Marks)

(h)Explain the rationale of the Accounting Equation to the various beneficiaries of

Accounting information as per IFRS.(2marks)

Total 50marks