Question
kindly attemp all the questions. Yebelte, a top executive at one of the top soft drinks company in Kenya, decided to retire from employment and
kindly attemp all the questions.
Yebelte, a top executive at one of the top soft drinks company in Kenya, decided to retire from employment and invest part of his savings in flower farming on his five acre land in Kitale. After two years of operation, in January 2022, Yebelte decided to explore expansion opportunities. He talked to a micro-finance institution in Kitale about finance for the expansion and presented a statement of income for the period ended December 31, 2021. The statement of income was based strictly on cash flows:
Yebelte Fish Farm
Statement of Income
For the period ended December 31, 2021
| Ksh |
Revenue |
|
Cash from sale of flowers | 40,800,000 |
|
|
Related Expenses |
|
Purchase of inputs | (33,600,000) |
Purchase of new green house | (4000,000) |
Wages | (6000,000) |
| (43,600,000) |
Operating loss | (2,800,000) |
Proceeds from sale of machinery | 2,000,000 |
Net loss for the period | (800,000) |
From discussions with Yebelte the credit officer of the micro-finance institution learnt the following:
(i) Ksh.14,400,000 of the cash collected in 2021 was from deliveries of flowers made prior to the beginning of the current financial year.
(ii) About half of the inputs bought in 2021 were on hand at year-end
(iii) Two green houses had been bought in 2020 at a total cost of Ksh.8000,000. The green house along with the one acquired at the beginning of 2021, were used all year. Each green house is expected to last for five years.
(iv) The machinery sold for Ksh.2,000,000 had been purchased in 2019 for Ksh.3,250,000 and had a net book value of Ksh. 1,950,000 when sold
(v) Ksh.150,000 was outstanding in respect of wages for two workers who had travelled in the third week of December for end of year holidays.
Required:
Provide Yebelte and the micro-finance institution with responses to each of the following questions:
(i) What amount of revenue from the sale of flowers should be reported in the statement of income for 2021? (3 marks)
(ii) What amount of expense for inputs should be reported in 2021? How should the amount of inputs on hand at year-end be reported? (5 marks)
(iii) Should some amount of the cost of the green house be included in determining
the income for the period? If yes, how much? If no, why? (4 marks)
(iv) What amount of expense in respect of wages should be reported in 2021
(3 marks)
(v) What amount, if any, with respect to the sale of machinery should be reported
in the statement of income for 2021 (3 marks)
(Total: 27 marks)
Yebelte, a top executive at one of the top soft drinks company in Kenya, decided to retire from employment and invest part of his savings in flower farming on his five acre land in Kitale. After two years of operation, in January 2022. Yebelte decided to explore expansion opportunities. He talked to a microfinance Institution in Kitale about finance for the expansion and presented a statement of Income for the period ended December 31, 2021. The statement of income was based strictly on cash flows: Yebelte Fish Farm Statement of income For the period ended December 31, 2021 Revenue Cash from sale of flowers 40.800.000 Related Expenses Purchase of inputs Purchase of new greenhouse Wages 133,600,000) (4000,000) 6000 000) 43,600,000) Operating loss Proceeds from sale of machinery Netloss for the period 12,800,000) 2.000.000 900.000 From discussions with Yebelte the credit officer of the microfinance institution learnt the following: () Ksh 14,400,000 of the cash collected in 2021 was from deliveries of flowers made prior to the beginning of the current financial year. ) About half of the inputs bought in 2021 were on hand at year-end Oll) Two green houses had been bought in 2020 at a total cost of Ksh.3000,000. The green house along with the one acquired at the beginning of 2021, were used all year. Each greenhouse is expected to last for five years. Ov) The machinery sold for Ksh.2,000,000 had been purchased in 2019 for Ksh 3,250,000 and had a netbook value of Ksh. 1,950,000 when sold M Ksh. 150,000 was outstanding in respect of wages for two workers who had travelled in the third week of December for end of year holdays. Required: Provide Yebelte and the microfinance institution with responses to each of the following questions: 0) What amount of revenue from the sale of flowers should be reported in the statement of Income for 2021? Bmarks) 1) What amount of expense for inputs should be reported in 2017 How should the amount of Inputs on hand at year-end be reported? 15 marks) () should some amount of the cost of the green house be included in determining the income for the period? If yes, how much? if no, why? (4 marks) What amount of expense in respect of wages should be reported in 2021 3 marks) MWhat amount, if any, with respect to the sale of machinery should be reported In the statement of income for 2021 13 marks (Total: 27 marks)Step by Step Solution
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