MULUNGUSHI UNIVERSITY SCHOOL OF BUSINESS STUDIES MOCK EXAMINATION ACADEMIC YEAR: 2019/2020, SEMESTER II PROGRAMME(S) ALL PROGRAMMES COURSE TITLE: PRINCIPLES OF ACCOUNTING II COURSE CODE: BAF112/ BAC212 DATE OF MOCK EXAMINATION: 13TH MAY 2020 TIME ALLOWED: GENERAL INSTRUCTIONS 1. THE EXAM BOOKLET HAS TWO QUESTIONS; ALL COMPULSORY 2. Use of calculator is allowed; 3 Use of pencil and red pen is strictly forbidden 4. Present tidy organized and well thought work. 5. Do not rush through but observe time QUESTION ONE. (25 MARKS) A. Floro Couriers bought a delivery van on January 2 2020 for K19, 000. The van was expected to remain in service for four years (36,000 Miles). At the end of its useful life, Floro officials estimated that the Vans residual value would be K2, 800. The Van travelled 11, 000 miles the first year, 13, 000 miles, the second year 5,000 miles, the third year and 7,000 miles in the fourth year. Required: Calculate the Depreciation expense and calculate the accumulated depreciation in each of the years. i. Straight Line Depreciation (2 Marks) ii. Units of Production (2 Marks) iii. Double Declining Balance (3 Marks) iv. Sum of Years Depreciation (3 Marks) B. Assume that on the same date January 2, 2020 Floro purchased Equipment for K8, 800 cash, expecting the equipment to remain in service for five years. Floro has depreciated the Equipment on a Double Declining Balance basis, with K1, 300 estimated residual value. On August 31, 2020 Floro sold the Equipment for K2, 900 cash. Record both the depreciation values on the Equipment to the date of sale and the calculations to record the sale of the Equipment, showing the gain or loss on disposal of the asset. (15 Marks) QUESTION TWO (20 MARKS) The Capital balances of Partners Eliza and Sara are k20, 600 and K14, 400 respectively before Ruth and Tatty are admitted to the Partnership. At admission Ruth purchased One third of Eliza's interest for k8, 000 and one third of Sara's interest for k4, 200. Tatty was admitted to the Partnership with an investment of K8, 000. For which she is to receive ownership title of K8, 000. After one year of operations, the Partnership made an income of K7, 000 and the Partners participation in net income was to be done under the following income ratios. Interest allowance of 30% annually on their capital balances, salary allowance of K1, 600, k4, 000, K3,000 and K2, 000 to Eliza, Sara, Ruth and Tatty respectively. Furthermore, Eliza was entitled to a bonus of 10% if the difference between her salary allowance and Net income is less than k5, 000 and the residual should be shared at the ratio 3:2:2:2 i. Journalize the entries for the admission of Ruth and Tatty. ii. Determine the Capital balances of Eliza and Sara after admission of Ruth and Tatty iii. Prepare the income sharing schedule and pass the necessary journal entry