NUMBER ONE The draft Balance Sheets of GTI Limited, KBD Limited and QBY Limited are as follows: UNA Limited and KMN Limited are both listed on the Nairobi Stock Exchange: Balance sheets as at 30 September 1996 PPE (Net book value) Investments: At cost:: Shares in KBD Ltd At Valuation: Shares in QBY Ltd Current assets Inventory Receivables Cash at bank GTI Ltd KBD Ltd QBY Ltd Sh. million Sh. million Sh. million 684 430 330 600 360 484 320 270 180 150 90 80 40 664 550 400 Current liabilities Bank overdraft 60 Payables 170 120 Current Tax 60 50 Proposed dividends 100 100 390 270 Net current assets 274 280 1,558 1070 Financed by: Sh.10 Ordinary shares 500 500 10% Preference shares 0 80 Revaluation reserve 0 30 Profit and loss account 1058 460 1.558 1070 550 + 180 220 550 0 300 Notes 1. 2. 3. 4, 5. GTI Ltd. purchased 60% of the ordinary share capital and 30% of the preference share capital of KBD Ltd. on 1 October 1992, when the balances on the Profit and Loss Accounts of GTI Ltd., KBD Ltd. and QBY Ltd. were Sh.899 million, Sh.360 million and Sh. 150 million respectively. KBD Ltd. had purchased 70% of the ordinary share capital of QBY Ltd. on 1 October 1991 for Sh.330 million when the balance on the Profit and Loss Accounts of GTI Ltd., KBD Ltd. and QBY Ltd. were Sh.856 million, Sh.330 million and Sh. 130 million respectively. The investment was revalued upwards by Sh.30 million on 30 September 1995. The directors of KBD Ltd. had decided to revalue the investment at Sh.378 million at 30 September 1996, but this has not yet been reflected in the books. KBD Ltd. makes sales to both GTI Ltd. and QBY Ltd. at normal selling price (cost plus a mark-up of 33/%). At 30 September 1996, items purchased by GTI Ltd. and QBY Ltd. from KBD Ltd. remaining unsold had cost Sh.24 million and Sh. 16 million respectively. Group policy on unrealised intra-group profits is in line with current international practice i.e. unrealised profits are eliminated in full from the book value of assets, and from the interests held by the group and the minority interest in respective proportion to their holdings in the company which had made the profit. GTI Ltd. and KBD Ltd. have not yet accounted for the dividends receivable. Intra-group balances are included in Receivables and payables as follows: 4. All proceeds from life policies are to be shared in profit sharing ratios. 5. Profit for the year was Sh.111,600. 6. At the close of business the bank balance was Sh.110,400 including the amount received from the insurance company. 7. All the remaining assets were sold and the net proceeds after settling liabilities was Sh.372,000. Legal fees paid was Sh.960. 8. Partners drawings were: Kim Ndritiu Ryan Sh. 37,800 40,500 23,700 9. The life assurance contract was reassigned and new policies issued to Kim and Ryan for Sh.27,000 and Sh.18,000 respectively. 10. The partnership winding up process was completed by 30 August 1997. Required: The following ledger accounts necessary for all the closing entries including final payments to the partners: (a) Capital accounts: (b) Current accounts (c) Loan account; (d) Life assurance fund account; (e) Cash book; (f) Life assurance policy account: (g) Net assets account. (5 marks) (4 marks) (1 mark) (1 mark) (3 marks) (2 marks) (4 marks) (Total: 20 marks) NUMBER THREE Annex Ltd is a company which deals in antiques. The Company is based in London and operates in the UK, but also has a profitable outlet in San Francisco, California, which is managed by one of the directors on his frequent trips to the States. Separate records are kept of the outlet's transactions b the American staff. The following trial balances were extracted from the books of Annex Ltd at 31 December 2003 M You are required to prepare for the year ended 31 December 2003 (a) The trial balance of the San Francisco outlet, converted at 'historic rate', after making the year end adjustments, and indicating clearly the rates of the conversion used. (b) The trading and profit and loss account of London, San Francisco and the combined business in columnar form. (c) The balance sheet of the combined business (3 marks) (10 marks) (7 marks) (Total: 20 marks) 4