NUMBER ONE The year end of Dmax Ltd is 30 June. The trial balance at 30 June 19X9 was as follows: 5.6% 100,000 Redeemable preference shares of 1 each fully paid. 400,000 ordinary shares of 1 each (authorized 500,000) Freehold land and buildings, July 19X8 cost Additions during the year Plant and equipment (cost, (240,000)-see note Office furniture (cost, (30,000) Inventory of raw material, July 19X8 Inventory of finished goods July 1 19X8 Work-in-progress July 19X8 Debtors 4% debenture (repayable at par, January 119X22) Debenture interest, half year to December 19X8 (gross), paid on January 1 19X9 Dividends and interest: From unquoted investments receive May 1 19X9 From quoted investments received June 30 19X9 100,000 400,000 414,900 20,000 120,000 22,000 93,200 12,700 9,200 107,600 150,000 3,000 700 3,000 Share premium account Unquoted investment at cost Quoted investments at cost (market value (71,000) Retained profits-balance July 1 19X8 Cash at bank and in hand Creditors Sales Purchases Carriage inwards Bank interest Wages and national insurance (factory) 136,400 32,000 60,200 30,900 182,920 78,580 791,000 319,600 16,000 2,900 137,900 Plant hire (internal telephone system) 1,300 Rates 5,000 Repairs to premises 600 Administrative salaries (including directors' 30,000) 61,300 Salesmen's salaries (including directors" (40,000) 100,000 Postage and telephone 1,800 Printing and stationery 400 Legal and professional charges 800 Advertising Directors' fees 1,700 600 100 5,200 Bank charges Salesmen's commissions Power and lighting (factory) 6,700 Insurances-factory 7,200 Insurances-office 400 Repairs to plant 8,500 Preference share dividend for half-year, due and paid on January 119X9 Tax paid 2,800 900 Provision for corporation tax, payable January 1 19X0 30,240 Deposit interest received 38,600 1.759.420 1.759,420) The following adjustments are required: 1. Accruals Power and lighting Salesmen's commissions Auditors' remuneration, including expenses Doubtful debts provision 2,400 1,600 1,000 2,500 Depreciation Plant and equipment 10% straight-line on cost Office furniture 10% on reducing balance Corporation tax on profits for the year estimated at 67,000. A final ordinary dividend of 5% (payable 31.7.19X9) is to be provided for. Closing Inventory Raw materials Work-in-progress Finished goods 7. Prepayments: Factory insurances Rates 8. The income tax position is: 76,400 12,800 40,100 1,100 1,200 INCOME TAX ACCOUNT 19X9 19X9 April 14 Bank 900 Jan 1 Debenture interest (tax deducted) 900 June 20 Tax deducted from 900 June 30 Corporation tax account 900 investment income 1.800 1.800 9. Corporation tax payable on 1 January 19X10, has been agreed at 28,840. 10. At June 30 19X9, the company had placed contracts for heavy machinery for 80,000 and the Board has authorized, but not yet placed, a contract for a new storeroom for 30,000. 11. During the year, the company acquired new plant for 10,000 and sold obsolete plant at written down value (cost 5,000, accumulated depreciation, 4,000). There were no acquisitions or disposals of office furniture. 12. The unlisted investments relate to a 3% shareholding in a private company. 13. There is no substantial difference between the purchase price or product costs of closing stocks, and their replacement cost or most recent prices at the balance sheet date. 14. The historical cost of land and buildings at 1 July 19X8 was 200,000. 15. The company acquired the business of G Huyton & Co on 18 August 19X9 for consideration in cash amounting to 139,500. 16. Staff details These details include relevant information relating to directors. i. Administrative salaries include (4,017 in respect of social security costs and 3,675 in respect of other pension costs. Respective figures for salesman's salaries are (7,095 and 6,042; for factory wages and national insurance, (10,538 and 8,473. 17. Directors' emoluments Director's emoluments, exclusive of pension contribution are (56,690. Required: 2. Prepare the published income statement for year ended 30 June 19X9 classifying expenses by function. b. Prepare the published balance sheet as at 30 June 19X9. c. The relevant notes to the accounts. (Total: 25 marks) NUMBER TWO Batu, Hari and Violet have been working in partnership as architects for several years. At 1 September 197 summaried balance sheet showed: Capital Accounts Shs. Shs. Batu 720,000 Studio 450,000 Hari Violet 450,000 Motor cars 720,000 360,000 Equipment 180,000 Net current assets 180,000 1,530,000 1.530.000 The partnership agreement allows for 15% per annum interest on capital and profit or loss shared between Batu, Hari and Violet in the ratio 5:4:3, respectively. Violet is guaranteed a minimum of Shs.559,000 per annum in addition to her interest on capital. Batu retired on 28 February 19 8, on which date the goodwill was valued by an agreed method at Shs.1,080,000. A goodwill account is not to be maintained in the books. Batu took over the car he had been using-its book value at 1 September 19 7 was Shs.270,000 and agreed valuation at 28 February 19 8 was Shs.207,000. Hari and Violet continued in partnership, sharing profits or loss equally after allowing interest on capital at 15% per annum as before and with no guarantee share to Violet Fees earned were Shs.1,080,000 for the first half-year and Shs. 1,400,000 for the second half. The operating expenses were Shs.450,000 and Shs.350,000 for the two half-years respectively. Depreciation on the cars is charged at 20%, on the equipment at 10% per annum on book values. At 28 February 19 8 Hari agreed to purchase the studio for Shs.990,000 cash and then to lease it back to the new partnership for Shs. 150,000 per annum. The cash was partly used to repay Batu all but Shs.360,000 of the amount owing to him, interest of 18% per annum being paid on that balance. The profit on the studio was credited to the partnership' capital accounts. Hari and Violet withdrew Shs.720,000 and Shs.675,000 respectively during the year. Required: Prepare the partners' capital accounts, the profit and loss account for the year ended 31 August 19 8 and a balance sheet at that date. (Total: 20 marks) NUMBER THREE Sir Arsen' is a fashionable men's clothing store with a Head Office in Mombasa and branches all over Kenya. Books are not maintained in the branches: data is sent by Tetra Services Ltd. from the branches to a head office computer in Mombasa. A computer program has been developed by Sir Arsen' to write up the traditional accounts of each branch in the usual way. The following data relates to the Kisumu branch. All prices quoted are selling prices. 1 July 1995 Transactions to 30 June 1996 Opening stock (at Head Office cost plus 50% on cost: goods with a normal selling price of Sh.600,000 had with the authority of the Head Office been marked down by 15/Q). Goods received by branch from Head Office (at cost plus 50%) Goods returned to Head Office (including one fifth of the opening stock of marked down goods) Sh.'000' 6,210 71,040 1,470 Cash sales (these include the remainder of the opening stock of marked down goods and one half of goods received in the year at a selling price of Sh.720,000 marked down by 50% to clear them - the other half is included in closing stock at the year end) - to general public 38,592 Credit sales (to other retailers) 27,990 Retailer customer returned goods to Kisumu branch 186 Goods received from Kisi branch during the year 246 Goods sent to Kitale branch during the year 321 522 129 420 Retailer customer returned goods to Head Office in Mombasa Cash stolen in transit to the bank on 21 June 1996 Goods stolen on the night of 9 March 1996 The stock-take carried out on 1 July 1996 confirmed that the book value of closing stock was correct. Kisumu branch expenses amounted to Sh. 19,200,000. Required: To test the correctness of the computer program, the chief accountant asks you to write up the Kisumu branch stock account and the Kisumu branch mark-up account, and a memorandum trading and profit and loss account for the year ended 30 June 1996. (Total: 20 marks) NUMBER FOUR What are the duties of an Interim Liquidator? How do they differ form those of a Receiver and Manager? (6 marks) As a result of serious problems with its export market, 'Whispers Stores Limited went into voluntary liquation on 1 May 1992. The interim liquidator provided the following information; The assets of the company including machinery realized Shs.2,100,000. Liquidation expenses amounted to Shs.75,000. Whispers Stores Limited had borrowed a loan of Shs.250,000 from National Bank. The loan was secured against machinery which realized Shs.402,500 upon disposal.. The company due to liquidity problems had not paid salaries of four clerks for four months. Each clerk was entitled to a salary of Shs.1,500 per month. In addition, salaries of four messengers for three months at the rate of Shs.750 per month was outstanding. Creditors worth shs.437,000 were in the books. The shares capital was composed as follows: 10,000 Class A ordinary shares of Shs. 100 each (Shs 75 paid-up). 8,000 Class B ordinary shares of shs.100 each (Shs.60 paid-up) 7,000 Class C ordinary shares of Shs.100 each (shs.50 paid-up) 10,000 8% preference shares of Shs100 each (fully paid-up) Required: The liquidator's Statement of receipts and payments with the appropriate support schedules. NUMBER FIVE a) With reference to the provisions of the law of succession: i) efine a will; ii) ive two short explanation of failure of legacies. (14 marks) (Total: 20 marks) D (2 marks) G (4 marks) b) Mr Munuhe dies intestate, leaving his two wives Lucy and charity whom he married under a system of law which permits polygamy. A third wife Beatrice had predeceased him. Lucy has three children Paul Luka and Renny. Beatrice had two children Shiru and Tom. Charity has no children. All the children are alive at the time of Mr. Munuhe's death. The value of his personal and household effects was Sh.350,000 and the value of the net intestate estate was Sh.3,150,000. Required: A clear statement to show how Mr. Munuhe's property would devolve. (9 marks) (Total: 15 marks)