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NUMBER THREE Wananchi Pools Lid. set up a business on 1 July 1999 to sell snooker tables of a standard size and quality. The company began with Sh.600,000 in the bank. The tables are purchased for Sh.5,400 each and sold for Sh.7,500 each. A friend of the managing director introduced ART Lid. a hire purchase company to Wananchi Pools Led. ART requires a deposit of Sh.2,100 followed by 18 months instalments of Sh.375 each, the first one payable one month after purchase. Wananchi Pools Led. decided to deal in hire-purchase business on terms and conditions to those ART on deposits and instalments. During the year ended 30 June 2000, Wananchi Pools Ltd. bought a total of 300 tables and sold 210 of them. Hire purchase sales were 12 in April 2000, 20 in May 2000 and 30 in June 2000, but 2 of those sold in April were repossessed in June with the deposit and one instalment having been paid. One of the repossessed tables was damaged and had to be repaired for Sh.1,800 while the other one was hardly damaged and could be treated as new stock.. At the year ended 30 June 2000, the following trial balance was extracted: Sh. Sh. Capital 600,000 Purchases 1,620,000 Sales 2,133,000 Debtors 470,250 Creditors 13,200 Expenses 135,000 Drawings 180,000 Bank balances 70.950 2,776,200 2,776,200 Required: (a) Trading, profit and loss account for the year ended 30 June 2000. (8 marks) (b) Hire purchase debtors account. (3 marks) Repossessions account. (2 marks) (c) Balance sheet as at 30 June 2000. (7 marks) (Total: 20 marks) NUMBER FOUR Kamau has negotiated with Onyango for a licence to manufacture and sell weighing scales patented as "wellscale". Onyango is the registered owner of the patent. The agreement provides for a royalty to be paid to Onyango of Sh.250 for each unit sold in a year, subject to a minimum of Sh.2,500,000 per year. The shortfall in any year can be recouped from any excess of royalties over the minimum sum in the following year. Kamau sold 8000 weighting scales in 1996 and 11000 in 1997. From the beginning of 1998, Kamau issued a sublicence to Kiplagat for the manufacture and sale of the same units, on the terms of a royalty of Sh.300 each, a minimum sum of Sh.1,500,000 per year and the right to recover any shortfall for a year from an excess in the following year. The sales volumes for the following two years were: Kamau Kiplagat 1998 12000 3000 1999 14000 4000 Required: The accounts in Kamau's books for each of the four years 1996, 1997, 1998 and 1999 indicating the amounts to be transferred to the profit and loss account each year and the amounts carried forward at the end of each year. Assume that all amounts due were received or paid in the appropriate year. (20 marks)( JOULE 20 marks) NUMBER TWO Nyumba Safi Lid. operates a housing development project. There was a fire on its premises on 31 January 2000 which destroyed most of the building, although stock to the value of Sh.3,960,000 was salvaged. The company has an insurance policy (with suitable average clauses) covering stock for Sh.600,000,000, buildings for Sh.800,000,000 and loss of profits (including standing charges for Sh.250,000,000 with a six months indemnity period). An extract of the company's trading profit and loss account for the year ended 31 December 1999 is as shown below: Sh.'000" Sh.'000" Opening stock 412,500 Sales of houses 2,000,000 Purchases: materials 1,812,500 Closing stock 525,000 Insured standing charges 167,500 Interest on investment 5,000 Other expenses 80,000 Net profit for the year 57,500 Additional information: 1. The company's records show that the sale of housing units for January 2000 had been the same as for the corresponding month in the previous year at Sh.100 million. 2. Payments to creditors were Sh.106,680,000 and Sh.3,320,000 was owing to creditors at the end of January 2000. 3. Business was disrupted until the end of April 2000 during which period turnover fell by Sh.180 million compared to the same period last year. 4. It was agreed that % of the value of buildings had been lost and that at the time of fire, buildings were worth Sh. 1,000 million. Required: Ascertain the amount of various claims to be submitted to the insurers. (20 marks)The following financial information is available: Balance sheet as at 30 September 1999 Capital Accounts: Sh.'000' Sh.'000' Fixed Assets: Sh. '000' Sh.'000" Tobiko 3,308 Furniture and fittings 96 Munyao 3.000 Equipment 284 6,308 Motor vehicles 1,504 1,884 Current liabilities: Investment in NSE shares 3,000 Client's account 128 Accrued rent 136 Current assets: Accrued salaries 132 396 Outstanding fees Cash at bank: Office 480 Clients 1,212 128 1.820 6.704 6.704 Receipts and Payments Account for the year ended 30 September 2000 Receipts Sh.'000' Payments Sh.'000" Fees for services rendered 3,552 Equipment purchased 596 Client's deposit for land buying 1,536 Drawings: Tobiko 300 Client's deposit for criminal case 1,296 Munyao 300 Received from clients for: Deposit on land purchase contract for client 920 Disbursements: Transport 224 Stationery 48 Office rent 896 Transport Telephone and postage 292 Miscellaneous 92 Printing and stationery 152 Motor vehicle expenses 392 Water and electricity 140 Office repairs 72 Salaries and wages 960 Miscellaneous expenses 208 Additional Information: 1. Depreciation is to be provided for on reducing balances at 121/2% for furniture, 15% for equipment and 25% for motor vehicles. 2. Fees in arrears at the year end was Sh.1,280,000. The advocates have agreed to create a reserve against the fees in arrears. 3. During the year, the criminal case client was defended in court. The advocates raised an interim fee note for Sh.500,000 but no entries have been made in the books. 4. Disbursements for stationery, Sh.20,000, transport, Sh.12,000 and miscellaneous expenses, Sh.4,000 have been charged to the client's account. 5. Accrued expenses were Sh.20,000, Sh.108,000 and Sh.112,000 for telephone, rent and salaries respectively. Required: (a) The advocates Income and Expenditure Account for the year ended 30 September 2000. (6 marks) The clients account(s) for the same period. (6 marks) Balance sheet as at 30 September 2000. (8 marks) (Total: 20 marks)