Question 1 Trust Electricals Limited (TEL) deals in electrical items both on wholesale and retail. The following trial balance was extracted from TEL's books of account for the year ended 31 December, 2019: Account title Capital Inventory (1 January, 2019) Furniture and fittings (cost) Computers and accessories (cost) Backup generator (cost) Salaries and wages Cash and bank Trading licenses Generator service and repairs Utilities Trade receivables and payables Carriage outwards Purchases and sales Transport inwards Accumulated depreciation: Furniture and fittings Computers and accessories Rent Retained profit/ (loss) Note 3 4 Debit Shs '000' 24,300 6,400 5,400 4,200 28,800 1,250 700 2,800 3,100 12,600 2,400 68,000 3,450 18,000 3,400 184,800 Credit Shs '000' 69,997 8,800 103,419 640 1,944 184,800 Additional notes: 1 A short circuit, in the process of testing one of the electrical items, damaged inventory worth Shs 1,200,000 in September 2019. The effect of this adjustment had not been made in the books of account. 2 The cost of closing inventory was Shs 48,000,000. However, given the prevailing market conditions, the business could sell these items for Shs 42,000,000. 3 The backup generator was procured on 30 September, 2019. Adjustments in relation to its depreciation had not been made in the books of account. 4 One of the debtors who had failed to settle his bill Shs 3,800,000 which was subsequently written off in the year ended December 2018, paid the entire amount through the bank. It was decided that a provision of 5% of

the net debtors be created. Adjustments in relation to repayment of the written off debt and the decision to create a provision had not yet been made in the books of account. 5 Rent Shs 1,600,000 was outstanding. 6 It is TEL's policy to time-apportion depreciation expense where applicable. The following information also relates to depreciation of non-current assets:

Question 2

Furniture and fittings Computers and accessories Backup generator Required: Depreciation rate (per annum) 5% 20% 20% Depreciation method Straight line Reducing balance Reducing balance Prepare, for Trust Electricals Limited, for the year ended 31 December 2019:

(a) Journal entries to record the adjustments in notes 1 to 4 (b) A statement of profit and loss (c) A statement of financial position (a) The reporting framework in Uganda encompasses the legal and policy framework; institutional framework; accounting policies and practices and International Accounting Standards. These are enforced through various laws and regulations all aimed at streamlining financial management, reporting and accountability.

Required: (i) Explain the responsibilities of the Accountant General as per Section 46 of the Public Finance Management Act, 2015 as Amended. (5 marks) (ii) Explain the general provisions as to the contents and form of accounts as per Section 156 of the Companies Act, 2012. (3 marks) (b) The following scenarios show the different accounting treatments and decisions made by the respective staff for the various transactions: 1 The accounts assistant of ABC Limited depreciated furniture at cost in 2017 using straight-line method and determined a depreciation expense Shs 7,400,000. In 2018, while preparing final accounts, he (Total 20 marks)

decided to recognise Shs 7,400,000 as depreciation expense on furniture because there was neither additions nor disposal of furniture during the year 2018. 2 An accountant decided to make a provision for bad debts of 5% of total net debtors in 2019 based on his experience in 2018 in which he had to write off debts worth Shs 10,400,000. 3 The accounts supervisor of a non-governmental organisation estimated the value of skills of the Director of programs and included the value in the books of account for the year ended 31 December, 2019. 4 An accountant did not recognise, in the business' books of account, a truck worth Shs 76,000,000 whose title was in the names of the owner of the business. The truck had been surrendered by the owner to the business and was being used to generate business income. 5 An accountant of a charity organisation recognised insurance expense Shs 10,280,000 at 31 December, 2019. This money related to insurance premium paid for the period 1 October, 2019 to 30 September, 2020. 6 A Finance Director managed to convince management that it was proper to depreciate all non-current assets. Management had initially declined, stating that there was no need to depreciate non- current assets.

Required:

Comment, for each of the scenarios above, on the appropriateness of the accounting treatment, specifically explaining the accounting concepts and conventions observed or not observed. (12 marks) (Total 20 marks)

Ronald, Adrian and Peter are partners in RAP Consultancy firm (RAP) sharing profits and losses in the ratio 4:4:2 respectively. RAP's statement of financial position as at 31 December 2019, before admission of a new partner, Suzan was as follows: Non-current assets Cash Total assets Capital: Ronald Adrian Peter Non-current liabilities: Bank loan Current liabilities: Bank Total capital and liabilities Shs '000' 20,000 15,000 10,000 Shs '000' 54,000 2,700 56,700 45,000 11,200 500 56,700 Suzan was admitted to the partnership and the following terms were agreed upon by the partners: 1 The name of the partnership would be changed to RAPS Consultancy firm. 2 Suzan was to contribute capital equivalent to half of Ronald's capital contribution after considering Ronald's charge of goodwill. Suzan deposited her capital contribution in the partnership's bank account. 3 Goodwill was valued at Shs 16,000,000. 4 Profit and loss sharing ratio was changed to 4:3:2:1 for Ronald, Adrian, Peter and Suzan respectively. Required: Show the necessary ledger accounts and the statement of financial position to reflect the admission of Suzan, if goodwill was accounted for using: (a) Memorandum revaluation method (b) Revaluation method (11 marks) (9 marks) (Total 20 marks) 18 December, 2020

Question 4 Super Properties Limited (SPL) deals in real estatebuying, constructing and letting out buildings. The company's assets register, as at 1 January 2019, showed the following information: Asset Building 1 Building 2 Building 3 Additional 1 The The 2 SPL Date of completion of construction 1 January 2018 30 September 2018 30 June 2018 Shs '000' 100,000 120,000 360,000 580,000 information: company revalued building 2 to Shs 245,000,000 on 1 January, 2019. estimated useful life remained unchanged. completed construction of building 4 on 31 March, 2019 but the building remained vacant until 1 July, 2019 when it became fully occupied. Construction of this building cost Shs 120,000,000 in materials; Shs 43,000,000 in fees paid to the architects; Shs 4,000,000 paid to the Municipal Authority for approval of the building plan; Shs 80,000,000 in labour expenses and Shs 78,000,000 that related to costs incurred to make the building inhabitable. The company was given a penalty, by the Municipal Authority, Shs 2,140,000 for failure to obtain a certificate of occupancy in July 2019. 3 Building 3 was disposed of at Shs 460,000,000 on 1 June, 2019. 4 On 1 December 2019, SPL purchased building 5 at Shs 240,000,000 by cheque and incurred Shs 1,200,000 in legal and professional fees relating to transfer of title. 5 The company estimates that each building would have an estimated useful life of 50 years from the year of completion. Depreciation expense is time apportioned as and when applicable. All payments and receipts are made through the company's bank account. 6 SPL's financial year ends 31 December.

Required: Prepare, for Super Properties Limited as at 31 December 2019, the ledger account for: (a) Buildings (combined) (b) Depreciation expense (combined) (c) Accumulated depreciation (combined) (d) Disposal of asset (e) Revaluation

Question 5 (a) Discuss the types of costs that would NOT be included in the cost of inventories but rather be recognised as expenses in the period in which they are incurred as per IAS 2: Inventories. (4 marks) (b) Identify the principal situations in which the net realisable value is likely to be less than the cost. (5 marks) (c) Quality Manufacturers Limited (QML) makes two products A and B. The unit costs of manufacturing these products as well as the net realisable value per unit extracted from the company's records are tabulated below: Product B Shs 650 550 180 120 300 450 220 170 110 130 Net realisable value The closing inventory (in units) as at 31 December, 2019 was 560 and 400 for products A and B respectively.

Required: Determine the value of closing inventory to be recorded in QML's books of account. (8 marks) (d) Explain the disclosure requirements under IAS 2: Inventories (3 marks) (Total 20 marks) Product A Item Shs Purchase of materials Import duties and other taxes on materials Cost of conversion Other costs incurred to bring the inventories to their present location and condition Storage costs 1,140 1,360

Mellon Enterprises Limited (MEL) started operating on 1 January, 2017. The following information was extracted from the company's fixed assets register as at 31 December, 2018: Non-current asset Cost Shs '000' Land 260,000 Equipment 48,000 Accumulated depreciation Shs '000' 17,280 1,650 6,387.5 Furniture Computers 14,600 16,500 Additional information: 1 During the year to 31 December 2019, MEL revalued the land to Shs 370,000,000. 2 The company procured a vehicle on 30 June, 2019. The purchase price was Shs 38,000,000 and the incidental costs relating to taxes and registration of the car were Shs 46,000,000. 3 Furniture that had cost Shs 4,600,000 on 1 January, 2017 was disposed of at Shs 2,200,000 on 30 September, 2019. The company procured additional furniture on 1 October, 2019 at Shs 6,200,000. 4 A component of equipment purchased at a cost Shs 4,000,000 on 1 January, 2017 was written off at book value on 30 June, 2019. 5 MEL's policy on depreciation is as follows: Non- current asset Equipment Furniture Computers Vehicle The company time-apportions depreciation expenses as and when applicable. 6 Unless expressly stated, assume that the assets were acquired on 1 January 2017.

Required: Prepare MEL's schedule for property, plant and equipment for the period ended 31 December 2019, in accordance with IAS 16: Property, Plant and Equipment.