Question 2 Kirungi Ltd has provided the following information for the year ended 31 December, 2020. Details Net profit Retained profits as at 1 January, 2020 Cash and bank Inventory as at 31 December, 2020 Trade payables Investments Allowance for bad debts Share capital at Shs 1,000 each. Share premium Trade receivables Revaluation reserve 1 January, 2020 Land at cost Motor vehicles at cost Accumulated depreciation as at 1 January, 2020 Motor vehicles Computers Plant and machinery Computers at cost Plant and machinery at cost Dividends paid 18% Loan repayable by 2027 Total 3,367,771 Additional information: Debit Shs '000' 111,000 45,507 1,656,760 402,160 420,340 230,504 Credit Shs '000' 905,000 87,540 100,357 42,380 1,145,151 475,506 76,540 115,252 16,350 103,695 300,000 3,367,771 65,400 345,650 90,450 - The senior accountant of Kirungi Ltd was on annual leave. The assistant accountant determined the net profit reflected in the trial balance but had not taken into consideration the following information: 1. The amount of inventory as at 31 December, 2020 of Shs 45,507,000 was used in determining the cost of sales. Further information revealed that part of the inventory that had cost Shs 6.7 million had a net realisable value of Shs 4.5 million.

2. Purchases returns of Shs 4.5 million to a credit supplier were not accounted for. 3. Interim dividends of Shs 90,450,000 reflected in the trial balance were paid on 3 October, 2020. Directors further proposed a final dividend of Shs 70 per share on 28 December, 2020 which is subject to a resolution at the annual general meeting in May 2021. 4. As at 31 December 2020, salaries and utilities Shs 12.5 million and Shs 670,000 respectively were outstanding. 5. Rent of Shs 48 million was paid on 1 October, 2020 catering for 12 month period. 6. Non-current assets are depreciated as follows: Details Motor vehicles Computers Plant and machinery Depreciation rate 12.5% on cost 25% on cost 20% reducing balance 8. The loan was acquired on 1 October, 2020 and interest was outstanding. 9. Sales include a deposit Shs 3 million cash, received from a customer on 4 November, 2020 for goods that were to be delivered on 14 February, 2021. 10. The estimated tax for the year is Shs 325 million.

Required:

For the year ended 31 December, 2020 prepare: (a) adjusted profit. (b) statement of changes in equity. (c) statement of financial position. (6 marks)

Question 3 The accounts assistant of Excel Ltd prepared the financial statements despite the existence of a suspense account balance of Shs 40,150,000. The statement of financial position as at 30 June, 2020 is provided below: Assets: Inventory Plant & equipment Buildings Cash & bank Land Trade receivables Suspense account Total assets Equity & liabilities: Share capital 10% loan Expenses payable Share premium Retained profits Trade payables Total equity & liabilities Shs '000' 78,540 236,560 324,000 54,500 304,850 95,850 40,150 1,134,450 450,400 434,301 23,450 123,780 56,763 45,756 1,134,450 On further analysis, the following errors were discovered: 1. The purchases for the period were under cast by Shs 3 million. 2. Extension to the building that cost Shs 65,560,000 was recorded as repair expenses. Buildings are depreciated at 2% on cost per annum. 3. A cash receipt of Shs 500,000 from a debtor was credited to the cash book as Shs 50,000 and debited to the debtors account as Shs 5 million. 4. Prompt Supplies Ltd had an outstanding balance of Shs 4 million that was paid twice using Electronic Funds Transfer (EFT) system. The company refunded the overpayment. 5. Depreciation of computers of Shs 1.3 million was entered in the statement of profit or loss as Shs 3.1 million. The correct amount was entered in the corresponding account. 6. A cheque of Shs 5.6 million received from a debtor was debited to the bank account and credited to the sales account. 7. No entry had been made in the company's books for bank charges of Shs 67,000 debited in the bank statement. 8. Share capital of Shs 405.4 million was brought forward in error as Shs 450.4 million.

9. A credit note received from a supplier of Shs 1.1 million had only been posted correctly in the suppliers account. No corresponding entry had been made. 10. The loss for the year ended 30 June, 2020 is Shs 8,750,600. Required: (a) Show journal entries to correct the above errors. (Ignore narrations) (b) (c) (10 marks) Prepare suspense account. (2 marks)

Prepare corrected statement of financial position as at 30 June, 2020. Question 4 (a) Briefly explain five roles of small businesses in Uganda's economic development. (5 marks) (b) The elements recognised in the financial statements are quantified in monetary terms which require selection of a measurement basis.

Required:

In relation to assets, explain the measurement bases permitted by the International Accounting Standards Board's conceptual framework. (5 marks) (c) The treasurer of Muyenga Social Club has provided the following information for the year ended 30 June, 2020. Details: Cash balance Accrued ordinary subscription Prepaid ordinary subscription Accrued rent Prepaid utilities Land & buildings Gym equipment Life subscription Other information: 1 July, 2019 Shs '000' 23,500 8,600 6,400 3,404 340 235,400 129,500 12,500 30 June, 2020 Shs '000' ? 12,500 9,850 2,308 140 220,400 110,400 ?

Question 5 1. The social club operates a gym that is paid for by members. 2. Subscription received during the year amounted to Shs 180,450,000 of which 80% was ordinary subscription and the remaining percentage was life subscription. 3. The life subscription as at 1 July, 2019 had a remaining period of 10 years. It is the company's policy to recognise life subscription over a period of 20 years. 4. Salaries and utilities paid during the year amounted to Shs 56.5 million and Shs 12.5 million respectively. The club and gym share both expenses in the ratio of 2:3 respectively. 5. Other expenses paid for during the year ended 30 June, 2020 relating to the running of the social club total to Shs 78.5 million. 6. The gym manager hands over the cash collections to the club manager at the end of every week. The club manager banks gym collections of Shs 700,000 weekly after deducting the following weekly gym expenses: Details Bottled water Allowance for the instructor Cleaning costs

Required:

Prepare (i) ordinary subscription account. (ii) life subscription account. (iii) receipts and payments account. (3 marks) (2 marks) (5 marks) (Total 20 marks) (a) Depreciation involves the allocation of an asset's cost over its useful life. For financial reporting purposes, a business chooses one of several methods to depreciate a non-current asset.

Required: Explain three factors that may influence choice of the depreciation method. (3 marks)

(b) Prosperous Ltd has provided the following information relating to motor vehicles as at 1 July, 2017. Cost Accumulated depreciation Shs '000' 65,760 Carrying amount Shs '000' 121,740 Shs '000' 187,500 Additional information: 1. On 3 August 2017, a delivery truck was imported and the following costs were incurred: Details Purchase price Shipping costs Taxes Fines Shs '000' 78,600 5,750 42,500 5,759 Of the taxes paid, Shs 22 million is refundable to Prosperous Ltd. 2. A motor vehicle which had cost Shs 26.5 million on 3 July 2014, was disposed of, on 3 January 2018, at Shs 19 million. 3. On 31 December 2018, a pick-up, registration number UAZ 33X which cost Shs 75 million, acquired on 1 October 2015, was traded in with a new double cabin from Zoe Motors Ltd. Zoe Motors Ltd valued the old pick up at Shs 20 million and Prosperous Ltd topped up cash Shs 70 million. 4. On 3 May 2019, a van which cost Shs 34.5 million on 1 June, 2015 was destroyed by fire. The insurance company has confirmed compensation of Shs 10.7 million though this was not yet received by the 30 June, 2019. 5. Non- current assets are depreciated as follows: Depreciation rate Motor vehicles 20% on cost 6. A full year's depreciation is provided for in the year of acquisition and none in the year of disposal. 7. The financial year of Prosperous Ltd ends on 30 June.

Required: Prepare for the year ended 30 June, 2018 and 2019, a combined: (i) motor vehicles account. (ii) accumulated depreciation account. (iii) motor vehicles disposal account.

Question 6 Debbie, Martha and Samson are in partnership trading as DMS Garments. They share profits and losses in the ratio 4:3:3 respectively. Below is the partnership's trial balance as at 30 June, 2020: Capital accounts: Debbie Martha Samson Current accounts: Debbie Martha Samson Leasehold premises at cost as at 2 August 2019 Furniture & fittings Equipment Inventory as at 1 July 2019 Sales & purchases Employee costs Operating expenses Administration costs Accumulated depreciation: Furniture & fittings Equipment Additions & alterations to leasehold premises Professional expenses Drawings: Debbie Martha Samson Cash & bank Provision for doubtful debts Trade payables & receivables 1,365,000 272,000 196,000 546,000 3,640,000 832,000 587,600 136,500 325,000 45,500 91,000 78,000 52,000 568,100 267,800 9,002,500 Debit Shs '000' Credit Shs '000' 1,040,000 650,000 390,000 208,000 156,000 104,000 5,785,000 121,400 60,600 6,500 481,000 9,002,500 Additional information: 1. Inventory at 30 June, 2020 was valued at Shs 572 million.

2. The partnership agreement provides that partners are credited at the end of each year with 5% on the balances of their respective capital accounts at the beginning of each financial year. 3. No interest is charged on drawings. 4. Professional expenses were in respect to acquisition of leasehold premises. 5. Employee costs include the following monthly salaries paid to the partners: Debbie Shs 6.5 million, Martha Shs 3.9 million and Samson Shs 3,250,000. 6. On 30 June 2020, operating expenses outstanding and administrative costs paid in advance amounted to Shs 32.5 million and Shs 31.2 million respectively. 7. Included in operating expenses are returns inwards of Shs 5.6 million and returns outwards of Shs 9.3 million. 8. Bad and doubtful debts are treated as operating expenses. Bad debts of Shs 10 million are to be written off and a provision for doubtful debts of 5% per annum made. 9. Leasehold premises are to be amortised over a period of 50 years, while depreciation of furniture & fittings, and equipment is at the rates of 10% and 20% per annum on cost respectively. A full year's depreciation is provided for in the year of acquisition and none in the year of disposal.

Required: Prepare the following in the books of DMS Garments for the period ending 30 June, 2020; (a) statement of profit or loss. (b) partners' current accounts.