Question 5 (a) Explain three benefits and two limitations of cash ow statements. (5 marks) (b) The following information was extracted from the books of Mukisa Ltd. Statement of financial position as at 31 December. 2017 and 2018. 2018 2017 Shs '000' Shs '000' Non-current assets: Property plant 8 equipment 400,000 330,000 Current assets: Inventory 468,000 460,000 Receivables 468,000 568,000 Short term investments 45.000 - Bank balance 31.640 0 Cash at hand 2,000 8.000 Total assets 1,414,640 1,366,000 Equity & liabilities: Share capital 719,000 535,000 Share premium 180,000 150,000 Retained earnings 99.280 25,140 Non-current liabilities: 10% Loan 160,000 140,000 Current liabilities: Payables 236,000 461,380 Accrued salaries 3,200 4.700 Dividends 4,800 6.800 Taxation 12.360 11,380 Bank - 31,600 MW Question 4 (a) Distinguish between ordinary subscription and life subscription. (2 marks) (b) Toto is a non-profit making organisation that commenced activities on 1 January, 2018. The organisation runs a trading business of manufacturing and selling t-shirts. The trial balance for the year ended 31 December, 2018 was as follows: Debit Shs Credit Shs Sales 86,200,000 Land 47,000,000 motor vehicles (3) 90,000,000 Buildings 120,000,000 Accumulated fund 101,580,000 Cost of goods fully manufactured 15,600,000 Subscriptions 9,000,000 Inventory (1 January, 2018) 4,500,000 Utilities 2,500,000 Salaries 4,000,000 Donations 100,739,000 Raffle receipts 30,000,000 Donations to other entities 600,000 Raffle expenses 569,500 Discount allowed 500,000 Bad debts written off 750,000 Return inwards (finished goods) 4,000,000 Accounts receivable 8,500,000 Accounts payable 16,000,500 Bank balance 45,000,000 343,519,500 343,519,500 Additional information: 1. The cost of closing inventory on 31 December, 2018 was Shs 5 million. This inventory could be sold at Shs 5.1 million with a cost to sale of Shs 300,000.uh. (vii) Accrued expenses as at 31 December. 2018 were: Shs '000' Wages 250 Sundry expenses 95 Accountancy fees 900 Magala's total drawings by cheque for the year amounted to Shs 130.000. Accrued electricity at the beginning of the year was settled by cash during the year while the interest free loan was paid by cheque during the year. Depreciation of non-current assets at net book value is as follows: Item: Depreciation rate Buildings 5% Motor vehicles 20% Equipment 10% Other balances as at 31 December. 2018 were: Shs '000' Inventory 8.925 Receivables 9.150 Payables 7.775 Required: Prepare for Magala Enterprises a statement of: (a) affairs as at 1 January, 2018. (4 marks) (b) profit or loss for the year ended 31 December, 2018. (11 marks) (c) financial position as at 31 December, 2018. (10 marks) (Total 25 marks) Statement of profit or loss for the year ended 31 December. 2018. Shs '000' Shs '000' Sales 980.000 Cost of sales (772.000) Gross profit 208.000 Operating expenses: Depreciation 36.200 Salaries & wages 63.5.0.0 Total expenses (100.700) Earnings before interest & tax (EBIT) 107.300 Interest on loan 110000) 91.300 Taxation [12.300] 78.940 Proposed dividends H.800) Net profits for the year 70.130 Additional information: The following information related to the property. plant and equipment 2018 2017 Shs '000' Shs '000' Cost 725,200 820,000 Accumulated depreciation 020.200 090.000 Net book value 400.000 330.000 Required: Prepare for Mukisa Ltd. a statement of cash flows for the year ended 31 December. 2018 using direct method. in accordance with IAS 7: Statement of cashflovvs. (Hint: Provide all the workings) (20 marks) (Total 25 marks) Business Accounting - Paper 5 (i) Show the ioint venture accounts as they would appear in the books of Tamale and Kibirige. (9 marks) (ii) Prepare a memorandum ioint venture account, showing the net profit. (Hint: show all the necessary workings) (8 marks) (Total 25 marks) Question 3 (a) Development expenditure may qualify for recognition as intangible assets ('3) provided that certain strict criteria are demonstrated. Required: Explain: (i) two objectives of IAS 38:1ntangible assets (2 marks) (ii) any three criteria that must be met for development costs to be recognised as intangible assets under IAS 38: Intangible Assets. (3 marks) 0n 1 January 2016, A 8: A Ltd bought machinery under a finance lease. The cash price of the machine was 154,200,000. The lease agreement requires an immediate deposit of Shs 40 million with the balance being settled in tour equal annual installments of Shs 40,000,303. The installments are made at the end of each year, commencing 31 December 2015. It is the company's policy to depreciate all its non-current assets at 25% per annum on reducing balance method and allocate finance charges for its leases on actuarial method. The interest implicit on the lease is 15% per annum. The Company's nancial year ends 31 December each year. Note: show workings to two decimal places. Required: In accordance with IFRS 16: Leases, prepare for A a A Ltd for the years ended 2015, 2016, 2017 and 2018: (i) lease repayment schedule. (10 marks) (ii) extracts of statement of profit or loss and statement of financial position. Clearly separate non-current and current liabilities (10 marks) (Total 25 marks) Question 2 (a) Explain: (i) any three features of a consignment. (3 marks) (ii) the differences between a consignment and a sale, as used in consignment accounts. (5 marks) (b) Tamale and Kibirige entered into a joint venture to buy and sell timber. It was agreed that Tamale would receive a commission of 5% on all sales and was to bear all losses from bad debts, if any. Subject to this arrangement, profits and losses were to be shared equally. On 1 February, 2018: Tamale purchased timber Shs 34 million for which he paid Shs 24 million in cash, and accepted bills of exchange Shs 4 million and Shs 6 million. On 2 February, 2018: Tamale sent Kibirige timber which had cost Shs 13,750,000 and Kibirige paid Shs 17.5 million to Tamale. On 8 February, 2018: Tamale sold timber to Kitaka Shs 2.1 million and to Yoweri Shs 1,250,000 and they accepted bills of exchange for the amounts respectively due from them. Tamale endorsed both these bills over to Kibirige On 2 March 2018: Tamale sold timber Shs 9 million. On delivery, the customer rejected timber worth Shs 450,000, and the rejected timber was collected by Kibirige, who sold it to another customer Shs 550,000. On 10 March, 2018: Kitaka paid his bill but Yoweri's bill was dishonoured. Yoweri has been declared bankrupt by court. On 4 April 2018: Kibirige paid the bill of exchange Shs 4 million which had been accepted by Tamale, and Tamale paid the second bill of exchange, Shs 6 million. During the month of April 2018, Tamale sold the remainder of the timber in his possession at Shs 14,550,000 while Kibirige's sales amounted to Shs 17 million. Other bad debts (apart from the amount due from Yoweri) were Shs 210,000, of which Shs 150,000 was in respect of sales by Tamale, and Shs 60,000 was in respect of sales by Kibirige. On 31 May 2017: the venture was closed. Kibirige took over the stock of timber in his possession valued at Shs 2.5 million, and the sum required to settle accounts between the venture was paid by the party accountable. Required:Question 1 Magala the proprietor of Magala Enterprises, has been operating without keeping accurate accounting records. He has approached you to examine his records and prepare appropriate financial statements for the year ended 31 December. 2018 so that he can comply with tax laws. He maintains various records of transactions relating to receipts. payments, payables and receivables. From your examination of the records and from an interview with Magala. you are able to ascertain the following: 1. Balances as at 1 January. 2018. Items: Shs '000' Buildings (cost Shs 100 million) 35,000 Motor vehicles (Cost Shs 40 million) 7.825 Equipment (Cost Shs 50 million) 13,750 Inventories 8.925 Trade payables 10,375 Interest free loan 10,000 Accrued electricity 3.500 Bank balance 7.750 Cash at hand 1.850 Trade receivables 8.725 2. Transactions during the year ended 31 December, 2018 were as follows: (i) Cash sales Shs 23.9 million of which Shs 2.5 million was banked. (ii) Cash purchases Shs 19,450.000. (iii) Receipts from trade receivables Shs 12.375.000 received by cheque. (iv) Payments by cheques to trade payables Shs 7.950.000. (v) Sundry expenses paid by cash Shs 25.000. (vi) Expenses paid by cheque were: Details: Shs '000' Salaries 8 wages 1,040 Motor vehicle repair 215 Sundry expenses 140 :5.\" 2\"?\" The following balances as at 31 December, 2018 were also available: Shs '000' Accrued salaries 1,500 Prepaid utilities 200 70% of utilities and 80% of salaries relate to the t-shirt business. 60% of the building space is occupied by the t-shirt business. The organisation uses this as a basis to apportion depreciation for the t- shirt business. Two of the motor vehicles (cost Shs 35 million each) shown in the trial balance are used for deliveries of t-shirts. A provision for bad debts Shs 640.000 is to be made. 01' the subscription received. 20% is life subscription which is to be amortised over a period of 8 years. The organisation's policy is to depreciate non-current assets at 10% per annum on cost. All non-current assets were acquired during the year ended 31 December, 2018. It is the company's policy to charge full year depreciation in the year of purchase and none in the year of disposal. Required: Prepare for Toto a statement of: (i) profit or loss for the t-shirt business for the year ended 31 December, 2018. (7 marks) (ii) income and expenditure for the year ended 31 December. 2018. (7 marks) (iii) financial position as at 31 December. 2018. (9 marks) (Total 25 marks)