QUESTION ONE 1. Which of the following statement is incorrect? Assets(K) Liabilities(K) Capital(K) a) 7,850 1,250 6,600 b) 8,200 2,800 5,400 c) 9,550 1,150 8,200 d) 6,540 1,120 5,420 2. Which of the following is correct? a) Profit does not alter capital b) Profit reduces capital c) Capital can only come from profit d) Profit increases capital 3. What is the balance on Mukopa Mulengas account on 31 May, 2016? 1.5.16 Sales K205 17.5.16 Cash K300 14.5.16 Sales K360 28.5.16 Returns K50 30.5.16 Sales K18 a) A credit balance of K395 b) A debit balance of K380 c) A debit balance of K395 d) There is a zero balance on the account 4. What would have been the balance on the account of Mukopa Mulenga in Question 3 on 19 May 2013? a) A debit balance of K265 b) A credit balance of K95 c) A credit balance of K445 d) A credit balance of K265 5. Which of the following best describes a trial balance? a) Shows the financial position of a business b) It is a special account c) Shows all the entries in the books d) It is a list of balances on the books 6. In a period, sales are K140, 000, purchases K75, 000 and other expenses K25, 000.What is the figure for net profit to be transferred to the capital account. a) K40,000 b) K65,000 3 c) K75,000 d) K140,000 7. How is the cost of goods sold calculated? a) Opening inventory+ Purchasing+ Closing inventory b) Opening inventory+ Closing inventory - Purchases c) Opening inventory+ Purchasing - Closing inventory d) Closing inventory + Purchases Closing inventory 8. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a) Monetary unit assumption b) Economic entity assumption c) Time period assumption d) Going concern assumption 9. K600, 000 cash taken from cash till and banked is entered as a) Debit cash ColumnK600, 000 and Credit Bank Column K600, 000. b) Debit bank column K600, 000 and Credit cash column K600, 000. c) Debit cash column K600, 000 and Credit Cash Column K600, 000. d) Debit bank column K600,000 and Credit bank column K600,000 10. If beginning capital was K25, 000, ending capital is K37, 000, and the owner's withdrawals were K23, 000, the amount of net income or net loss for the period was: a) Net loss of K35,00 b) Net income of K35,000 c) Net income of K14,000 d) Net loss of K14,000 11. 1.2 Musas Car Repair Shop started the year with total assets of K60, 000 and total liabilities of K 40,000. During the year the business recorded K100, 000 in car repair revenues, K55, 000 in expenses, and dividends of K10, 000. The net income reported by Musas Car Repair Shop for the year was: a) K35,000 b) K45,000 c) K20,000 d) K90,000 12. Which of the following is not a book of prime entry a) Sales invoice b) Purchase day book c) Sales day book d) The journal 4 13. A firm bought a machine for K16, 000.It is expected to be used for 5years then sold for K1 000.What is the annual amount of depreciation if the straight line method is used? a) K3,200 b) K3,100 c) K3,750 d) K3,000 14. An allowance for doubtful debts is created a) When debtors become bankrupt b) When debtors cease to be business c) To provide for possible bad debts d) To write off bad debts 15. Which of the following would give you a gross profit mark-up of 25%? a) Sales of K100,000 and gross profit of K25,000 b) Sales of K100,000 and cost of sales of K75,000 c) Sales of K187,500 and cost of sales of K150,000 d) Sales of K187,500 and cost of sales of K80,000 16. A firm bought a machine for K3, 200 it is to be depreciated at a rate of 25% using the reducing balance method. What would be the remaining book value after two years? a) K1,600 b) K 2,400 c) K1,800 d) None of the above 17. Muzinvela Enterprises Ltd operates an imprest system with a cash float of K550.00. During the month of February 2015, the following payments were made: Items K Stationery 145.00 Postage 110.50 Refreshments 89.20 Travel Expenses 65.00 Office supplies 90.30 How much cash reimbursement was made from the bank to restore the imprest at the end of the month? a) K500.00 b) K550.00 c) K50.00 d) K600.00 18. A company values its inventory using the FIFO method. At 1 May 2015 the company had 700 engines in inventory, valued at K190 each. During the year ended 30 April 2016 the following transactions took place: 2015 1 July Purchased 500 engines at K220 each 1 November Sold 400 engines for K160,000 2016 5 1 February Purchased 300 engines at K230 each 15 April Sold 250 engines for K125,000 What is the value of the companys closing inventory of engines at 30 April 2016? a) K188,500 b) K195,500 c) K166,000 d) K106,000 19. Capital Fisheries Limited distributes fish to major retailers around the country. They are concerned about their cash flow situation and have asked the accountant to calculate the quick ratio to determine the companys ability to pay their fish suppliers. The following figures were extracted from the Statement of Financial Position as at 30 November 2013. Inventory K25,000 Trade receivables K22,000 Cash in hand K23,000 Cash at bank K5,000 Trade creditors K60,000 The acid test (Quick) ratio for Capital fisheries limited is: a) 1.08 b) 0.69 c) 1.25 d) 0.75 20. The following extracts are from Telemundos financial statements: Profit before interest and tax K10,200 interest K(1,600) tax K(3,300) Profit after tax K5,300 Share capital K20,000 reserves K 15,600 K35,600 Loan liability K6,900 K 42,500 What is Telemundos Return on Capital Employed (ROCE)? a) 15% b) 29% c) 24% d) 12% 6 SECTION B: ANSWER ANY FOUR QUESTIONS QUESTION TWO Polepole has been trading for some years as a wine merchant. The following list of balances has been extracted from his ledger as at 30 April 2017, the end of his most recent financial year. K Capital 83,887 Sales 259,870 Trade creditors 19,840 Returns out 13,407 Provision for doubtful debts 512 Discounts allowed 2,306 Discounts received 1,750 Purchases 135,680 Returns inwards 5,624 Carriage outwards 4,562 Drawings 18,440 Carriage inwards 11,830 Rent, rates and insurance 25,973 Heating and lighting 11,010 Postage, stationery and telephone 2,410 Advertising 5,980 Salaries and wages 38,521 Bad debts 2,008 Cash in hand 534 Cash at bank 4,440 Stock as at 1 May 2016 15,654 Trade debtors 24,500 Fixtures and fittings at cost 120,740 Provision for depreciation on fixtures and fittings as at 30 April 2017 63,020 Depreciation 12,074 The following additional information as at 30 April 2017 is available: Stock at the close of business was valued at K17, 750. Insurances have been prepaid by K1, 120. Heating and lighting is accrued by K1, 360. Rates have been prepaid by K5, 435. The provision for doubtful debts is to be adjusted so that it is 3% of trade debtors. Required: Prepare Pole poles Income statement for the year ended 30 April 2017 and a Statement of financial position as at that date. [Total: 20Marks] 7 QUESTION THREE The following are the extracts from the cash book and the bank statement of F. Perry Cash Book Dec 2012 Date Dr. K Dec 2012 Date Cr. K 1 Bal b/d 3419 8 B.Young 462 7 F.Lamb 101 15 F.Gray 21 22 G.Brock 44 28 T.Errant 209 31 W.Terry 319 31 Bal c/d 3437 31 S.Miller 246 4,129 4129 Bank Statement Dec 2012 Date Dr. Cr. balance K K K 1 Bal b/d 3419 7 Cheque 101 3520 11 B.Young 462 3058 20 F.Gray 21 3037 22 Cheque 44 3081 31 Credit transfer: T. Morris 93 3174 31 Bank charges 47 3127 Required: a) Write the cash book up to date, and state the new balance as on 31 December 2012. [10 Marks] b) Draw up a bank reconciliation statement as on 31 December 2012. [10 Marks] [Total: 20Marks] 8 QUESTION FOUR You are to study the following financial statement for the two furniture stores then answer the questions which follow. Ngwengwe Ngungu K K K K Income statement sales 555,000 750,000 Less cost of goods sold Opening inventory 100,000 80,000 Add purchase 200,000 320,000 300,000 400,000 Less closing inventory (60,000) (240,000) (70,000) (330,000) Gross profit 315,000 420,000 Less Expenses: Depreciation 5,000 15,000 Wages and salaries 165,000 220,000 Other expenses 45,000 (215,000) 35,000 (270,000) Net profit 100,000 150,000 Statement of financial position Non-Current Assets Equipment at cost 50,000 100,000 Less Depreciation to date (40,000) 10,000 (30,000) 70,000 Current Assets Inventory 60,000 70,000 Account receivable 125,000 100,000 bank 25,000 210,000 12,000 182,500 TOTAL ASSETS 220,000 252,500 Current Liabilities Account payables (104,000) (100,500) NET ASSETS 116,000 152,000 Financed by: capital 76,000 72,000 Add net profit 100,000 150,000 176,000 222,000 Less drawings (60,000) (70,000) 116,000 152,000 9 Required: a) Calculate the following ratios for each business: (i) Current ratio and Acid test ratio (ii) Return on capital employed(ROCE), Gross Profit Margin and Net Profit Margin (iii) Net Asset Turnover, Stock Turnover, Debtors TurnOver period and Creditors turn over period [15 Marks] b) Drawing upon all your knowledge of accounting, comment on the differences and similarities of the accounting ratios for Ngwengwe and Ngungu. Which business seems to be the most efficient? Give possible reasons. [5Marks] [Total: 20Marks] QUESTION FIVE a) From the figures below, calculate the closing inventory-in-trade that would be shown using FIFO, LIFO and AVCO. [10 Marks] BOUGHT SOLD January 120@K16 each April 80@ K18 each October 150@ K19 each June 125@K22 each November 210@ K25 each b) During the month of September, your organization had sales of K148, 000, which made a gross profit of 40,000.purchases amounted to K100, 000 and opening stock was at 34,000. Required From the above given figures, calculate the value of closing inventory. [5Marks] 10 c) A partnership business owned and run by Mr. Facebook and Mr.WhatsApp has opening inventory worth K12, 000 and closing inventory worth K18, 000.Purchases returns were worth K5, 000.Cost of goods sold was worth K111, 000. Required: From the above details, calculate the purchases figure. [5Marks] [Total: 20Marks] QUESTION SIX Write short notes on any of the following five (05) concepts with examples: Entity concept [4Marks] Going concern concept [4Marks] Periodicity concept [4Marks] Consistency concept [4Marks] Historical concept [4Marks] Prudence concept [4Marks] Accrual concept [4Marks] [Total: 20Marks]