Question One

A Plc acquired plant on 1 January 2005 costing K100m. The plant has a useful life of 5 years. A Plc depreciates a plant on a straight-line basis with nil residual value. For tax purposes, A Plc will claim an initial allowance of 25% in the year ended 31 December 2005 and the balance of the cost as wear and tear allowances over the next four years on a straight-line basis.

Required

For all the years over the useful life of the plant, show the temporary differences between the accounting and tax base values of the plant. A Plc prepares accounts for 31 December each year.

Question Three

The audit for 2009 for MK Ltd has not yet commenced. The estimated audit fee for the audit of the 2009 financial statements amounts to K3, 000. The Finance Manager was not sure whether or not this fee should be provided for in the 2009 financial statement.

You are required to advise through a memorandum to the directors of MK Ltd explaining the query above. Your answer should refer to the relevant definitions and the necessary legal and accounting requirements.

Question two

Balance streets as at 31 May 2006 20115 K ' Millions K ' Millions K ' Millions K ' Millions Non-current assets 4,500 2300 Current assets Inventoryr 580 500 Trade receivables 300 230 Bank DI Q-Iil] 1T1] 900 Total assets 5,540 3,000 Equity and liabilities Capital and reserves Ordinary share capital 3,500 2,370 Share premium 300 150 Retained earnings 1.052 470 4.852 2,990 Non-uurent liabilities 10% Loan note [Redeemable 31 May 2006] 100 Current liabilities Trade payables 450 3-65 Taxation 180 145 Bimlr overdraft 58 533 I] 510 Total equity and liabilities 5.540 3.600 Additional Information: (t) The income staterneot for the year ended 31 May 2000 shows the following: K ' Millions Operating profit L042 Interest payable [10] Profit before taxation 15132 Taxation [180) Profit for nancial year $52 (ti) During the year dividends paid were K270. 0000!). (iii) Profit before taxation had been arrived at after charging KT00, 000,000 for depreciation on noncurrent assets. (iv) During the year nonuutent assets with a net boolt value of K200, 000,000 were sold for K180. 000,011]. Required: [3) Prepare a cash ow statement for ZamCop Ltd for the year ended 31 May 2006 in aooordance with ms 1' 'Cash Flow Statements'. 11$ng the indirect method. (b) Comment on the nancial position of ZamCop Ltd as shown by the cash ow statement you have prepared. [cl Briey state some of the ways in which companies could manipulate their year-end rash Pew"- A