QUESTION ONE (Compulsory) The following list of balances were extracted from the books of Sakamba Ltd for the year ending 30th June 2014. K K' Purchases and Sales K0.50 Ordinary Shares Revaluation Reserve General Reserve 100, 200 975,000 781,080 92,000 64,000 Retained Earnings 132,621 Goodwill 75,250 Plant and Machinery at cost 912,000 Accumulated depreciation-Plant and Machinery 94,000 Buildings at cost 737,251 Motor Vehicles at cost 577,000 Accumulated depreciation-Motor vehicles 82,000 Inventory-1 July 2013 196,000 Trade Receivables and Payables 710,000 237,000 10% Loan notes 322,000 15% Loan notes 25% Loan notes 230,000 408,000 Cash and bank 110,000 3,417,701 3,417,701 Additional Information 1. Closing inventory at the year-end is comprised of a purchase price of K6, 000, 10% discount and 15% import duty. The inventory can be sold for K5, 000 after incurring selling costs of K950. 2. The building is a qualifying asset and was built from general borrowings. All three loans were taken out at the beginning of the year and interest on the loans is allocated in accordance with the provisions of appropriate accounting standards. 3. Plant and machinery is depreciated over 5 years using the sum-of-digits method and charged to administrative expenses. Motor vehicles are depreciated at 35% on reducing balance basis and charged to selling and distribution costs. 4. Plant and machinery is to be revalued to K1,000, 000 as at 30th June 2014. 5. Goodwill and motor vehicles represent a cash generating unit whose value has been impaired by K80, 250 as at 30th June 2014. 6. Sakamba Ltd is being sued by a former employee for wrongful dismissal. Their lawyers have advised that if the company loses the case it will incur costs of K100, 000 7. The Board of Directors decided on 31" May 2014 to close down a branch due to lack of liquidity. A detailed plan was put in place and all the employees at the branch handed termination notices. The exercise is likely to cost K150,000.