Question One

Having gone through the principles II class, imagine you are an intern at Floro agro florists and its end year. The Warehouse Manager is overwhelmed with work and realizes that you can just be the perfect person to help him with inventory related issues after he realizes a glitch in some year's records. The information for the years in question has been provided as follows;201820192020

Current Assets1,0001,2501,750 Non-Current Assets5,0006,2508,750 Total Assets6,0007,50010,500 Long term Liabilities2,0002,5003,500 Revenue1,0001,2501,750 Cost of Sales40% on cost for all the Years

Assume that ending Inventory was overstated by K1, 500 in 2018 and Understated by K10, 000 ends of 2019. Requireda. Calculate the Cost of goods sold for the years 2018, 2019, and 2020 (6 Marks) b. Calculate the Owners Equity value for the years 2018, 2019 and 2020 (3 Marks) c. Calculate the correct values for the below listed items in 2018 and 2019 indicating the effect with an explanation. (21 Marks) i. Current Assets ii. Non-current Assets iii. Total Assets iv. Long term Liabilities v. Owners Equity vi. Revenue vii. Cost of sales viii. Gross Profit

QUESTION TWO (30 MARKS)

a. The Capital balances of Partners Eliza and Sara are k20, 600 and K14, 400 respectively before Ruth and Tatty are admitted to the Partnership. At admission Ruth purchased One third of Eliza's interest for k8, 000 and one third of Sara's interest for k4, 200. Tatty was admitted to the Partnership with an investment of K8, 000. For which she is to receive ownership title of K8, 000.

After one year of operations, the Partnership made an income of K7, 000 and the Partners participation in net income was to be done under the following income ratios.

BAF112/BAC212 FINAL EXAM MU 2019/20 II SBS MW. Page 3

Interest allowance of 30% annually on their capital balances, salary allowance of K1, 600, k4, 000, K3,000 and K2, 000 to Eliza, Sara, Ruth and Tatty respectively. Furthermore, Eliza was entitled to a bonus of 10% if the difference between her salary allowance and Net income is less than k5, 000 and the residual should be shared on an equal basis

i. Journalize the entries for the admission of Ruth and Tatty. ( 5 Marks) ii. Determine the Capital balances of Eliza and Sara after admission of Ruth and Tatty (10 Marks) iii. Prepare the income sharing schedule and pass the necessary journal entry ( 5 Marks)

b. Mulungushi University freight line is a provider of transportation services to Muteteshi residents. Included in its balance is land, Buildings and coach equipment. Depreciation is calculated separately for each depreciable item. The following transaction was completed for Mulungushi University in the year 2019. Equipment with an accumulated depreciation of K80, 000 and a cost of K120, 000 was traded for similar new equipment with a cash cost of K186, 000. A trade in allowance was received by Mulungushi on the old equipment and paid the balance in cash.

Required: (show workings clearly) i. Calculate the book value of the old asset on the date of the transaction ( 2 Marks) ii. What is the Gain on Loss on the trade for the old asset( 2 Marks) iii. What is the value to be recorded as the cost for the New Equipment? ( 6 Ma