QUESTION ONE

The balance sheet of ABC Ltd. For the year ended 31 December 2019, together with comparative figures for the previous year is shown below:

2019 2018

Sh. 000 Sh.'000

Fixed assets 270 180

Depreciation (90) (56)

180 124

Current Assets

Stock 50 42

Debtors 40 33

Cash -___ 11

90 86

Current Liabilities

Creditors (33) (24)

Taxation (19) (17)

Proposed dividends (28) (26)

Bank overdraft (10) 19

180 143

Presented by:

Ordinary share capital sh.1 25 20

Share premium 10 8

Profit and loss account 65 55

15% Debentures 80 60

180 143

You are informed that:

• There were no sales of fixed assets during the year 2019
• The company does not pay interim dividends
• New debentures and shares issued in 2019 were issued on January

Required

1. Prepare a cashflow statement for the year in accordance with IAS 7. (16mks)
2. Distinguish between direct and indirect methods of preparing cash from operations. (4mks)

3. (Total 20 Marks)

   QUESTION TWO

   ABC Limited had offered 500,000 ordinary shares of Ksh. 10 each that were payable as follows:

   On application Ksh 4.00

   On allotment Ksh. 5.00 (including premium)

   On First and final call Ksh 3.00

   400 000 applicants were received. All amounts due on allotment and calls were received on due dates except for one member holding 15,000 shares who never paid for the calls.

   After giving him the time and without success the directors declared the shares for feighted and were later reissued at shs.5.00 each fully paid.

   Required:

   Journal entries/ledgers to record the above transactions. (20 mks)