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QUESTION ONE The following balances were extracted from the books of Chiponde Investment Ltd on 31 December 2020. Dr Cr Purchases Sales Inventories at 1

QUESTION ONE

The following balances were extracted from the books of Chiponde Investment Ltd on 31 December 2020.

Dr

Cr

Purchases

Sales

Inventories at 1 January 2020

Distribution costs

Electricity

Telephone

Irrecoverable debt expense

Allowance for receivables at 1 January 2020

Wages

Directors remuneration

Administration expenses

Dividends paid

Equity Share capital (K1 shares)

5% Loan stock

Retained earnings at 1 January 2020

Fixtures and Fittings at cost

Fixtures and Fittings, accumulated depreciation at 01-

Jan-2020

Motor vehicles at cost

K

283,000

K

495,000

840

50,000

25,000

23,700

43,700

18,000

22,000

9,500

1,600

1,200

84,500

32,000

40,880

5,200

98,200

64,000

Motor Vehicles, accumulated depreciation at 01-Jan-2020

Trade receivables

Trade payables

Bank

VAT payable

55,400

18,500

57,300

1,000

600

Cash

160

_______

715,640

715,640

Additional information:

  1. Inventories at 31 December 2020 was valued at K18, 226.
  2. Directors bonuses for the year ended 31 December 2020 calculated at K1, 160 have not been accounted for.
  3. Distribution costs include a payment of K3, 750 for rent for the three months to 28 February 2020.
  4. The companys depreciation policies are as follows:
  • Fixtures and Fittings Straight line over 5 years.
  • Motor vehicles Reducing balance method at 20% per

annum.

  • All non-current asset residual values are estimated at zero.

v) The company reviewed the trade receivables at 31 December 2020, and the following adjustments are required:

  • Irrecoverable debts of K450 in addition to those already written off.
  • Specific allowance for receivables of K650.
  • General allowance of 3% against the remaining receivables.

Required:

  1. Prepare a Statement of Profit or Loss account for Chiponde Ltd for the year ended 31 December 2020.

  1. Prepare a Statement of Financial Position for Chiponde Ltd as at 31 December 2020.

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