Question

The following information relates to Bukoma Church for the year ended 31

December, 2017. The church's Planning & Development unit operates a clinic

with a dentistry unit at Bukoma trading centre. The proceeds from the clinic are

used to finance some of the church's activities.

The following are the church's receipts and payments for the year ended 31

December, 2017.

Receipts: Shs '000'

Church offerings 76,000

Tithes 54,500

Donations to church 25,600

Income from weddings 23,400

Clinic consultation fees 184,000

Cash from sale of drugs 153,600

Income from dentistry unit 67,500

Payments:

Staff costs 53,600

Payments to credit suppliers of drugs 76,500

License, dentistry & laboratory expenses 54,900

Utilities 25,600

Maintenance of clinical equipment 10,500

Purchase of additional clinical equipment (note 2) 43,600

Clinic waste management costs 6,700

Motor vehicles expenses 13,500

Donation by church to orphanage home 4,500

Remittances to the diocese 21,400

Welfare expenses for (hosting church visitors) 8,300

Rental expenses for the clinic 6,000

2. The clinical equipment was acquired during the year and had not been

capitalised by the year end. The church provides for full year's

depreciation of non-current assets in the year of purchase and none in the

year of disposal.

3. The non-current assets are depreciated, on straight-line basis per annum,

as follows:

Asset Rate (%)

Clinical equipment 10

Motor vehicle 20

Church building 5

4. The church's policy is to charge 30% of utilities expenses to the clinic. In

addition, staff costs, motor vehicle depreciation and motor vehicle

expenses are apportioned between the church and clinic in the ratio of 2:3

respectively.

Required:

Prepare for Bukoma Church for the year ended 31 December, 2017 a

statement of:

(a) profit or loss for the clinic. (11 marks)

(b) income and expenditure for the church. (5 marks)

(c) financial position as at 31 December for the church. (4 marks

Question 3

The following trial balance was extracted from the books of Njogoo Transporters

Limited (NTL) as at 31 December, 2017. In addition to provision of transport

services, the company owns a garage that offers mechanical services to other

companies and lets out part of the business' parking yard.

Account title: Shs '000' Shs '000'

Cash 6,700

Bank 85,000

Share capital 9,217,400

Retained earnings 112,318

Transport fares (note 3) 2,605,950

Mechanical services 45,620

7% investments 1,180,000

Interest on investments 82,600

Buses 8,017,000

Computers & printers 80,000

Furniture 10,000

Garage equipment 180,000

Land 2,960,000

Repairs & maintenance 200,000

Salaries 340,000

Utilities 15,000

Insurance premium 150,000

Fuel 640,000

Rent expense 8,418

License fees 10,000

Stationery 56,000

Provision for depreciation:

Buses 2,000,000

Computers & printers 20,000

Furniture 2,000

Garage equipment 45,000

Compensation (accident victims) 180,450

Court penalties 12,320

14,130,888 14,130,888

Additional information:

1. Shs 8 million worth of invoices issued to tenants for sub-letting of the

parking yard was outstanding by the year end. This had not been

incorporated in the books.

2. Shs 40 million and Shs 620,000 in salaries and mechanical services

respectively were prepaid by the year end.

3. Included in the amount for transport fares was Shs 10 million received

from HTT Preparatory Schools to transport pupils for a tour to Kigali,

Rwanda. The tour was slated for 14 January, 2018.

4. Shs 2.5 million for compensation for the loss of a passenger's luggage that

was in the company's custody had not been paid by the year end.

5. The company depreciates non-current assets as follows:

Buses 25% on cost

Computers & printers 20% reducing balance

Furniture 15% on cost

Garage equipment 30% reducing balance

Required:

(a) Prepare Journal entries for the additional information 1 - 5 above.

(9 marks)

(b) Prepare statement of profit or loss for the year ended 31

December, 2017.

Question 4

The following transactions were extracted from Hajjati Hadijah's catering

business for the month of January 2018.

Date Transaction Shs '000'

1 Brought the following personal items into the business:

Bread toaster 35

Microwave 550

Fridge 1,500

Furniture 800

Car 14,000

Cash 5,000

3 Purchased catering equipment on credit from Ken Suppliers

on terms of a 5% discount if paid within two months 8,000

6 Paid rent for three months in cash 1,200

6 Paid for utilities in advance in cash 250

7 Purchased foodstuffs in cash 500

7 Received cash for catering services provided 1,500

8 Purchased fruits in cash 250

8 Received cash from catering services 900

9 Acquired loan directly into the business bank account. 15,000

10 Paid Ken suppliers in full by cheque ?

11 Purchased foodstuffs for the restaurant in cash 1,200

11 Received cheque for catering services provided 2,500

12 Withdrew cash from the bank to pay wages 600

15 Invoiced NRP Ltd for outside catering services provided on

terms of 2% discount if paid within one month 3,000

16 Paid for fuel in cash 300

17 Deposited cash into the bank 1,000

20 Withdrew cash from the bank for business use 5,000

20 Purchased serving dishes for outside catering by cheque 4,500

22 Received cheque from NRP Ltd in full settlement ?

Required:

Prepare the following ledger accounts for Hajjati Hadijah's catering business:

Three column cash book.

Capital.

Purchases.

Sales.

Suppliers.

Receivables.

Single expenses account.

Question 5

(a) Explain reasons why Uganda has a high failure rate of businesses annually.

(5 marks)

(b) Kwality Investments Ltd (KIL) owns a number of assets. The following is

an extract from their assets register as at 1 January, 2017.

Asset Shs 'million' Date of purchase

Machinery 400 30 June, 2014

Land 600 1 January, 2016

1. On 31 March, 2018 the company's management decided to dispose

of the entire machinery due to obsolescence and acquired a new line

of machinery in a part exchange arrangement. The old machinery

was valued at Shs 200 million on the date of disposal and the

company topped up Shs 350 million to acquire the new machinery.

Additional costs incurred in the purchase of the new line of

machinery included installation Shs 20 million, refundable and non-

refundable taxes Shs 26 million and Shs 40 million respectively,

testing of the new machinery Shs 3.6 million. Shs 4 million was

incurred in the servicing of the new machinery during the first

quarter of its operation after installation.

The company's policy is to depreciate machinery at 20% per annum

using reducing balance method. Depreciation is time apportioned

where applicable.

2. On 31 December, 2017 the land was revalued upwards by Shs 400

million. This land, however, was affected by the government's road

construction project. On 1 January, 2018 the company received Shs

900 million in compensation for the portion of the land (valued at

Shs 550 million) that had been affected by the road construction

project.

3. All transactions were made through the bank.

4. KIL's financial year ends 30 June.

Required:

Prepare for KIL as at 30 June, 2017 and 2018:

(i) machinery, provision for depreciation of machinery and

disposal of machinery accounts.

(11 marks)

(ii) land and disposal of land accounts.

5 Kalule could only manage to meet half of his deficiency before he became

insolvent.

Required:

Prepare for WafanyaKazi Traders as at 31 December, 2017:

(a) Realisation account. (7 marks)

(b) Bank account. (5 marks)

(c) Partners' capital accounts (columnar format) (5 marks)

(d) Loan account. (1 mark)

(e) Payables account. (2 marks)

Note: Apply the rule in the case of Garner vs Murray.