QUESTION THREE Batumi Ltd is in the motor vehicle assembling industry A trial balance extract from the books at 30 September 2020 was as follows Sh Sh Authorized and issued share capital 140,000 ordinary shares of sh 10 each 1,4000,000 Share premium 350,000 General reserve 840,000 Retained profits 730,835 Interim dividend paid 112,000 Cash at bank and in hand 234,990 Accounts receivable and payable 924,315 407,645 Land and buildings, at cost (land sh 525,000) 875,000 Plant, at cost 910,000 Plant accumulated depreciation 434,000 Motor vehicle, at cost 371,000 Motor vehicle accumulated depreciation 213,500 Fixtures and fittings, at cost 277,935 Fixtures and fittings accumulated Depreciation 82,530 Inventories, 1 October 2019 Raw materials 238,385 Work in progress 403,315 Finished goods 758,415 Provision for doubtful debts 48,335 Bad debts 34,265 Rates and insurance 64,505 Direct wages 758,590 Factory power 157,920 Electricity and water 113,960 Plant maintenance 76,790 Salaries 630,000 Return inwards and outwards 9,415 22,190 Advertising 60,060 Transport expenses 161,315 Bank charges 20,415 General expenses 204,415 Purchases and Sales 6,421,660 8,572,375 15 debentures 700,000 Discount received 17,255 13,818,665 13,818,665 Additional information Provision for bad and doubtful debts is to be adjusted to a figure equal to 10 of accounts receivable Depreciation is to be provided for the year using the reducing balance method and applying rates of 15 on plant, 25 on motor vehicles and 10 on fixtures and fittings Building is to be depreciated at the rate of 4 using the straight line method Electricity and water, rates and insurance and general expenses are to be apportioned in the ratio 4 1 between factory and administrative overheads At 30 September 2020 Sh Electricity and water accrued 5,390 Insurance prepaid 1,680 Rates prepaid 5,250 Inventories Raw materials 974,785 Work in progress 577,150 Finished goods 861,945 Debenture interest has not yet been paid A final dividend has been declared to be paid on 30 November 2020 which will bring the dividend for the year up to sh 2 per share Provide corporation tax at 30 Required i) Prepare the manufacturing account and income statement for the year ended 30 September 2020 (12 marks) ii) Statement of changes in equity for the year ended 30 September 2020 (3 marks) iii) Statement of Financial Position as at 30 September 2020 (8 marks)

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QUESTION THREE

Batumi Ltd. is in the motor vehicle assembling industry. A trial balance extract from the books at 30 September 2020 was as follows:

	Sh.	Sh.
Authorized and issued share capital:
140,000 ordinary shares of sh.10 each		1,4000,000
Share premium		350,000
General reserve		840,000
Retained profits		730,835
Interim dividend paid	112,000
Cash at bank and in hand	234,990
Accounts receivable and payable	924,315	407,645
Land and buildings, at cost (land sh. 525,000)	875,000
Plant, at cost	910,000
Plant- accumulated depreciation		434,000
Motor vehicle, at cost	371,000
Motor vehicle- accumulated depreciation		213,500
Fixtures and fittings, at cost	277,935
Fixtures and fittings- accumulated Depreciation		82,530
Inventories, 1 October 2019:
Raw materials	238,385
Work in progress	403,315
Finished goods	758,415
Provision for doubtful debts		48,335
Bad debts	34,265
Rates and insurance	64,505
Direct wages	758,590
Factory power	157,920
Electricity and water	113,960
Plant maintenance	76,790
Salaries	630,000
Return inwards and outwards	9,415	22,190
Advertising	60,060
Transport expenses	161,315
Bank charges	20,415
General expenses	204,415
Purchases and Sales	6,421,660	8,572,375
15% debentures		700,000
Discount received		17,255
	13,818,665	13,818,665

Additional information:

Provision for bad and doubtful debts is to be adjusted to a figure equal to 10% of accounts receivable.
Depreciation is to be provided for the year using the reducing balance method and applying rates of 15% on plant, 25% on motor vehicles and 10% on fixtures and fittings.
Building is to be depreciated at the rate of 4% using the straight-line method.
Electricity and water, rates and insurance and general expenses are to be apportioned in the ratio 4:1 between factory and administrative overheads.
At 30 September 2020:

	Sh.
Electricity and water accrued	5,390
Insurance prepaid	1,680
Rates prepaid	5,250
Inventories:
Raw materials	974,785
Work in progress	577,150
Finished goods	861,945

Debenture interest has not yet been paid.
A final dividend has been declared to be paid on 30 November 2020 which will bring the dividend for the year up to sh. 2 per share.
Provide corporation tax at 30%.

Required:

i) Prepare the manufacturing account and income statement for the year ended 30 September 2020 (12 marks)

ii) Statement of changes in equity for the year ended 30 September 2020 (3 marks)

iii) Statement of Financial Position as at 30 September 2020 (8 marks)