Questions

NUMBER FIVE The approved Estimates and Actual Expenditure details for vote 1:45 of murstry ABC for the financial year 2004/2105 were as fulleras: Approved Actual Estimates Expenditure Sh.'000' Sh. '000 Personal Emoluments 246.560 195 040 House allowances 39,100 28,520 Passages and Leave Expenses 8,280 1.3.34 Transport Operating Expenses 32 2081 27,186 1 10 Traveling and Accommodation Expenses 2,608 3,312 120 Postal and Telegram Expenses 6,624 190 Miscellaneous other Charges 34,960 33,764 196 Training Expenses 11,960 13,476 2 30 Purchase of Equipment 17,6010 620 Appropriations - in -And 2,000 11,120 (Realised) The Ministry made four equal withdraws from the Exchequer in July 2004, October 20104, January 2005 and May 2005. In total the Ministry had withdrawn Sh.400,000,000 by the end of the 2004/2005 financial year. Supplementary estimates authored during the year were as follows: Shour Personal Emoluments 12,000 (reduction) 196 Training Expenses 2,000 (increase) 620 Appropriations - In-And 8,000 increase) Required: a) Appropriation account for the year ended 30 June 2005 6 marks b) General Account of vote for the year ended 30 June 2005. 4 marks) c) Exchequer Account for the year ended 30 June 2005 (4 marks) d) Paymaster General (PM() account for the year ended 30 June 2005. (2 marks) Statement of assets and habilities as at 30 June 20105. (4 marks) (Total: 20 marks)NUMBER FOUR The objective of this standard is to require the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a cash flow statement which classifies cash flow during the period from operating, investing and financing activities." [International Accounting Standard (IAS) 71 Required: In view of IAS 7 whose objective is quoted above, distinguish between the "direct method" and the "indirect method" of the presentation of cash flow statements. (b) Home Marketing Limited sells a single product "Wonder Home" exclusively through personal marketing. The comparative income statements and balance sheet of the company for the year ended 31 December 2004 and 2005 are given below: Home Marketing Lid. Income statement for the year ended 31 December: 2014 20805 Sh. THEY Sh.'000' Sales 350 (HM) Less: cost of sales Gross profit on sales 30010 210(NM) Less: operating expenses (243,000) Loss on sale of marketable securities Net income (loss) (34,000) Balance sheet as at 31 December: 2004 2005 Sh. INMY Sh.'900' Assets: 104MM) 60,000 Cash and cash equivalents 5,000 Marketable securities 23,004) Accounts receivable (net of provision) 12050 122,(4) Inventory 3002000 285.OH) Plant and equipment ( net) 4902060 495.(M) Shareholders' equity and liabilities: Accounts payable 73.0100 Accrued expenses 17 MN) 14,0100 Long-term loan 245,000 253.(NM) Share capital (Sh. 10 par value) 100,000 1 10,(KM) Share premium 25,0100 Retained earnings 20 0100 495 (HM) Additional information: 1 In the year ended 31 December 2005, the company paid a total of sh.4 million as cash dividends. 2 The company purchased equipment for Sh. 20 million, paying in Sh. 2 million in cash and carrying the balance of sh.18 million as long-term loan. Interest on the long-term loan amounting to sh.6 million was paid during the year ended 31 December 201015. 4 Accounts receivable are stated net of provision of sh.8 million and sh.6 million as at 31 December 2005and 20104 respectively. 5 Marketable securities are shares in non-quoted companies. Required: Cash flow statement for the year ended 31 December 2005 using the direct method and in accordance with IAS 7 (Cash Flow Statements). (10) marks) By preparing a reconciliation of net profit from operating activities, demonstrate how I lome Marketing Limited achieved a positive cash flow from operating activities during the year ended 31 December 2005 despite incurring a net loss for the same yearaga Electronics Company Led. Leased a patent for the manufacture of television component from Rama Scientific Developers Lad. On 1 January 20101 for a ten year period at a loyalty of Sh.50 per component manufactured and sold. Minimum rent was agreed at Sh.4,010,010 per annum and loyalties for each year were paid on 15 February of the following year. Short workings ansing in any year were recoverable only within the following two years of operation. Iaga Electronics Lid. Sub-leased the patent to DXI Lad. On 1 January 2002 at a myalty of Shoo per component manufactured with a minimum rent of Sh. 1,2010,090 per annum. The agreement between the two companies provided for recovery of short workings within the first four years of operation. Rovalues for each year were paid on 31 December of the same year. The number of components manufactured and sold by each company in each of the five years ended 31 December 2005 were as follows. Year Lega Electronics DXT Lid. Company Lid. Number of units Number of Number of units Number of Manufactured. Units sold. Manufactured units sols 2010 48 000 2010 62,000 1 1 ,010 20103 72,000 18,000 16,009) 201014 84,000 H2,IMM) 24,010 26,000) 20105 90,000 32,010 30,0109 Required: Prepare the following accounts in the books of Lega Electronics Company Led. For each of the five years ended 31 December 2005: (a) Royalties payable account (4 marks) (b) Bama Ltd. Account (5 marks) (c) Short workings recoverable (2 marks) Royalties receivable account (4 marks) DXT Led. Account (3 marks) (f) Short workings allowable account (2 marks) (Total: 20 marks) NUMBER FOURNUMBER TWO a) Distinguish between "leasing" and "hire purchase" highlighting how each is accounted for. bj Kopesha Limited has been in business for several years dealing in electronic goods. All the firm's goods are sold on hire purchase terms. The following trial balance extracted from the books of the firm as at 31 March 2006: Sh.'000* sh.'000" Ordinary share capital 53,200 Cash at bank and in hand 1.800 Accounts payable Operating expenses 16,000 Property, plants and equipment (1 April 2005) 55,000 Depreciation (1 April 2005) 204000 I lire purchase installments receivable 34,200 I lire purchase sales 55,200 Purchases 24,600 Inventory (1 April 2005) 1,800 133,400 133,400 Additional information: 1. Inventory as at 31 March 2006 was valued at sh.2,400,000. 2. Property, plant and equipment should be depreciated at sh.5,000)0) for the year ended 31 March 20106. 3. Each unit was sold on hire purchase basis on the following terms: Sh. Sh. Cash price 40,000 Deposits 10,000 30,000 Interest 6.000 4 Assume that all sales are made at the end of each quarter. The quarters end on 31 march, 30 June , 30 September and 31 December respectively. The balance due on each hire purchase sale is payable in four equal installments of Sh. 9,000 per quarter payable at the end of each quarter and commencing in the quarter following that in which the sale was made. 5 The number of units sold during each quarter were made as follows: Quarter to Number of units sold. 30)-Jun-05 100 30-Sep-05 200 31-Dec-05 3on 31-Mar-06 All installments were received on their due dates. 6 The sum of digits method is to be used to apportion interest, the appropriate amount being credited to the quarter in which an installment is received. Included in the operating expense is a base rental payment of Sh.2,090,090 paid at the commencement of the financial year. This relates to equipment whose fair value is Sh.8,090,900. The payment has been treated as an operating lease whereas it is a finance lease . The duration of the lease is 5 years and interest is at 10% er annum. Lease rentals are paid in advance. Required: Trading, profit and loss account for the year ended 31 march 2010. 8 marks) Balance sheet as at 31 March 2006 6 marks) (Total: 20 marks)QUESTIONS NUMBER ONE The following trial balance was extracted from the books of Regional Commercial Bank Led as at 31 March 20106: Sh.'000' Sh. '000' Property and equipment 14,427 Interest on loans and advances Interest on customers' 5,308 Customers deposits 62,234) Shares capital Revaluation reserve 2.480 Staff costs 2,184 Borrowed funds 3,520 Directors emoluments 645 Depreciation on property and equipment 815 Other interest income 4.301 Specific provision for doubtful debts 2,750 Interest on government securities 4,768 Other operating expenses 1,630 Repair and maintenance 210 Printing and stationary 27H Deposits and placements due from banking institutions 8,560 Loans and advances to customers 67.655 Deposits and placements due to other banking institutions 6,410 Interest on deposit and placements with other banking institutions Other interest expense 314 Interest paid on deposits and placements from other banking institutions 1,280 Cash and balances with the Central Bank of Kenya 3,630 Interim dividend paid Bad debts written off Share premium 3000 Fees and commission income 764 Dividend income Investment in securities 5,460 Miscellaneous accruals 140 Government securities 13,2010 Retained profit (1 April 2005) 2,480 Other assets 131,575 131,575 Additional information: 1. An analysis of the debtors balances as at the end of the year showed that an additional provision of sh. 1,850,0100 for non-performing loans should be made. 2. A provision of sh.1,050,000 should be made for tax on the profit for the year ended 31 March 2006. 3. Interest accrued and not accounted for in the books as at 31 March was as follows: On loans and advances sh.642,000 On customers' deposits sh. 448,000 4. The directors of the bank have proposed a final dividend of ('s. Required: a) Profit and loss account for the year ended 31 March 2006 (12 marks) bj Balance sheet as at 31 March 2006. (H marks) (Total: 20 marks)