questions,:
NUMBER THREE On 1 January 2003; Hassan and Kamau entered into a joint venture to buy and sell goods. It was agreed that Hassan should receive a commission of 2% on all sales in consideration for which he was to bear all losses from bad debts. Profits and losses were to be shared equally. The following transactions took place: 2 January 2003: Hassan purchased goods for Sh. 680,000 paying Sh. 480,000 in cash and accepted two bills of exchange, one for Sh. 80,000 and the other for Sh. 120,000. 3 January 2003: Hassan sent to Kamau goods which had cost Sh. 275,000 and Kamau transferred Sh. 350,000 to Hassan in cash. 9 January 2003: Hassan sold goods to Oticno for Sh. 42,000 and to Wafula for Sh. 25,000 and they accepted bills of exchange for the amounts respectively due from them. Hassan endorsed both bills to Kamau who discounted them incurring discounting charges of Sh. 2,000. 3 February 2003: Hassan sold goods for Sh. 180,000. On delivery, the customer rejected goods invoiced at Sh. 9,000 and these goods were collected by Kamau who sold them to another customer for Sh. 11,000. 11 Feb 2003: Oticno met his bill but Wafula's bill was dishonoured. Wafula could not meet his debt and it was written off as a bad debt. 5 March 2003: Kamau paid the bill for Sh.80,000 which had been accepted by Hassan and Hassan paid the second bill for Sh. 120,000. 20 March 2003: Hassan sold the remainder of the goods in his possession for Sh. 291,000 and Kamau's sales on the same date amounted to Sh. 340,000. Bad debts (apart from the amount due from Wafula) were Sh. 4,200 of which Sh. 3,000 was in respect of sales by Hassan. On 30 April 2003, the venture was closed. Kamau took over the stock in his possession at a valuation of Sh. 50,000 and the sum required to settle accounts between the venturers was paid by the relevant venturer. Required: Joint venture accounts which would appear in the books of Hassan and Kamau for the period ended 30 April 2003. (14 marks) (b) Memorandum joint venture account showing the distribution of profit for the period ended 30 April 2003. (6 marks) (Total: 20 marks)NUMBER TWO (a) Briefly explain the following terms as used in accounting for returnable containers: @) charge-out price (2 marks) (1) Credit-back price (2 marks) (b) Jiko Led. supplies cooking gas in 10 kilogramme cylinders which are returnable after use. The cylinders are purchased at Sh. 500 each and are valued at Sh. 400 for stocktaking purposes. On issue of the cylinders to customers, a deposit of Sh.600 is paid per cylinder of which Sh.520 is refunded to customers on return of a cylinder within a period of three months. On 1 January 2002, there were 2,000 cylinders in the company's warehouse and 8,000 cylinders in the hands of customers in respect of which the return period had not expired. During the year ended 31 December 2002, the company purchased 6,000 new cylinders at the normal purchase price but returned 200 cylinders to the supplier due to defects detected on inspection. A credit of Sh. 100,000 was given by the supplier for the returned cylinders. For the year ended 31 December 2002, customers were issued with 72,000 cylinders and they returned 68,000 cylinders. As at 31 December 2002, the customers held 10,000 cylinders which had been issued within the previous three months. For safety purposes the cylinder returned by customers were thoroughly inspected and repaired for any damages or defects. On average, Sh. 40 was spent as inspection and repair costs per cylinder returned by a customer. Due to wear and tear. 250 cylinders were confirmed to be unsafe for use. These were sold to a crap metal dealer at Sh. 180 each. On 31 December 2002, stocktaking revealed that there were only 3,500 cylinders in the warehouse. The deficit was treated as a loss. Required: Containers stock account as at 31 December 2002. (5 marks) Containers suspense account as at 31 December 2002. (6 marks) Containers profit and loss account for the year ended 31 December 2002 (5 marks) (Total: 20 marks)QUESTIONS NUMBER ONE The following trial balance has been extracted from the books of Lina Insurance Company Led as at 31 December 2002: Sh. Sh. '000' 000* Net premium written: Fire 53,816 Motor 107,691 Unearned premiums as at 1 January 2002: Fire 36,018 Motor 72,037 Net commissions paid: Fire 1,733 Motor 3,469 Net claims paid: Fire 27,892 Motor 55,781 Net claims outstanding as at 1 January 2002: Fire 36,018 Motor 72,037 Management expenses to be charged to revenue account 77,554 Management expenses not to be charged to revenue account 10,000 Bad and doubtful debts 2,500 Treasury bills 99,550 Treasury bonds 5,693 Motor vehicle (Net book value) 500 Deposits in banks 237,050 Equipment (Net book value) 7,207 Bank overdraft 8,000 Amounts due to other insurance companies 2,000 Amounts due from other insurance companies 3,470 Share capital 60,000 Investment income 36,000 Other income 8,782 Revaluation reserve 25,000 Retained earnings as at 1 January 2002 15,000 532.390 532.390 Additional information: 1. Management expenses to be charged to revenue account are to be apportioned on the basis of net premiums written: 2. The management made the following estimates as at 31 December 2002: Sh.000 Unearned Premiums: Fire 20,000 Motor 30,000 Net claims outstanding: Fire 45,000 Motor 79,000 Required: a) Revenue accounts, showing results of the fire and motor departments and combined business, for the year ended 31 December 2002. (8 marks) b) Profit and loss account for the year ended 31 December 2002 (6 marks) c) Balance sheet as at 31 December 2002 (6 marks) (Total: 20 marks)
