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NUMBER FOUR (a) What is the basic principal involved in accounting for hire purchases transaction? Describe how that principle is accommodated by two of the accounting methods commonly used to account for hire purchase transactions. (6 marks) (b) Luthuli Electronics Led. commenced business on 1 April 1999, selling television sets both on a cash basis and by instalments. Hire purchase sales require a deposit of one-third of the cash selling price with the balance payable in 18 equal monthly instalments. No additional charge is made for this service. At the end of each financial year the firm takes credit for the profit instalment sales only in respect of the proportion represented by deposit and instalments actually reserved. The following transactions took place during the two yeas ended 31 March 2000 and 2001: 2000 2001 Shs. Shs. Cash sales 9,606,600 13,131,000 Instalment sales 84,893,400 119,394,000 New TV sets purchased 69,300,000 75,119,700 Cash collections or instalment contracts: Shs. Shs. Initial deposit 28,297,800 39,798,000 Monthly instalments 2000 sales 19,323,900 27,623,700 2001 sales 25,182,000 Stocks at 31 March: New TV sets at cost 16,380,000 21,604,500 Required: Trading accounts in respect of cash sales for each of the years ended 31 March 2000 and 31 March 2001 respectively. (6 marks) Show the gross profit on hire purchase sales for each of the years ended 31 March 2000 and 31 March 2001. (8 marks) (Total: 20 marks) NUMBER FIVE Write brief notes on the following: Controller and Auditor General: (5 marks) Sinking fund: (5 marks) (c) Trust fund: (5 marks) ( d) Revolving fund (5 marks) (Total: 20 marks)NUMBER THREE During the month of March 2001, a manufacturing firm advertised in the local press that it had bonded goods which were to be auctioned. On reading the advertisement, Mr Michael Karanja and Mr. Joseph Abuya agreed to pool their resources together and participate in the auction. They agreed to share the joint venture profits and losses. Karanja and Abuya in the ration of 3:2 respectively. Karanja sent Abuya a cheque of Sh. 2,400,000 on 15 March 2001 to provide him with funds for Karanja's participation in the joint venture. Karanja and Abuya successfully bought goods and managed to sell all of the goods purchased by the end of April 2001. Their cash transactions appeared as follows: Karanja Abuya Sh. Sh. Sales 3,840,000 2,520,000 Travelling expenses 392,400 555,600 Advertising 123,600 109,200 City Council charges 102,000 84,000 Salaries and wages 57,600 78,100 Sundry expenses 70,800 34,800 Purchases 1,920,000 1,320,000 Telephone expenses 33,700 28,900 Insurance 12,300 11,200 Transportation of goods 157,000 121,500 Settlement between Karanja and Abuya was done by cheque on 30 April 2001. Required: (a) Memorandum joint venture account. (6 marks) (b) Joint Venture account with Abuya in Karanja's ledger (7 marks) ( c ) Joint Venture account with Karanja in Abuya's ledger (7 marks) (Total: 20 marks) NUMBER FOUR (a) What is the basic principal involved in accounting for hire purchases transaction? Describe how that principle is accommodated by two of the accounting methods commonly used to account for hire purchase transactions. (6 marks) (b) Luthuli Electronics Led. commenced business on 1 April 1999, selling television sets both on a cash basis and by instalments. Hire purchase sales require a deposit of one-third of the cash selling price with the balance payable in 18 equal monthly instalments. No additional charge is made for this service. At the end of each financial year the firm takes credit for the profit instalment sales only in respect of the proportion represented by deposit and instalments actually reserved. The following transactions took place during the two yeas ended 31 March 2000 and 2001: 2000 2001 Shs. Shs Cash sales 9,606,600 13,131,000 Instalment sales 84,893,400 119,394,000 New TV sets purchased 69,300,000 75,119,700 Cash collections or instalment contracts: Shs. Shs. Initial deposit 28,297,800 39,798,000 Monthly instalments 2000 sales 19,323,900 27,623,700 2001 sales 25,182,000 Stocks at 31 March: New TV sets at cost 16,380,000 21,604,500NUMBER TWO The following balances were extracted from the books of Exotic Marine Insurance Company Led. on 30 April 2001. Sh. Premium less re-insurance 14,791,500 Commission on direct business 660,000 Commission on re-insurance ceded 78,000 Commission on re-insurance accepted 57,000 Depreciation 96,000 Loss on sale of investment 150,000 Claims paid less re-insurance 7,560,000 Claims recovered under re-insurance not adjusted 300,000 Directors remuneration 450,000 Interest and dividends (net) not relating to any fund 412,500 Reserves for unexpired risk on 1 May 2000 11,700,000 Additional reserve on 1 May 2000 1,170,000 Claims outstanding on 1 May 2000 567,000 Claims outstanding on 30 April 2001 687,000 Tax deducted from interest and dividends 120,000 Salaries 960,000 Rent and rates 87,000 Postage and stationery 129.000 Surveyors fees and legal charges for settlement of claims 300,000 Profit and loss appropriation account 1 May 2000 2,925,000 The following additional information is available: Reserves for unexpired risks to be maintained at 100% of the net premium income. 2. Additional reserves of 10% on the said premium is also to be maintained. 3. Provision for taxation to be made for the year Sh. 912,450 4. Investment reserve to be increased by Sh. 225,090. Required: (a) Revenue account for the year ended 30 April 2001. (12 marks) (b) The profit and loss account for the year ended 30 April 2001 (8 marks) (Total: 20 marks)Livestock 42,800 Coconuts 19,100 Cashew nuts 33,700 (3) Depreciation is to be provided for at the rate of 20% and 10% per annum for motor vehicles and farm implements respectively on the book values. Buildings to be depreciated at 2% per annum on cost. (4) The bank interest is 15% per annum on the loan. The interest for the current year has not been paid. The loan of Sh. 3,800,000 was used as follows: Livestock Sh. 2,000,000 Crop Sh. 1,800,000 Sh. 3.800.000 (5) At the end of the year Sh. 19,100 was paid for medicine which had not been delivered by 30 April 2001. Required: (a) Trading and profit and loss account in columnar from for the year ended 30 April 2001, showing profit/loss on crop, livestock and total profit. (10 marks) General profit an loss account showing the profit/loss from (1) above and net Profit after charging depreciation and bank charges. (2 marks) Balance sheet as at 30 April 2001. (5 marks) Three advantages the farmers may gain by adopting and implementing farm accounting and proper record keeping as a standard practice. (3 marks) (Total: 20 marks)NUMBER ONE The following trial balance was extracted from the books of Mr. Charles Msafiri as at 30 April 2001. Sh. Sh. Fixed assets Land 4,000,000 Buildings 800,000 Motor vehicles 1,780,000 Farm implements 900,000 Current assets Pesticides 1 May 2000 170,000 Cashew nuts 1 May 2000 896,200 Coconuts' 1 May 2000 1,687,500 Animal feed 1 May 2000 300,700 Debtors 520,800 Cash in hand and at bank 1,160,100 Purchases Livestock 2,000,000 Pesticides 617,800 Medicine 130,800 Seeds 92,500 Livestock fattening formula 220,000 Sales Cashew nuts 3,200,900 Coconuts 1,430,000 Livestock 3,900,000 Crop expenses Labour 538,000 Other direct expenses 118,000 Livestock expenses Medicine 247,000 Labour 128,800 General expenses 71,400 Creditors 798,300 Loan 3,800,000 Bank charges 20,200 Capital 3.270.600 16 399.800 16 390.800 You are given the following additional information: (1) Stocks as at 30 April 2001 were: Sh. Livestock 1,200,000 Cashew nuts 640,000 Coconuts 1,506,100 Pesticides 120,700 (2) Drawings Sh
