Total 20 Marks

QUESTION TWO

b) The following trial balance was extracted from the books of Mapema Traders Ltd. as at

31 March 2008:

	Sh.	Sh.
Ordinary shares Sh. 10 each		18,000,000
10% Preference shares Sh. 10 each		3,000,000
8% Loan stock		3,000,000
Share premium		2,400,000
Trade debtors	9,900,000
Trade creditors		4,440,000
Purchases and sales	126,600,000	144,000,000
Discounts allowed	150,000
Discounts received		390,000
Freehold buildings:
At cost	15,000,000
Provision for depreciation		1,500,000
Fixtures and fittings:
At cost	19,200,000
Provision for depreciation		7,680,000
Stock April 2007	12,600,000
Returns outwards		2,400,000
Selling and distribution expenses	5,010,000
Establishment expenses	3,900,000
Administration expenses	1,680,000
Bad debts written off	120,000
Provision for doubtful debts		540,000
Profit and loss account at 1.4.2007		10,860,000
Goodwill	4,800,000
Bank Overdraft	_______	750 000
	198,960,000	198,960,000

Additional information:

1. The debtors balance includes Sh.600,000 due from Otieno who has now been declared bankrupt and it has been decided to write-off this debt as a bad debt.

2. The provision for doubtful debts is to be adjusted to 5 % of trade debtors at 31 March 2008.

3. Establishment expenses prepaid at 31 March 2008 amount to Sh. 120,000. The difference is to be written off during the year.

4. Administration expenses accrued due at 31 March 2008 amounted tosh.210,000.

1. The company paid the interest on the loan stock for the year ended 31 March 2008 on 28 May 2008.
2. Gross profit is at the rate of 20% of sales.

7. Depreciation is provided annually on the cost of fixed assets held at the end of the year at the following rates:

Freehold buildings 2 %

Fixtures and fittings 10%

8. The company's directors propose that the preference share dividend be paid, a dividend of 10% on the ordinary shares to be paid and to transfer an amount of Sh.7,500,000 to General Reserve.

Required:

Post the sales ledger and the purchases ledger control accounts for the month of December 2009 and derive the respective debit and credit closing balances on 31December 2009. (20 marks

Required

Prepare a cash flow statement for the year ended 31^st March 2010 in accordance to IAS7 using the indirect method (20 marks)

(Total 20