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UNIVERSITY EXAMINATIONS: 2019/2020 EXAMINATION FOR THE BACHELOR OF COMMERCE ACC 1204: INTRODUCTION TO ACCOUNTING II/ FINANCIAL ACCOUNTING II DATE: MAY 2020 TIME: 6 HOURS INSTRUCTIONS:

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UNIVERSITY EXAMINATIONS: 2019/2020 EXAMINATION FOR THE BACHELOR OF COMMERCE ACC 1204: INTRODUCTION TO ACCOUNTING II/ FINANCIAL ACCOUNTING II DATE: MAY 2020 TIME: 6 HOURS INSTRUCTIONS: Answer All the Questions QUESTION ONE Munge, Omolo and Kombo are in partnership sharing profits and losses in the ratio 3:2:1 respectively. The following is the trial balance of the partnership as at 30th June 2019. Sh. Sh. Capital accounts Munge 540,000 Omolo 360,000 Kombo 180,000 Current Accounts: Munge 21,000 Omolo 15,000 Kombo 9,000 Debtors 690,000 Creditors 1,050,000 Provision for bad debts as at 1 July 30,000 2018 Bank and cash at hand 75,000 Provision for depreciation as at 1 July 2018 Buildings 360,000 Motor vehicles 240,000 1,800,00 Buildings at cost (1 July 2018) 0 Motor vehicles at cost (1 July 2018) 600,000 Drawings: Munge 120,000 Omolo Kombo 90,000 90,000 2,550,00 0 Purchases Sales Rent and rates Motor vehicle expenses Office expenses Selling expenses Stock on 1st July 2018 4,500,000 120,000 40,000 80,000 420,000 600,000 7,290,00 7,290,000 0 The following additional information is provided: 1. The partnership agreement covers the following provisions: (i) Kombo is to be allowed a salary of Sh.180, 000 per annum. (ii) An interest of 10% per annum is allowed on the partners' capital account balances. (iii) No interest is allowed on the partners' current accounts. (iv) Interest of 15% is charged on the partners' drawings. 2. Stock as at 30th June 2019 was valued at Sh.900,000 3. Fixed assets are written-off at the following rates: (i) Buildings 5% per annum on cost (ii) Motor vehicles 20% per annum on reducing balance basis 4. Rents and rates were prepaid by Sh.60, 000. 5. Bad debts amounting to Sh.25, 000 are to be written-off. 6. The bad debts provision is to be made equal to 8 % of the outstanding debtors as at 30th June 2019. 7. On 30th June 2019 an amount of Sh.53, 250 was unpaid for selling expenses. Required; a. Income statement and appropriation account for the year ended 30th June 2019 (10 Marks) b. Partners' current accounts for the year ended 30th June 2019 (4 marks) c. Statement of financial position as at 30th June 2019 (6 Marks) QUESTION TWO Mamba Company Ltd is a retail provider with an authorised share capital of 800,000 Sh. 20 ordinary shares and 250,000 8% Sh. 20 redeemable preference shares. The following financial information reflects the position of the company as at 31 December 2018 after preparing the trading profit and loss account. Provision for depreciation - Fittings Motor vehicles Sh. '000' 1,500 3,740 Goodwill Issued share capital: 600,000 Sh. 20 Ordinary shares 250,000 Sh. 20 Redeemable preference shares Share premium account Trade debtors and prepayments Land and buildings at valuation (cost Sh. 4,400,000) Capital redemption reserve fund Fittings at cost Motor vehicles at cost 10% Debentures Trade creditors and accruals Short term investments (Market value Sh. 860,000) Stock 31 December 2018 Bank overdraft Revaluation reserve Net profit for the year Retained profit as at 1 January 2018 General reserve Provision for doubtful debts Interim dividends paid Ordinary Preference 1,200 12,000 5,000 400 1,708 18,400 3,000 3,000 7,940 1,600 960 780 2,960 540 1,000 1,440 4,460 1,100 48 600 200 The following resolutions relating to the year ended 31 December 2018 have been passed by the board of directors of the company: a) Transfer Sh. 500,000 to general reserves. b) Transfer Sh. 700,000 to capital redemption reserve fund. c) Provide for 5% final dividend and final preference dividend on shares issued and outstanding on 31 December 2018 d) Make a bonus issue of 100,000 fully paid ordinary shares from the retained profits account. Required: i. The income statement and appropriation account of Mamba Company Ltd for the year ended 31 December 2018 . (9 Marks) ii. The Statement of financial position of Mamba Company Ltd as at 31 December 2018 (6 Marks)

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