ACCT 433 Advanced Accounting II

06 Sep ACCT 433 Advanced Accounting II

QUESTION ONE

Auto Transmissions manufactures electrical equipments. The following trial balance as at 31 March 2005 has been extracted from the books of the company:

£

£

Ordinary shares of 50 p each

400,000

10% Redeemable Preference shares of £1 each

200,000

Retained profits as at 1 April 2004

42,475

Office block (Land £40,000)

170,000

Plant and machinery

730,000

Office equipment

110,000

Motor vehicles

200,000

Provision for depreciation – Plant and Machinery

224,500

–   Office equipment

24,500

–   Motor vehicles

80,000

Accounts receivables/Payables

500,000

356,226

Provision for doubtful debts

1,000

Manufacturing wages

501,400

Inventory as at 1 April 2004 – raw materials

70,000

– Work in progress

126,000

– Finished goods

250,000

Transport expenses

85,013

Returns inwards

15,106

Purchases of raw materials

518,600

Sales

2,600,147

Bank balance

60,020

Directors salaries

60,114

Maintenance of plan t

30,102

Rent

40,063

Advertising

190,048

Rates

50,171

Insurance

20,116

Office salaries

166,013

Light and heat

46,027

Factory power

30,014

Bank interest

7,070

Interim dividends on preference shares

10,000

General administration expenses

63,011

_________

3,988,868

3,988,868

Further information is as follows:

(1) Depreciation is to be provided as follows:

Plant and machinery 15% on cost. (Production expense)

Office equipment 10% on cost (administration expense)

Motor vehicles 25% on WDV (distribution cost)

New office blocks 2% on cost (Administration expense).

(2) Prepayment of rates at 31 March 2005 was £3,140.

(3) An insurance premium for public liability cover amounting to £3,360 was paid for the year to 30 June 2005.

(4) The amount owing for light and heat is £1,214 and rent is £2,321 as at 31 March 2005.

(5) Rent, rates, light and heat and insurance are to be apportioned in the ratio of 5:1 in relation to factory and office expenses.

(6) The provision for doubtful debts is to be maintained at 1% of the accounts receivables.

(7) The production director acts as a factory manager, his salary is £20,000.Office salaries include amounts paid to salesmen of £64,237.

(8) The corporation tax of £100,000 is to be provided,

(9) During the year 1,500 electrical equipments were transferred from the factory to the warehouse. Only 100 equipments were in hand at the end of the year.

(10) Inventory at cost as at 31 March 2005 was as follows:

Raw materials

£56,200.

Work in progress

£47,190.

Finished goods

?

Required:

Prepare the published income statement for the year ended 31 March 2005 and a balance sheet as at the same date. (20 marks)

QUESTION TWO

Nagala supermarket Ltd. deals in imported goods which are paid for in foreign exchange. Following the recent depreciation of the Kenyan shilling the company has incurred exchange losses on trade debtors and its business has become generally uncompetitive and consequently forcing the company into a voluntary liquidation on 1 November 1997

As at 1 November 1997:

1. The company had a bank loan of Sh.625,000 which was secured on furniture and fittings. The furniture and fittings realised Sh.1,000,000.

2. Assets not specifically pledged realised Sh.4,250,000.

3. Liquidation expenses amounted to Sh.187,500.

4. Salaries payable to messengers for the last three months amounted to Sh.22,500, Sh.60,000 was four months salary payable to clerks.

5. Unsecured trade creditors were Sh.1,092,500.

6. The share capital comprised of 10,000 8% preference shares of Sh.100 each and 25,000 ordinary shares of Sh.100 each.

7. Calls in arrears were : Sh.25 on 10,000 ordinary shares

: Sh.40 on 8,000 ordinary shares

: Sh.50 on 7,000 ordinary shares

Required:

The liquidator’s statement of receipts and payments with the appropriate support schedule (15 marks)

QUESTION 3

H Ltd acquired 60% of the ordinary share capital   of S Ltd on 1.4.20X2.The income

statements of the two companies for the year   ended 31.12.20X2 are as follows: