Unit: Financial accounting
9 Questions| 1. | Brought in her personal pick-up van valued at Sh.6,000,000 to be used in the business. The van was estimated to have an economic useful life of 4 years as at 1 July 2023. |
| 2. | On 31 December 2023, she took a bank loan of Sh.4,000,000 at an interest rate of 15% per annum. At the end of the year the loan interest was in arrears. |
| 3. | During the year ended 30 June 2024, Angela purchased goods amounting to Sh.79,000,000 on credit and Sh.6,000,000 on cash paid through the bank. As at 30 June 2024, Sh.3,000,000 accounts payable to suppliers was still outstanding. |
| 4. | Credit sales during the year amounted to Sh.125,000,000 while cash sales amounted to Sh.6,500,000. A customer who owed Sh.1,500,000 was declared bankrupt and the debt had to be written off. By 30 June 2024, accounts receivable stood at Sh.5,500,000. |
| 5. | During the year, Angela Riziki spent Sh.2,500,000 of the cash sales received for her personal use and Sh.1,200,000 to pay for telephone and water bills. The balance was banked. |
| 6. | Discount received and discount allowed during the year ended 30 June 2024 amounted to Sh.1,800,000 and 1,100,000 respectively. |
| 7. | As at 30 June 2024, inventory was valued at Sh.7,200,000. |
| 8. | Credit suppliers and credit customers are paid and pay through the bank respectively. |
| 9. | The following payments were made through the bank during the year: |
| 9. | Expenses | Sh.“000” |
| Rent expenses | 3,600 | |
| Purchase of furniture (1 July 2023) | 8,000 | |
| Salaries and wages | 11,000 | |
| Transport | 4,200 | |
| Insurance | 2,800 | |
| Advertisement | 2,100 | |
| Repair of motor vehicle (van) | 850 | |
| Electricity and internet | 2,200 | |
| Carriage inwards | 2,500 |
| 10. | Furniture was to be depreciated at the rate of 15% per annum on a straight line basis. |
| 11. | As at 30 June 2024, electricity bills unpaid amounted to Sh.450,000, while insurance prepaid was Sh.1,200,000. |
| Vijana Youth Club Receipt and payments account |
| Sh.“000” | Sh.“000” | ||
| Balance brought forward | 1,400 | Motor vehicle | 26,000 |
| Subscriptions | 25,800 | Water and electricity | 3,520 |
| Bar takings | 40,000 | Secretary honoraria | 720 |
| Donations | 9,600 | Bar wages | 2,800 |
| Sale of equipment | 800 | Administrative staff salaries | 12,800 |
| Sale of magazines | 3,200 | Bar payables | 29,600 |
| Competition tickets | 7,200 | Ground maintenance | 4,400 |
| Insurance | 4,800 | ||
| Balance carried forward | ? | ||
| 88,000 | 88,000 |
| 1. | Investment income of 10% per annum is receivable as at 30 June 2024. |
| 2. | During the year ended 30 June 2024, equipment with a net book value of Sh.600,000 was disposed of for Sh.800,000. |
| 3. | Depreciation policy is on a reducing balance basis at the following rates: |
| 3. | Asset | Rate per annum (%) |
| Motor vehicle | 10 | |
| Equipment | 20 |
| 4. | The following balances were provided for the years ended 30 June: |
| 4. | 2023 Sh.“000” | 2024 Sh.“000” | |
| Bank | 1,400 | ? | |
| Land at cost | 10,000 | 10,000 | |
| Motor vehicles | 20,000 | ? | |
| Equipment | 14,400 | ? | |
| Investment at cost | 40,000 | 40,000 | |
| Bar inventory | 880 | 1,440 | |
| Bar payables | 1,600 | 2,000 | |
| Subscription in arrears | 1,840 | 1,480 | |
| Subscriptions in advance | 2,880 | 720 | |
| Accrued insurance | 800 | 1,200 | |
| Accrued electricity | 400 | 520 | |
| Accrued bar wages | - | 600 |
| Required: | |
| (a) | Bar statement of profit or loss for the year ended 30 June 2024. |
| (b) | Income and expenditure account for the year ended 30 June 2024. |
| (c) | Statement of financial position as at 30 June 2024. |
| Sh.“000” | Sh.“000” | |
| Ordinary share capital of Sh.100 each | 78,000 | |
| 12% preference share capital of Sh.100 each | 13,000 | |
| Share premium | 10,400 | |
| 10% debentures | 13,000 | |
| Accounts payable | 19,240 | |
| Accounts receivable | 42,900 | |
| Sales | 724,000 | |
| Purchases | 548,600 | |
| Discounts allowed | 650 | |
| Discounts received | 1,690 | |
| Freehold buildings | 165,000 | |
| Furniture and fittings | 83,200 | |
| Accumulated depreciation: | ||
| 6,500 | |
| 33,280 | |
| Inventory (1 July 2023) | 54,600 | |
| Returns outward | 10,400 | |
| Rent expenses | 16,900 | |
| Selling and distribution expenses | 21,710 | |
| Bad debts written off | 520 | |
| Allowance for doubtful debts | 2,340 | |
| Administrative expenses | 7,280 | |
| Retained earnings (1 July 2023) | 47,060 | |
| Goodwill | 20,800 | |
| Bank overdraft | 3,250 | |
| 962,160 | 962,160 |
| 1. | Depreciation on non-current assets is provided on a straight line basis at the following rates: |
| 1. | Asset | Rate per annum (%) |
| Freehold buildings | 20 | |
| Furniture and fittings | 12.5 |
| 2. | As at 30 June 2023, accounts receivables included Sh.130,000 due from Johnson Wetu who has now been declared bankrupt. It has been decided to write off this debt as a bad debt. |
| 3. | The allowance for doubtful debt as at 30 June 2024 is to be adjusted to 10% of accounts receivable. |
| 4. | Rent expenses prepaid as at 30 June 2024 amounted to Sh.52,000. |
| 5. | Administrative expenses accrued as at 30 June 2024 amounted to Sh.95,000. |
| 6. | The company paid the interest on debentures for the year ended 30 June 2024 on 31 July 2024. |
| 7. | As at 30 June 2024, inventory was valued at Sh.7,280,000. |
| 8. | The company directors propose that the preference shares dividend be paid and a dividend of 10% of the ordinary shares be paid. |
| 9. | Corporation tax is charged at the rate of 30% of the net profit. |
Required: | |
| (i) | Statement of profit or loss for the year ended 30 June 2024. |
| (ii) | Statement of financial position as at 30 June 2024. |
| Precious Ltd. Statement of profit or loss for the year ended 31 March 2024: |
| Sh.“000” | Sh.“000” | |
| Gross profit | 26,700 | |
| Operating expenses | (22,050) | |
| 4,650 | ||
| Other incomes: | ||
| Interest income received | 900 | |
| Gain on sale of investments | 1,800 | |
| Less: Loss on sale of plant | (450) | 2,250 |
| 6,900 | ||
| Interest expenses paid | 3,450 | |
| Net profit before tax | 3,450 | |
| Income tax | (1,050) | |
| Net profit after tax | 2,400 |
| Precious Ltd. Statement of financial position as at 31 March: |
| 2023 | 2024 | |
| Non-current assets: | Sh.“000” | Sh.“000” |
| Property, plant and equipment (cost) | 75,750 | 107,250 |
| Accumulated depreciation | (10,200) | (15,450) |
| 65,550 | 91,800 | |
| Investments | 19,050 | 17,250 |
| Current assets: | ||
| Inventory | 16,500 | 21,600 |
| Accounts receivable | 8,250 | 7,050 |
| Cash | 2,250 | 6,900 |
| Prepayments | 750 | 150 |
| Total current assets | 27,720 | 35,700 |
| Total assets | 112,350 | 144,750 |
| Liabilities and capital: | ||
| Ordinary share capital | 47,250 | 69,750 |
| Revenue reserves | 19,800 | 21,000 |
| 67,050 | 90,750 | |
| Long term liabilities: | ||
| Bonds | 36,750 | 44,250 |
| Current liabilities: | ||
| Accounts payable | 6,450 | 7,500 |
| Accrued liabilities | 1,350 | 1,800 |
| Tax payable | 750 | 450 |
| Current liabilities | 8,550 | 9,750 |
| Total liabilities and equity | 112,350 | 144,750 |
| Non-current assets | Cost | Accumulated depreciation |
| Sh.“000” | Sh.“000” | |
| Freehold property | 70,000 | - |
| Plant and machinery | 52,500 | 20,320 |
| Office equipment | 10,500 | 5,110 |
| Motor vehicles | 31,500 | 18,200 |
| 1. | The following non-current assets were acquired during the year ended 31 March 2024: |
| 1. | Date | Non-current assets | Cost Sh.“000” |
| 1 April 2023 | Machinery | 7,000 | |
| 1 October 2023 | Motor vehicle | 4,200 |
| 2. | The following non-current assets were disposed of during the year ended 31 March 2024: | ||||
| Date | Non-current Assets | Sales proceeds Sh.“000” | Cost Sh.“000” | Accumulated depreciation as at date of disposal Sh.“000” | |
| 1 April 2023 | Machinery | 4,830 | 6,300 | 700 | |
| 1 July 2023 | Office equipment | 448 | 560 | 140 | |
| 31 March 2024 | Motor vehicle | 2,240 | 3,500 | 350 | |
| 3. | Daraja Ltd. depreciates the assets using the straight-line method on a pro rata basis at the following rates per annum: |
| 3. | Non-current assets | Rate per annum (%) |
| Plant and machinery | 20 | |
| Office equipment | 15 | |
| Motor vehicle | 25 |
| 4 | On 1 April 2023, the management of Daraja Ltd. decided to start depreciating freehold property at the rate of 2.5% per annum. |
Required: Non-current asset movement schedule for the year ended 31 March 2024. |
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