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May 2016

Unit: Financial accounting

12 Questions

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Questions

1a
Financial Statements of a manufacturing entity
​ ​ ​ ​ ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Bidii Ltd. is in the business of manufacturing gas cylinders. The following balances were extracted from the books of the company as at 31 March 2016;

                                     Trial Balance
Sh."000" 
Issued and fully paid ordinary share capital (Sh. 10 par value) 
441,000
General reserves (1 April 2015) 
 429,200
Retained profit (l April 201 5)
140,000
Production machinery (cost Sh.600 million)
390,000
Office equipment (cost Sh. 140 million)
100,000
Inventory(1st April 2015)
               Raw Materila
46,000
               Finished goods
667,000
               Work-in-progress
33,000
Sales
2,400,000
Trade receivables
691,000
Trade payables
497,000
Carriage outwards
124,000
Factory wages
333,000
Carriage on raw materials
39,400
Purchases of raw materials
400,000
General factory expenses
66,000
Lighting expenses
72,000
Factory power
118,000
Administrative salaries
270,000
Sales agents' salaries
80,000
Commission to sales agents
19,000
Rent
120,000
Insurance expenses
132,000
General administrative expenses
144,000
Bank overdraft
26,800
Cash in hand
15,000
Bank charges
9,600
Discounts allowed
28,000
Royalties
37,000
Additional information:

1.Inventory as at 31 March 2016 was made up of the following:

Sh."000"
Raw materials
60,000
Work-in-progress
25,000
2. The finished goods were sold at a mark-up of 66 2/3 
3.  Lighting expenses, rent and insurance expenses are to be apportioned as follows: factory 70% and administration
4.  Depreciation is to be provided as follows:

Production machinery
10% per annum on cost
Office equipment
10% per annum on reducing balance
5. Sales agents' salaries include sh 35,000  that relates to the 7 months ending 31 May 2016.
6.The directors have proposed the following:
         - Sh. 100 million be transferred to general reserves.
​​         - Dividend of Sh.0.8 per share be paid to ordinary shareholders
7. Factory wages included Sh. 143 million for indirect labour.   Required: 
   (a)  Manufacturing account and income statement for the year ended 31 March 2016. (12 Marks) 
   (b)  Statement of financial position as at 31 March 2016.(12 Marks)
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1b
Financial Statements of a manufacturing entity
​ ​ ​​Statement of financial position as at 31 March 2016.
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2a
Financial Statements of a partnership
​ ​​ Income statement for the year ended 30 April 2016.
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2b
Financial Statements of a partnership
​​ Statement of financial position as at 30 April 2016.
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3a
Correction of errors and preparing financial statements with incomplete records
Income statement for the year ended 31 March 2016.
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3b
Correction of errors and preparing financial statements with incomplete records
​ ​​ Statement of financial position as at 31 March 2016.
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4a
Analyzing Financial Statements
​ ​ ​ ​ ​ ​ ​ ​​
Explain three reasons why the amount of cash generated by a business entity might differ from the profit reported by the same business entity during the same financial period-
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4b
Analyzing Financial Statements
​​ (i) Gross profit margin.

(ii) Return on capital employed (ROCE).

(iii) Current ratio.

(iv) Acid test ratio.

(v) Inventory turnover.

(vi) Trade receivables collection period.
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5a
Regulation and other principles guiding the accounting profession
Explain two objectives of the International Public Sector Accounting Standards Board (IPSASB).
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5b
Introduction to Accounting
​​ Describe three qualities of useful accounting information.
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5c
Accounting for Assets and Liabilities
Explain in what way, if at all, the practice of providing for depreciation ensures that property, plant and equipment are replaced at the end of their useful economic lives.
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5d
Correction of errors and preparing financial statements with incomplete records
Describe three errors that do not affect the trial balance.
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