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Advanced ACC - revision park
Accounting and finance
Kyambogo University
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Question 1 (a) Write short notes on any three (3) of the following i). Dual concept ii). Business entity iii). Going concern iv). Materiality v). Accruals (b) The accounting profession has got rules and guidance in place on how to report information i. Accounting standards that provides guidance to the problems Required: i clearly explain four (4) objectives of the accounting standards, giving relevant examples ii clearly explain four (4)importance of the accounting standards, giving relevant examples Question 2 a) Write short notes on the following i). Conservatism concept ii). Consistency concept iii). Economic entity concept iv). Matching concept b) As a student of BSc Accounting and finance, with examples explain how this particular course unit (Advanced accounting) has changed your career and state how you are now going to be a better person in the society c) A complete set of financial statements includes the following: a statement of financial position, a statement of comprehensive income and profit and loss, a statement of changes in equity and a statement of cash flows, notes , comprising a summary of significant accounting policies and explanatory notes Required: with relevant examples bring two (2) importance of statement of financial position (SoFP) and a statement if changes in equity
On 31st December 2018, the following trial balance as extracted from the books of Musiru Upon further examination of the books you discover the following (a) Deprecation on plant and machinery and furniture and fittings is at 20% per annum (b) According to pass pattern records directors have recommended that 10% of - Question - Details Dr. 000 Cr. Industries Limited - Wages 280, - General expenses 24, - Freehold land 300, - Receivables 242, - Cash and bank 202, - Sales 2. - Purchases 1,434, - Machine and equipment- cost 684, - Inventory 1/01/2018 108, - Share capital 800, - Furniture and fittings- Cost 176, - Payables 156, - Bank Overdraft 100, - Postage and telephone 8, - Bank interest paid and received 16,000 4, - Distribution expenses 108, - Salaries 304, - Insurance 8, - Profit and loss a/c 9, - Electricity 15, - -machinery and equipment 130, Accumulated depreciation 1.1: - -furniture and fittings 150, - 3,909,600 3,909, - (c) Inventory was valued at 104,592,000 as at 31st December receivables should be set aside as bad debts - (d) On 31st December 2018 outstanding wages amounted to 9,000, - (e) Insurance has been paid in advance amounting to 570,
Sundry debtors 121,
Cash and bank 202,
Sales 2.
Purchases 1,434,
Machine and equipment- cost 684,
Inventory at 1st Jan 2016 54,
Share capital 800,
Furniture and fittings-Cost 88, Sundry creditors 78,
Bank Overdraft 100,
Postage and telephone 8,
Bank interest paid and received 16,000 4,
Distribution expenses 54,
Salaries 304,
Insurance 8,
Profit and loss a/c 9,
Electricity 15,
Accumulated Depreciation: Machinery and equipment 65, Furniture and fittings 75, 1,955,888 1,955, Upon further examinations of the books, you discover the following (a) Inventory was valued at 57,296,000 on 31st December 2016 (b) The directors recommended that 10% of receivables should be set aside as bad debts (c) On 31st December 2016, outstanding wages amounted to shs,800, (d) Insurance has been paid in advance amounting to shs, (e) The Marketing managers’ close 1 (b) grants him a sales commission of 4% of gross profit. The commission is payable on 31. (f) Machinery which stood in the books at 3st May 2016 at 16,000,000 has been sold for 12,000,000 in part exchange for machinery costing 24,000,000. A net invoice for 12,000,000 has been posted into the purchase account. No entry has been made in respect of this transaction The original cost of the old machinery was 20,000,000. It’s the company’s policy to charge full tears depreciation in the years of purchase and none in the year of sale Required: As far as the information provided can allow: (a) Prepare a Statement of Comprehensive Income for the year ended 31st December 2016
(b) Statement of financial position as at 31st December 2016 as per the requirements of IAS 1: preparation and presentation of financial statements. NB: Show all the relevant workings Question 5 IFRS 10 requires that a parent prepares consolidated financial statements using uniform accounting policies for transactions and other events in similar circumstances, however, a parent NEED NOT to present consolidated financial statements under the following conditions. (a) Briefly explain the above conditions or circumstances (b) Distinguish between a subsidiary company and an associate company (c) Statement of financial position of PP Ltd and Savanna security Group as at 30th June 2014 are given below: Details PP Ltd UGX Savanna Ltd UGX Non-Current assets Land 4,500,000 2,500, Plant & Equipment 2,400,000 1,750, Investment 8,000, Current assets 5,200,000 1,700, 20,100,000 5,950,
Ordinary share capital 250,000 60, 8% preference share capital 40, 7% debentures 20, Revenue reserve 75,000 33, Capital reserve 25,000 15, Accumulated depreciation 35,000 27, Creditors 65,000 16, 450,000 211, Fixed assets at cost 225,000 140, Additional information 1. Each ordinary shares Shs 1,000 and the share value is the same for each preference share. The debenture stock is Shs 1,000 per unit of stock. 2. Ntungamo Limited acquired 45,000 ordinary shares, 25,000 preference shares and 5,000 debentures in Kisoro Limited on 1st July 2007. 3. At the date of acquisition, the capital and revenue reserves were Shs 6,000,000 (Cr) and Shs 15,250,000 (Dr) respectively. 4. Included in the current assets of Ntungamo Ltd is a debenture interest receivable from Kisoro Ltd, which has been accrued for 1 year. 5. During the year just ended Ntungamo Ltd, received goods worth Shs 45,000,000, of this 11,400,000 in stock is still unsold. Kisoro invoices at cost plus 25%. 6. The preference dividends were proposed by Kisoro Ltd but not yet paid. Ntungamo has not yet recognized the proposed dividends of Kisoro Ltd. 7. It is the group’s policy to amortize goodwill arising on consolidation over a period of 6 years. REQUIRED Prepare the consolidated statement of financial position of Ntungamo Ltd and group as at 30. 6 2010
Question 7 a) Define the following terms used in Group Accounting i) Non -Controlling interest ii) Parent company iii) An associate company iv) Gain on bargain purchase v) Indirect interest/ control b) Below are the summarized Accounts for three entities for the year ended 30/6/ that was presented to you to look into. Particulars KLA Ltd GUL ltd JJA Ltd ASSETS UGX’000 UGX’000 UGX’ Tangible non-current assets
100,000 80,000 65,
Investment -Gulu Ltd -JJA Ltd
-90,
-31,
-
-
-
-
Inventories 80,000 50,000 35, Receivables 70,000 35,000 23, Cash at Bank 37,000 20,000 1, 408,000 185,000 124, Equity and Liabilities Equity capital (UGX 1,000 per share)
100,000 75,000 50,
Retained earnings 150,000 50,000 40, Share premium 55,000 20,000 18, General reserves 53,000 25,000 11, Liabilities 50,000 15,000 5, 408,000 185,000 124, You were also given additional information relating to three entities as follows.
- On 1 July 2017, an item of plant in the books of S had a fair value o $ 5,000 in excess of its carrying value. At this time, the plant had a remaining life of 10 years. Depreciation is charged to cost of sales.
- During the year S sold goods to P for $ 4,400. Of this amount, $ 500 was included in the inventory of P at the year –end. S earns a 35% margin on its sales.
- Goodwill amounting to $ 800 arose on the acquisition of S, which had been measured using the fair value method. Goodwill is to be impaired by 10% at the year – end. Impairment losses should be charged to operating expenses.
- S paid dividend of $ 500 on 1 January 2017. Required Prepare the consolidated income statement for the year ended 31 March 2017 Question 9 On 1/7/2015 Crystal ltd acquired 60,000 of the 100,000 shares of Pebble. The draft below shows the income statements of the two companies for the year ended 31/12/2015. Details Crystal Pebble Shs 000 Shs 000 Revenue 43,000 26, Cost of sales (28,000) (18,000) Gross profit 15,000 8, Other income-dividend from pebble 2,000 - Distribution costs (2,000) (800) Administration costs (4,000) (2,200) Finance costs (500) (300) Profit before tax 10,500 4, Income tax (1,400) (900) Profit for the year 9,100 3, Other comprehensive income Gain on property revaluation (i) - 2, Investment in equity instrument 200 - Total comprehensive income 9,300 5, Additional information i) At the date of acquisition, the fair value of pebble’s assets was equal to their carrying amounts. At the date of acquisition the building had a remaining useful life of 20 years. Depreciation is charged to administrative expenses. The building
was revalued again at 31/ 12/2015 and its fair value had increased by an additional Shs 1m. ii) Sales from crystal to Pebble were 6 million during the post-acquisition period. Crystal marks up all sales by 20% iii) Despite the property revaluation, Crystal has concluded that goodwill in Pebble has been impaired by Shs 0 iv) Its crystal’s policy to value the non-controlling interest at full (fair) value. v) Income and expenses are assumed to have arisen evenly throughout the year. Required Prepare the consolidated statement of profit and loss for the year ended 31 December 2015.
Question
BINEMYE LTD after a series of trading loses over several years decided to go into voluntary liquidation. The balance sheet as at 1 th Nov 2010 was as follows
Required: Prepare a Statement of Affairs and a statement of estimated deficiency Question TROUBLE LTD Whose Balance Sheet was as below as at 30.6 is undergoing liquidation ASSETS Ushs000 Shs 000 NON CUURENT ASSETS Land 5, Plant & Machinery(at cost) 16,
-furniture and fittings 150,
Buildings 25, 57, Goodwill 4, Organization Costs 900 4, CUURENT ASSETS Inventories 24, Notes Receivable 14, Accrued Interest on Notes
307.
Stock subscription receivable 2, Provision for Doubtful debts (400) Accounts Receivable 9, Cash 7,067 57,725. 119, FINANCED BY EQUITY ACCOUNTS Capital stock 32, Capital stock subscribed 2, Retained Earnings (19,850) 15, LIABILITIES Notes payable CERUDEB 9, Citibank 3, Suppliers 12, Accrued Interest on Bonds
debts is Adequate to cover any other in collectable accounts. A total of shs, 600, of the Remaining collectable accounts receivable was pledged as collateral for the notes Payable to Citi bank of Shs 3,000,000 with accrued interest of Shs 90,000 as at the date of the balance sheet. C) Subscriptions receivable from stock holders are due and are considered fully collectable D) Inventories are valued at cost and are expected to realize 25% on the post liquidation sale after a write off of Shs 5,000,000 as obsolete stock E) Land and buildings, which are appraised at 110% of the carrying value, are collateral to the bond. The respective interest is Shs 910,000 to date. At the same time the company expects to realize 20% of the cost on machinery and equipment and 50% of the cost on fixture and fittings after incurring a refinishing cost of Shs 400, F) Estimated costs of liquidation are Shs 2,250, Required i Prepare a Statement of Affairs and a statement of estimated deficiency ii Explain the difference between a balance sheet and a statement of affairs QUESTION EXXON LTD after a series of trading loses over several years decided to go into voluntary liquidation. The balance sheet as at 1 th Nov 2010 was as follows ASSETS U Shs EQUITY&LIABILITIES U Shs Freehold property 580,000 Ordinary share capital 475, Plant and machinery 289,000 5%Preferrence share capital 600, Vehicles 57,500 Share premium 50, Stock 186,000 5% Debenture 100, Debtors 74,000 Debenture interest 2, Profit &Loss 214,000 Bank overdraft 58, Creditors 115,
1,400,500 1,400,
Additional data 1) Preference dividends are in arrears since the year 2007 2) The articles of association provided that, out of the surplus assets remaining after paying outside liabilities, there shall be paid firstly all arrears of preference dividends, secondly paid up preference share capital together with a premium of thereon of Shs 10 per share and any balance remaining paid to the equity share holders. 3) The bank overdraft was secured against vehicles while the creditors were secured against the freehold property 4) Creditors were paid with a discount granted of 5% 5) Liquidation costs were 38500 and liquidation fees were 10% of the total realized amounts from the assets 6) Upon liquidation the following assets were realized as follows Freehold property 700, Plant and machinery 240, Vehicles 59, Stock 150, Debtors 60, Calls in arrears 25, Required: Prepare a Statement of Affairs and a statement of estimated deficiency
Advanced ACC - revision park
Course: Accounting and finance
University: Kyambogo University
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