THE CATHOLIC UNIVERSITY OF EASTERN AFRICA A. M. E. C. E. A CITY CAMPUS MAIN EXAMINATION P.O. Box 62157 00200 Nairobi - KENYA Telephone: 891601-6 Fax: 254-20-891084 E-mail:academics@cuea.edu JANUARY APRIL 2015 TRIMESTER FACULTY OF COMMERCE MBA PROGRAMME CAC 510: FINANCIAL ACCOUNTING Date: APRIL 2015 INSTRUCTIONS: Answer ALL FOUR Questions Duration: 3 Hours Q1. a) The following information was obtained from the records of Mamosa Traders for the year 2011. Opening stock 1,200,000 Closing stock 1,800,000 Purchases 7,800,000 Sales 18,000,000 Operating expense 3,600,000 Capital 15,000,000 Current assets 3,000,000 Shor term liabilities 1,200,000 Use this information to calculate the following accounting ratios i ii iii iv Mar-up percentage. Net profit ratio. Stock turn-over ratio. Current ratio v Quick ratio. Cuea/ACD/EXM/JANUARY - APRIL 2015/MBA Page 1
b) CUEA manufacturers have provided you with the following details from their 2011 business records. Stock as at 1 st January 2011 Raw materials 6,982,000 Work-in-progress 8,150,000 Finished goods 9,673,000 Royalties 845,000 Trade mark fees 987,000 Factory power bills 398,100 Sales of finished goods 19,894,300 Purchase of raw material 4,633,450 Depreciation of factory machines 238,700 Factory supervisor salary 621,350 Office stationery bills 136,710 Stock as at 31 st December 2011 Raw materials 3,986,000 Work-in-progress 4,792,000 Finished goods 6,538,000 The policy of the firm is to transfer finished goods manufactured to the trading account with a manufacturing margin of 10%. Prepare a manufacturing account clearly showing the prime cost and the production cost of goods manufactured. c) Bonoko company Ltd invited applications for the issue of 10,000,000 preference shares of shs 60 each at a price of Sh 66 per share, payable as follows; Shs 30 on application Shs 22 on application Shs 8 on first call Shs 6 on second call Cuea/ACD/EXM/JANUARY - APRIL 2015/MBA Page 2
Applications were received for 10,800,000 shares, and the directors decided to reject the excess applications and refund their money.all other monies were promptly received when due Show the relevant journal entries necessary to record the above issue of shares. Q2. Wilkister, a trader, extracted the following trial balance from his books at the close of business on 31 st March 2009. Dr. Shs Cr. Shs Purchase ans sales 762,000 1,399,000 Stock 1 st April 2008 172,000 Capital 1 st April 2008 240,000 Bank overdraft 145,000 Cash 3,000 Discounts 48,000 31,000 Returns inwards 27,000 Returns outtwards 19,000 Carriage outwards 72,000 Rent, rates, insurance 58,000 Provision of bad and doubtful debts 22,000 Fixtures and fittings 40,000 Delivery van 70,000 Debtors and creditors 397,000 202,000 Drawings 96,000 Wages and salaries 298,000 General office expenses 15,000 2,058,000 2,058,000 Notes: a) Stock 31 st March 2009 shs 143,000 b) Wages and salaries accrued at 31 st March 2009 shs 7,000 c) Rates prepaid 31 st March 2009 shs 6,000 d) Increase the provision of bad and doubtful debtd by shs 5,000 to shs 27,000 e) Provide for depreciation as follows Fixtures and fittings shs 4,000 Delivery van shs 10,000 Cuea/ACD/EXM/JANUARY - APRIL 2015/MBA Page 3
i Trading account for the year ended 31 st March 2009. (4 marks) ii Profit and loss account for the year ended 31 st March 2009. (6 marks) iii Balance sheet as at that date. Q3. The following are receipts and payments account for the year ended 31 st December 2011 for Amani members club. Bank balance 1/1/2011 480,000 Payment for bar supplies 70,000 Subscriptions 250,000 Bar electicity expenses 18,000 Bar sales 220,000 Equipment 100,000 Donations 40,000 Staff gifts expenses 24,000 Repairs 36,000 Stationary 10,000 Bar man wages 20,000 Furniture 190,000 Bank balance 506,000 990,000 990,000 Additional information 1/1/2011 (Shs) 31/12/2011 (Shs) Bar stock 60,000 50,000 Bar creditors 32,000 58,000 Motor vehicle 160,000 150,000 Subscriptions owing 23,000 34,000 Prepare the following i Statement of affairs as at 1 st January 2011. (2 marks) ii Bar trading and profit and loss account for the year ended 31/12/2011 (3 marks) iii Income and expenditure account for the year ended 31 st December 2011. Cuea/ACD/EXM/JANUARY - APRIL 2015/MBA Page 4
iv Balance sheet as at 31 st December 2011. Note: All bar sales are on credit basis. Q4. Mr. Iqbal and Mr Black trading in partnership as transporters, wholesalers and distributors close their accounts on 30 th November each year. Their trial balance as at 30 th November 2010 appeared as follows. Capital:Iqbal Shs Shs 250,000 Black Shs 150,000 Motor vehicles at cost 2,500,000 Provosion for depreciation Shs 750,000 Provision for bad debts Shs 25,000 Debtors and creditors 850,000 Shs 440,000 Salaries and wages 150,000 Transport and income Shs 1,200,000 Sales and purchases 4,080,000 Shs 6,145,000 Returns outwards/inwards 225,000 Shs 450,000 Stocks on 1 st Dec. 2009 1,065,000 Rents 18,000 Water and electricity 4,800 Telephone and postages 10,800 Printing and stationery 5,400 Petrol and oil 548,000 Service and spares 202,550 Legal fees and expenses 15,000 Insurances 73,000 Current accounts: Iqbal Shs 45,000 Black 29,000 Loan and overdraft interest 75,300 Bank charges 12,150 Bank overdraft Shs 225,000 Bank loan Shs 154,000 9,864,000 Shs 9,864,000 The following additional information is provided. i Salary at Shs 15,000 per month should be credited to the current account of Mr. Black. Cuea/ACD/EXM/JANUARY - APRIL 2015/MBA Page 5
ii iii iv Partners are entitled to interest on capital at 12% per annum. Profits and losses are to be shared equally after allowing for partners salary and interest on capital. Motor vehicle is to be depreciated at 25% by the straight line method. v Provision is to be made for accounting and auditing fees at Shs 56,000 vi Bad debts amounting to Shs 44,000 are to be written off. vii Provision for bad debts should be increased by Shs 60,000 viii Stocks as at 30 th Novemebr 2010 were valued at Shs 1,075,000 i Trading account for the year. (3 marks) ii Profit and loss account. (3 marks) iii The partnership appropriation account. (3 marks) iv Partner s current accounts. (3 marks) v Balance sheet as at 30 th Novemeber 2010. (3 marks) *END* Cuea/ACD/EXM/JANUARY - APRIL 2015/MBA Page 6