QUESTION ONE. Book world sales books to various colleges across Zambia on credit.

Below is
the age analysis as at 31 December 2013.

Age NORTEC KABWE TRADES SOLWEZI LUSAKA TOTAL

TRADES TRADES
CURRENT K6,000 K9,000 K3,600 K18,600
1-30 K1,200 K18,000 K19,200
31-60 K4,500 K7,500 K12,000
0VER 60 K1,500 K15,000 K9,000 K25,500
TOTAL K12,000 K10,200 K15,000 K38,100 K75,300

On the basis of the past experience, the company has the estimated the rates below as a percentage of
the uncollectible in each age category.

Current 4%

1 -30 Past due 10%

31-60 days past due 12%

Over 60 days past due 15%

A. Compute the estimated uncollectible amount at the end of the year using the above rates and
show the journal entry if the allowance for uncollectible has a credit balance of K5,000 (5
Marks)
B. On January 1 2014 Book World received a 90 days 15% note from NORTEC in exchange for the
total debt outstanding (2Marks)
C. After 30 days book world discounted the note from NORTEC to ZANACO at the rate of 18%. How
much will ZANACO give book world? ( 5 Marks)
D. On January 5 Book world made a credit card of K2,000,000 with the credit card fee of 6% of the
total sales value. Show how this will reflect in the books of book world if payment is delayed.
( 3 Marks)

QUESTION TWO
Manny Proprietorship has a single product on offer for sale (Mongu rice) whose selling price has
continuously increased in the market due to favorable publicity on social media. As at March 1
2019, Manny had inventories that amounted to 15,000 units with a unit cost of K10. The
purchases and sales made in the months March to May 2019 are presented in the table below:
DATE DETAILS NO. OF UNITS UNIT COST SELLING PRICE
March 10 Purchases 13,000 K15
March 11 Sales 8,000 K30
March 21 Purchases 15,000 K20
March 22 Sales 10,000 K35
April 5 Purchases 14,000 K22
April 18 Purchases 6,000 K25
April 20 Sales 16,000 K40
May 5 Purchases 7,000 K24
May 10 Sales 10,000 K42
May 22 Purchases 6,000 K26
May 25 Sales 14,000 K45

Manny believes that the Periodic system of Inventory valuation is easier, cheaper and will be
used in the business.
Required:
a. Compute the cost of Manny’s inventory count available on hand as at May 31 using
i. FIFO method
ii. LIFO Method and,
iii. Weighted Average Cost Method (6 MARKS)
b. Compute the cost of sales for Manny at the end of each the first three months of 2019
using:
i. FIFO method
ii. LIFO Method and,
iii. Weighted Average Cost Method (6 MARKS)
c. Prepare a comparative statement summarizing the gross profit on sales for each month,
using the three Cost Flow Methods, FIFO, LIFO and Weighted Average Methods
respectively. Which method would you recommend for Manny and why? (3 MARKS)