UNIVERSITY EXAMINATIONS: 2019/2020

EXAMINATION FOR THE BACHELOR OF COMMERCE

ACC 1204: INTRODUCTION TO ACCOUNTING II/ FINANCIAL ACCOUNTING II

DATE: MAY 2020 TIME: 6 HOURS

INSTRUCTIONS: Answer All the Questions

QUESTION ONE
Munge, Omolo and Kombo are in partnership sharing profits and losses in the ratio
3:2:1 respectively. The following is the trial balance of the partnership as at 30th June
2019.
Sh. Sh.
Capital accounts
Munge 540,000
Omolo 360,000
Kombo 180,000
Current Accounts:
Munge 21,000
Omolo 15,000
Kombo 9,000
Debtors 690,000
Creditors 1,050,000
Provision for bad debts as at 1 July
30,000
2018
Bank and cash at hand 75,000
Provision for depreciation as at 1 July
2018
Buildings 360,000
Motor vehicles 240,000
1,800,00
Buildings at cost (1 July 2018)
0
Motor vehicles at cost (1 July 2018) 600,000
Drawings:
Munge 120,000
 Omolo 90,000
Kombo 90,000
2,550,00
Purchases
0
Sales 4,500,000
Rent and rates 120,000
Motor vehicle expenses 40,000
Office expenses 80,000
Selling expenses 420,000
Stock on 1st July 2018 600,000
7,290,00
7,290,000
0
The following additional information is provided:
1. The partnership agreement covers the following provisions:
(i) Kombo is to be allowed a salary of Sh.180, 000 per annum.
(ii) An interest of 10% per annum is allowed on the partners' capital account
balances.
(iii) No interest is allowed on the partners' current accounts.
(iv) Interest of 15% is charged on the partners' drawings.
2. Stock as at 30th June 2019 was valued at Sh.900,000
3. Fixed assets are written-off at the following rates:
(i) Buildings 5% per annum on cost
(ii) Motor vehicles 20% per annum on reducing balance basis
4. Rents and rates were prepaid by Sh.60, 000.
5. Bad debts amounting to Sh.25, 000 are to be written-off.
6. The bad debts provision is to be made equal to 8 % of the outstanding debtors as at 30th June
2019.
7. On 30th June 2019 an amount of Sh.53, 250 was unpaid for selling expenses.
Required;
a. Income statement and appropriation account for the year ended 30th June 2019
(10 Marks)
b. Partners' current accounts for the year ended 30th June 2019 (4 marks)
c. Statement of financial position as at 30th June 2019 (6 Marks)

QUESTION TWO

Mamba Company Ltd is a retail provider with an authorised share capital of 800,000 Sh. 20
ordinary shares and 250,000 8% Sh. 20 redeemable preference shares.

The following financial information reflects the position of the company as at 31 December
2018 after preparing the trading profit and loss account.

Sh. ‘000’
Provision for depreciation - Fittings 1,500
- Motor vehicles 3,740
 Goodwill 1,200
Issued share capital: 600,000 Sh. 20 Ordinary shares 12,000
250,000 Sh. 20 Redeemable preference shares 5,000
Share premium account 400
Trade debtors and prepayments 1,708
Land and buildings at valuation (cost Sh. 4,400,000) 18,400
Capital redemption reserve fund 3,000
Fittings at cost 3,000
Motor vehicles at cost 7,940
10% Debentures 1,600
Trade creditors and accruals 960
Short term investments (Market value Sh. 860,000) 780
Stock 31 December 2018 2,960
Bank overdraft 540
Revaluation reserve 1,000
Net profit for the year 1,440
Retained profit as at 1 January 2018 4,460
General reserve 1,100
Provision for doubtful debts 48
Interim dividends paid - Ordinary 600
- Preference 200

The following resolutions relating to the year ended 31 December 2018 have been
passed by the board of directors of the company:
a) Transfer Sh. 500,000 to general reserves.
b) Transfer Sh. 700,000 to capital redemption reserve fund.
c) Provide for 5% final dividend and final preference dividend on shares
issued and outstanding on 31 December 2018
d) Make a bonus issue of 100,000 fully paid ordinary shares from the
retained profits account.

Required:
i. The income statement and appropriation account of Mamba Company Ltd for the year
ended 31 December 2018 . (9 Marks)
ii. The Statement of financial position of Mamba Company Ltd as at 31 December 2018
(6 Marks)