Answer ALL questions in this section. 1; ‘Andy Limited has its accounting year end on 31 December 2014. The post-closing trial balance was as follows. Dr cr $ $ 15,600,000 Property, plant and equipment 2'340,000 Trade and other receivables 1,860,000 Bank and cash 9,000,000 Ordinary share, $6 each, Sharepremium — DI CIEE Teae Retained profit, 1 January 2014 ee Profit for the year 2.000000 8% Debentures a Trade and other payables 5,140,000 19,800,000 19,800,000 Additional information: i) The 8% Debentures were issued at par on I July 2014. There was no movement in ordinary share capital during the year. ii) On 10 January 2015, the company was informed that one of its major customers has declared bankrupt on 30 December 2014. Total debt owed by the customer amounted to $200,000. No entries have been made for this transaction. REQUIRED: Based on the information above, calculate (to two decimal places) the following accounting ratios for the year 2014: (a) Return on capital employed (using average figures) (b) Eamings per share (©) Gearing ratio (using year-end figures) G marks) Baby Limited is a trading company. Cash sales of $200,000 made to Honey Ltd were included in the sales of Baby Limited during the year. The sale contact stated that Baby Limited has an option to repurchase these goods after one year atthe price of $230,000. It is most likely that Baby Limited will exercise the option and repurchase the goods. REQUIRED: (@) State the accounting principle or concept that Baby Limited has been violated and provide an explanation. a (3 marks) (Total 6 marks)2 : oo : Catherine Company has its financial year ending on 31 December. It is the company’s policy to depreciate tg non-current assets on a straight-line basis at an annual rate.of 20%. The relevant financial data about its offigg ‘equipment, the non-current asset as at 1 January 2016 is as follows: s Office equipment, at cost, 1 January 2016 3,280,000 1,040,000 ‘Accumulated depreciation - office equipment, 1 January 2016 On 1 October 2016, Catherine Company traded in a piece of used office equipment with a cost of $158 000 for a new model. The trade-in value was agreed at $28 000. The old office equipment had an accumulated depreciation of $92 500 on I January 2016. In respect of this trade-in, the company was required to pay $26800) for the new office equipment, $6200 for its delivery, $1500 for the insurance during its delivery and $9000 to train staff to operate the new office equipment. ) Compute the depreciation expense for the office equipment of Catherine Company for the year ended 31 December 2016 which would be shown in the Income statement for the year. (2 marks) +b) Compute the net book value of the amount of total office equipment of Catherine Company as at 31 December 2016 which would be shown in the statement of financial position on that date. (2 marks) ©) Prepare the journal entries for recording the transactions related to the trade-in of the office equipment in 2016. Narration is not required. 3 marks) (7 marks)3. ‘After checking the monthly bank statement i, the accountant of. ‘AY Company discovered that the bank "I balance did not agree with the cash book (bat "ater t ‘nk column) balance as at 31 March 2016. HSBB Bank Statement of Account for the month ended 31 March 2016 Date Details Debit = Credit Balance $ $ $ 1Mar Balance b/f 186,560 1 Mar Cheque #256421 45,000 141,560 1Mar Cheque deposit 42,210 183,770 2Mar Cheque #256424 38,000 145,770 6Mar Cheque deposit 16,200 161,970 15Mar Cheque #256422 7,000 154,970 20Mar Cheque #256427 8,350 146,620 22Mar Cheque deposit L 38,300 184,920 23Mar Cheque dishonoured - 16,200 168,720 28Mar Bank charges 650 168,070 29Mar Cheque #256426 5,500 162,570 31Mar Transfer to saving account een isn Accomparison of the cash book (bank column) and the bank statement revealed the following: (Cheques issued during the month: $ #256421 45,000 #256422 7,000 — #256423, 48,500 #256424 380 #256425, 8,300 #256426 5,500 = #256427 8,350 & (ii) It was found that the cheque #256424 had been over-paid by the bank. The over-paid amount will be returned to company’s account by the bank on April (iii) Deposits amounting to $24,730 had been entered in the cash book but not credited by the bank until 1 April 2016. (iv) On 31 March, the company had instructed the bank to transfer an amount from the the current account. ‘The bank had made the transfer in reverse. . (v) The dishonoured cheque during the month had not been entered in cash book, REQUIRED: Prepare a bank reconciliation statenient-as at 3 Tk 2016, commencing with the balance of bank statement and ending with the bglatice of unadjusted cash book bal: . (6 marks)5. The end of accounting year of Beauty Shop was 31 March 2015, However, the annual physical invento taking was not taken on that date. The physical inventory taking was delayed to 9 April ae and the Value inventory was $85,600. All normal sales by the company are made at a gross profit of 20% on cost. Subsequent investigation revealed the following: (i) The total amount of sales invoices between 1 April and 8 April was $165,000, in which $21,000 was solg to company’s staff at 30% off the normal selling price. (ii) The purchase invoices between 1 April and 8 April was amounting to $96,800. All goods was receive On the other hand, it was found that included in th except one order costing $8,200 was still in trar purchase invoice was an amount of $200 for carriage inwards which was mistakenly charged by supplier. (iii) The debit notes and credit notes received during the period from 1 April to 8 April was amounting to $3,300 and $1,660. All of the debit notes and credit notes received are for goods returned only. (iv) One of the inventory valuation sheets of $3,600 which was used in the inventory-taking process had been missed out. (v) Inventories amounting to $8,400 were wrongly measured at selling price and recorded on the inventory list. vi) According to the inventory records on 31 March 2015, the cost and net realisable value of a batch of ig ry goods were $7,000 and $5,500 respectively. Beauty Shop used the cost as the values of this batch of goods. (vii). Goods with a selling price of $1,080 were sent on 1 March 2015 on a sale or return basis to a customer. This transaction had been recorded as sales. The customer confirmed his acceptance of the goods on 10 April 2015. REQUIRED: (a) Prepare a statement to calculate the value of inventory as at 31 March 2015, (8 marks) () Explain what “net realizable value” is. (2marks) ™,. (Total 10 marks)6 ‘Ann and Bee were in partnership sharing profits and losses in the ratio of 3:2 respectively. According to the partnership agreement, they were entitled to an annual salary $90,000 and $80,000 respectively. Interest of 5% p.a. was allowed on the credit balances in capital accounts. The financial year ends on 31 December each year. On I January 2014, the balances of their accounts were as follows: Capital Account Current Account s $ Ann 330,000 38,000 (Cr) Ben 240,000 15,000 (Dr) On 1 January 2014, a new partner, Cecilia, was admitted on the following terms: Cecilia would contribute $200,000 cash as capital, plus additional cash for the share of goodwill. @ Gi) Goodwill was valued at $210,000. No goodwill account was to be maintained in the partnership books. (iii) The office equipment was to be revalued upward by $40,000 and an allowance for doubtful debt $5,000 should be provided. In addition, a batch of goods costing $3,000 was to be written off as obsolete. (iv) Ann, Bee and Cecilia agreed that the profit and loss sharing ratio was 3:2:2. Interest of 6% p.a. was allowed on the credit balances in capital accounts. Ann and Bee will keep their original salary. Cecilia was entitled to an annual salary $75,000. It was agreed that the capital balance would be made according to the new profit and loss sharing ratio. ™) Ann and Bee would transfer any surplus amounts to their current accounts. REQUIRED: (a) Prepare journal entries to record the above in the books of the new partnership. (Narrations are not required.) (7 marks)At31 December 2014, the accountant of the partnership has drafted the income statement for the year of 2014 ‘and the drafted net profit was $298,620. Before preparing the appropriation account, the followings were revealed: (vi) The inventory valuation as at 31 December 2014 did not include goods which had cost the partnership $25,000 and had been forwarded to a customer on a “sale-or-retum basis”. These goods had not been recorded as sales for the year. (vii), The amount of salaries and wages included the salaries paid to Cecilia. (viii) Ann had drawn $3,000 goods on 30 December 2014 for personal use. No accounting entries had been made. (ix) Depreciation had not been made on the office equipment. The valuation of office equipment after revaluation was $312,000. It was company’s policy to depreciate the office equipment at the rate of 20% per annum using the reducing balance method. REQUIRED: (b) Prepare for the partnership of Ann, Bee and Cecilia the appropriation account (including the adjustments of net profit) for the year ended 31 December 2014. (7 marks) (Total: 14 marks)SEERA 8 The following post-closing trial balance was extracted from the books of Umbrella Limited as at 2014: 31 December Debit credit $ 8 Property, plant and equipment, at cost 4,200,000 Accumulated depreciation — property, plant and equipment, 340,000 31 December 2014 Inventory, 31 December 2014 2,520,000 ‘Trade and other receivables 1,663,000 Cash and bank 1,542,000 Trade and other payables 863,000 3,000,000 ordinary shares of $1 each 3,000,000 8% debentures (repayable on 2020) * 1,000,000, Share premium = Preference 4uaye 1,500,000 Share issues = pycliyy ery shove 1,800,000 General reserve 500,000 Retained profits, 31 December 2014 422,000 9,925,000, 9,925,000 After checking the books from auditor, the following errors and omissions were revealed: (i) $500,000 8% debentures were issued at par on 1 October 2014. ‘The proceeds had been wrongly credited to the share premium account. No interest on these new issued debentures has been paid during the year. Gi) On 1 December 2014, 500,000 ordinary shares were issued at $3 per share. Subscription had been received for 600,000 shares. All subscription money had been credited to the share issue account. The shares had been allotted on 30 December and the excess subscriptions were refunded to unsuccessful applicants on 10 January 2015. (iii) Ttwas found that a prepaid rates amounting to $12,000 was wrongly adjusted as accrued, (iv) A batch of goods costing $150,000 was found to be defective. It was estimated that the saleable value of these goods were $130,000 after spending $15,000 to repair them. (vi) A batch of goods with invoiced price $58,000 was sent by a supplier on 31 December 2014 under “sale or return basis”. The transaction has been recorded as purchases and the whole amount of these goods has been included in the closing inventory at 31 December 2014. (vi) The board of directors proposed a transfer of $100,000 to the general reserve and declared a final dividend of $0.02 per share. The new shares were also entitled to the final dividend proposed for the year. No entries had been made for these transactions.REQUIRED: Prepare the following for Umbrella Limite: (@) _ the journal entries necessary for correcting the errors and omissions, (Narrations are not required.) (9 marks) (b) a statement to calculate the revised retained profit as at 31 December 2014. (Gimarks) ony Fev isk (©) the statement of financial position (Gatbeat form) as at 31 December 2014. (7 marks) (1 mark) (d) _ list the type of error occurred in point (i). (Total: 20 marks)