Question 1

a) Cost of Land K
Land - purchase price 150,000,000
Delinquent Tax Paid On Land 3,500,000
Total 153,500,000

b) Cost of Building
Construction insurance 3,500,000
Building Construction contract 220,000,000
Architect fee 2,000,000
Street walk & side walk installation 4,000,000
Excavation Costs 3,100,000
Property tax( prio ta constriction) 1,600,000
Interest cost on loan 2,600,000

Total 236,800,000

c) Depreciation
i) Straight line method
Depreciation = (cost of building - residue value)/economic life
Depreciation = (236, 800, 000 - 60, 000)/10 = 17, 680, 000

Year Depreciation Cost Accumulated dep Book value

1 17,680,000 236,800,000 17,680,000 219,120,000
2 17,680,000 236,800,000 35,360,000 201,440,000
3 17,680,000 236,800,000 53,040,000 183,760,000

ii) Double declining method

Double declining rate =100%/Economic life
Double declining rate =100%/10 = 10
double rate 2 * 10 = 20%
Depreciation = rate * book value

Year Depreciation Cost Accumulated dep Book value

1 47,360,000 236,800,000 47,360,000 189,440,000
2 37,888,000 236,800,000 85,248,000 151,552,000
3 30,310,400 236,800,000 115,558,400 121,241,600

iii) Sum of years digit

Denominator = 1+2+3++4+5+6+7+8+9+10 55
n = remaining years
Depreciation = n/55(cost of building - residue value)
Year Depreciation Cost Accumulated dep Book value n
1 28,930,909.09 236,800,000 28,930,909.09 207,869,090.91 9
2 25,716,363.64 236,800,000 54,647,272.73 182,152,727.27 8
3 22,501,818.18 236,800,000 77,149,090.91 159,650,909.09 7

d) Depreciation
New economic life =(7 + 2) 9
New salvage value = 5m + 60m 65,000,000
Cost = BV + Additional cost 193,760,000

Depreciation = (Cost - Residue value)/economic life

Depreciation = (193,760, 000 - 65, 000 000)/9

Year Depreciation Cost Accumulated dep Book value

(10,000,000.00)
4 14,306,667 236,800,000.00 14,306,667 232,493,333.33
5 14,306,667 236,800,000.00 28,613,333 208,186,666.67
Question 2
a) Journal entries
Date Account Debit Credit
1/1/2016 Cash (500 000 * 3) 1,500,000
Common stock (500 000 * 2) 1,000,000
Share premium 500,000
1/1/2016 Subscription receivable (500 00 * 4) 2,000,000
Common stock (500 000 * 2) 1,000,000
Share premium 1,000,000
2/1/2016 Building 3,500,000
Common stock (1000 000 * 2) 2,000,000
Share premium 1,500,000
3/1/2016 Cash (100 000 * 120) 12,000,000
Preference shares(100 000 * 100) 10,000,000
Share premium 2,000,000
30/1/2016 Cash 2,000,000
Subscription receivable (500 00 * 4) 2,000,000

b)
Stockholders Equity section Amount
Common Stock 4,000,000
Preference stock 10,000,000
Share premium 5,000,000

Total stockholders equity 19,000,000

C)
 Cumulative preference shares
Dividend per share =Par * Rate
Dividend per share =100 * 10%
Dividend per share =10
Dividend per year = 10 * 200 000 = 2 000, 000

Profit 50,000,000
Retained (25%) 12,500,000
Profit to be shared 37,500,000
P/shares Dividend for 2016 2,000,000
P/Share Dividend for 2017 2,000,000
P/Share Dividend for 2018 2,000,000
Profit share for preference stock 6,000,000

Common stock Dividend for 2018 31,500,000

d) Earnings per share = Dividend/no of shares

Earnings per share = 31, 500,000/3 000, 000
Earnings per share = K10.5/share

Question 3
a)
Basic Pay 15,000.0
Housing Allowance 3,000.0
Overtime Allowance 1,800.0
Transport Allowance 1,500.0

Gross pay 21,300.0

PAYE COMPUTATION
Band Rate Amount
2000 - -
800 0.25 200
2900 0.30 870
15,600.0 0.35 5,460

Total 6,530

PAYSLIP
Additions Deductions
Basic Pay 15,000.0
Housing Allowance 3,000.0
Overtime Allowance 1,800.0
Transport Allowance 1,500.0
NAPSA (5%) 1,065.00
PAYE 6,530

Gross Pay 21,300.0 7,595.00

NET PAY 13,705.0
b) When Payroll is prepared
Debit Credit
Basic Pay 15,000
Housing Allowance 3,000
Overtime Allowance 1,800
Transport Allowance 1,500
NAPSA payable(employer) 1,065
PAYE 6,530
NAPSA expense 1,065
Net pay 13,705
NAPSA payable(employee) 1,065

b) When Payroll is paid

Debit Credit
Cash 22,365
NAPSA payable
PAYE 6,530.0
NAPSA expense 2,130.0
Net pay 13,705.0
Question 4

Step 1: Calculating gain or loss on sell of assets

Cash Asset Value Gain/loss
K'000 K'000 K'000
Freehold 8,000 4,000 4,000
Plant & Machinery 1,300 1,500 (200)
Stock 4,300 5,000 (700)
Total 3,100.00

JOURNAL ENTRIES
DATE ACCOUNT DEBIT CREDIT
K'000 K'000
Cash 8,000
Freehold(Asset) 4,000
Gain on sale 4,000

Cash 1,300
Loss on sale 200
Plant & Machinery (Asset) 1,500

Cash 4,300
Loss on sale 700
Stock 5,000

Step 2: Share gain or loss on sell of assets Debit Credit

Gain on sale 3,100.00
Mubukwanu Capital 1,240.00
Nthanda Capital 930.00
Manny Capital 930.00

Step 3: Capital after gain/loss sharing

Mubukwanu Nthanda Manny
K'000 K'000 K'000
Opening 5,500 4,000 2,500
Add:Share 1,240 930 930
Closing 6,740 4,930 3,430
Step 4: settle creditors
Debit Credit
Account K'000 K'000
Creditors 2,000
Cash 2,000

Manny takes over debtors

Debit Credit
Account K'000 K'000
Manny capital 2,200
Debtors 2,200

Mubukwanu takes over Nthandas loan

Debit Credit
Account K'000 K'000
Manny capital 2,000
Debtors 2,000

Car Sharing Debit Credit

K'000 K'000
Mubukwanu Capital 600
Nthanda Capital 800
Manny Capital 400
Realization expense 200
Cars (Assets) 2,000