Financial Accounting 2

BBA 212
Instructions
1 Answer one (1) question only

Q. 1
The trial balance of Beta PLC as at 30 September 2018 was as follows:

Dr Cr
K K
Revenue 380,000
Material purchases 64,000
Production labour 124,000
Factory overheads 80,000
Distribution costs 14,200
Administrative expenses 46,400
Finance costs 350
Investment income 800
Leasehold property at cost 50,000
Plant and equipment at cost 44,500
Accumulated depreciation
- Leasehold property 10,000
-Plant and equipment 14,500
Investments at cost 18,000
Inventory 46,700
Trade receivables 33,550
Trade payables 27,000
Bank 2,300
Ordinary share capital 50,000
Retained profits 33,600
Deferred tax 2,700

521,700 521, 700

Notes:
(i) Inventory of finished goods on promises of Beta PLC at 30 September 2018 was counted and
valued at K54, 800.
(ii) All plant and equipment is depreciated at 20% per annum using the reducing balance method
with time apportionment in the year of purchase.
The directors decided to revalue the leased property in line with recent increases in market
values. On 1 October 2017 an independent surveyor valued the leased property at K48, 000,
which the directors have accepted. The leased property was being amortized over an original
life of 20 years which has not changed. Beta PLC does not make a transfer to retained earnings
in respect of excess amortization.
All depreciation and amortization is charged to cost of sales No depreciation or amortization has
yet been charged on any non-current asset for the year ended 30 September 2018.
(iii) Provide for corporation tax for the year for K24, 300.
(iv) Included in production labour is the cost of K10,000 pertaining to the construction of plant and
equipment

Required:
(a) Prepare a statement of profit or loss and other comprehensive income for the year ending 30
September 2018 in accordance with the Companies Act and International Accounting Standards
(10 marks).
(b) Prepare a Statement of Financial Position as at 30 September 2018 in accordance with the
Companies Act and International Accounting Standards ( 10 marks).
(c) A friend of yours has bought some shares in Zambeef PLC a company listed on the Lusaka
Stock Exchange (LUSE) and has received the financial statements. There is one page he is
having difficulty in understanding.
Clearly answer his questions with specific examples where applicable:
i) What is a statement of financial position?
ii) What is an asset?
iii) What is a liability?
iv) What is share capital?
v) What is share premium?
vi) What is revaluation reserve?
vii) What is bonus issue of shares?
viii) What is rights issue of shares?
ix) What are loan notes?
x) What is a statement of comprehensive income? ( 10 marks)

Total 30 marks
Q.2

The following trial balance as at 31 December, 2015 relates to Tiger and Lion who are in partnership
sharing profits and losses in the ratio 2: 3.
K K
Buildings at cost 160,000
Fixtures and fittings at cost 8,200
Provision for depreciation- Fixtures 4,200
Accounts receivables 62,000
Accounts payables 26,590
Cash at bank 6,130
Inventory 62,740
Purchases 210,000
Sales 363,711
Carriage outwards 3,410
Discounts allowed 620
Loan interest- J. Gumbo 3,900
Office expenses 4,760
Salaries and wages 57,809
Bad debts 1,632
Allowance for receivables 1,400
Long-term loan 65,000
Capitals: Tiger 100,000
Lion 75,000
Current accounts: Tiger 4,100
Lion 1,200
Drawings: Tiger 31,800
Lion 28,200
641,201 641,201
Additional information:
i) Inventory, 31 December,2015 was K85,000
ii) Expenses to be accrued : Office expenses K300; Wages K 1,000
iii) Depreciation on Fixtures 15% reducing balance basis; Buildings 5% straight line basis.
iv) A customer owing K2, 000 was killed by a crocodile while swimming in the Zambezi River
and there is no hope of recovering the amount due.
v) An allowance of 2% should be provided on outstanding accounts receivables.
vi) Partnership salary : K25,000 to Tiger, not yet entered
vii) Interest on drawings : Tiger K800 : Lion K600
viii) Interest on capital account balances at 5% per annum.

Required:
a) Prepare the income statement for the partnership for the year ending 31 December, 2015
(10 marks)
b) Prepare the following partners’ accounts:
i) Profit and Loss Appropriation Account

ii) Partners capitals and current accounts in columnar form (5 marks)

 c) Prepare the statement of financial position for the partnership as at 31 December, 2015
(10 marks)
d) Discuss the provisions of the Gamer v Murray rule with regard to partnership dissolution?
(5 marks)
Q. 3
Discuss the key provisions of the following accounting standards:
a) IFRS 16 Leases ( 15 marks)
b) IAS 7 Statement of cash flows ( 15 marks)
Total 30 marks