Get premium membership and access revision papers, questions with answers as well as video lessons.
Cpa Section1 Financial Accountings 1 Question Paper
Cpa Section1 Financial Accountings 1
Course:Cpa
Institution: Kisii University question papers
Exam Year:2000
Answer ALL questions.
Marks allocated to each question are shown at the end of the question.
Show ALL your workings.
QUESTION ONE
(a) Briefly state the reasons why a company would not wish to distribute all its profits to its shareholders. (5 marks)
(b) The following balances were extracted from the books of Wamu Traders Ltd.as at 30 September 2000:
Sh Sh.
Ordinary shares of Sh.20 each. Fully paid
600,000
8% preference shares Sh.20 each. Fully paid
100,000
Share premium account
80,000
6°-o loan stock
100,000
Trade creditors
I48,000
Trade debtors
330,000
Sales
4,800,000
Purchases
4,220,000
Discounts allowed
5,000
Discounts received
13,000
Freehold buildings:
At cost
500,000
Provision for depreciation
50,000
Fixtures and fittings:
At cost
640,000
Provision for depreciation
256,000
Stock I October 1999
420.000
Returns outwards
80,000
Establishment expenses
130,000
Administration expenses
56,000
Selling and distribution expenses
167,000
Bad debts written off
4,000
Provision for doubtful debts
18,000
Retained profit I October 1999
362,000
Goodwill
160,000
Bank overdraft
25,000
The following additional information is available:
1. Depreciation is provided annually on the cost of fixed assets held at the end of the financial year at the following rate: Freehold buildings 20% Fixtures and fittings 10%
2. The trade debtors balance includes Sh. 10,000 due from Musa who has now been declared bankrupt. In the circumstances, it has been decided to write the debt off as a bad debt.
3. The provision for doubtful debts as at 30 September 2000 is to be 5°,% of trade debtors
4. Establishment expenses prepaid at 30 September 2000 amounted to Sh.4,000.
5. Administration expenses accrued at 30 September 2000 amounted to Sh.7.000.
6. The company paid the interest on the loan stock for the year, ended 30 September 2000 on 30 October 2000.
7. Closing stock was valued at Sh.560,000. 8. The company''s directors propose that the preference share dividend be paid and a dividend of 10% the ordinary shares he paid. Required:
(i) Trading and profit and loss account and appropriation account for the sear ended 30 September 2000 of Wamu Traders Ltd. (8 marks)
(ii) Balance sheet as at 30 September 2000. (7 marks) (Total: 20 marks)
QUESTION TWO
(a) List the main advantages of ratio analysis. (5 marks)
(b) Munyah Ltd. is an expanding company and the following accounts relate to its operations for the years 1999 and 2000:
Profit statement for the year ended 30 June
1999
2000
Sh.
Sh.
Sales
3,000,000
4,800,000
Less: cost of goods sold
1,650,000
2,700,000
Gross profit
1,150,000
2,100,000
Less: trading expenses
675,000
825,000
Trading profit
675,000
1,275,000
Less: Debenture interest
37,500
37,500
Net profit before taxation
637,500
1,275,000
Less: Corporation tax
240,000
480,000
Net profit after taxation
397,500
757,500
Less: Ordinary share dividend
187,500
262,500
Undistributed profit for the year
210,000
495,000
Introduction 19
FINANCIAL ACCOUNTING 1
Balance sheet as at 30 June
1999
2000
Sh.
Sh.
Sh.
Sh.
Fixed assets at cost
1,500,000
2,100,000
Less: Depreciation
300,000
1,200,000
375,000
1,725,000
Current assets:
Stock
600,000
825,000
Debtors
375,000
525,000
Cash
120,000
1,350,000
Less: current liabilities
1,095,000
Creditors
217,500
300,000
Taxation
240,000
480,000
Proposed dividend
187,500
262,500
Bank overdraft
_______
97,500
(645,000)
(1,140,000)
1,650,000
1,935,000
Financed by:
Ordinary share capital (Authorised and issued)
750,000
750,000
Undistributed profits
525,000
1,020,000
10% debentures
375,000
165,000
1,650,000
1,935,000
Required:
(a)Compute six accounting ratios for both 1999 and 200(1 which you feel would be of particular value in assessing the Profitability and Liquidity of Munyah Ltd. (12 marks)
(b) Comment on the current position of the company with the aid of the accounting ratios computed in (a) above and any other information that you consider to be relevant. (3marks)
QUESTION THREE
The following trial balance was extracted from the books of Literary and, Philosophical Society as at 30 September 2000:
Sh.
Sh.
Balance at bank current account
724,800
Accumulated fund 1 October 1999
5,771,200
Land and building at cost
3,700,000
Debtors for subscription
62,000
Furniture and fittings
1,874,000
Provision for depreciation of furniture and fittings
284,000
Subscriptions
1,450,800
Lecturers? fees
920,000
Lecturers? travel and accommodation expenses
358,000
Donations
108,000
Camera and projector repairs
17,000
Projectors, cameras and audio equipment
190,400
Depreciation of equipment
54,400
Rates and water
277,000
Lighting and heating
367,200
Rental of rooms
495,000
Wages - caretaker
880,000
Restaurant
1,600,000
Bar staff
800,000
Purchase of food
1,565,800
Stock- bar I October 1999
473,600
Bar receipts,
4,032,000
Bar purchases
2,842,000
Restaurant receipts
3,642,000
Loan
1,600,000
Deposit account - bank
1,000,000
Interest payable and receivable
36,000
Creditors for bar an d food
________
178,400
17,651,800
17, 651,800
Additional information:
1: The bar stock was valued at Sh.642.800 as at 30 September 2000.
2. It is expected that of the debtors for subscriptions, Sh.43.600 will not be collectable.
3. The interest account is net. The loan is at a concessional rate of 4% while I0% has been earned on the deposit account. No changes have taken place all year in the principal sums involved.
4. An invoice for Sh.43.000 of wine had been omitted from the records at the close of the year although the wine had been included in the bar stock valuation.
5.Depreciation for the rear is to be provided as follows: Furniture and fittings Sh. 194.000 Projectors. Cameras etc. Sh. 19.000
Required:
(a) Bar and restaurant trading account for the year ended 30 September 2000. (6 marks)
(b) An income and expenditure account for the year ended 30 September 2000. (8 marks)
(c) A balance sheet as at 30 September 2000. (6 marks) (Total: 20 marks)
QUESTION FOUR
Nzioka is a grocer who had not kept complete books of account. The following was a summary of his bank statements for the ear ended 31 October 2000:
Sh.
Sh.
Amounts credited by bank
7,034,000
Balance 1 November 1999
178,400
Payments to trade creditors
6,100,000
Rent and rates
95,000
Fixtures
20,000
Lighting and heating
42,000
General expenses
160,000
Loan interest
24,000
Drawings
180,000
Customer cheque dishonoured
36,000
________
Balance 31 October 2000
198,600
7,034,000
7,034,000
The following information is also available
1. Trading receipts consists partly of cash and party of cheques. During the year. Nzioka had paid out of his cash takings wages amounting to Sh.590.000 and sundry expenditure of Sh 28.000. He retained Sh.600 a week (assume 52 ~weeks in a year) pocket money and maintained a balance of Sh.4.000 in the till tot-change. The balance of his takings. together with cheques amounting to Sh.50,000 which he had cashed out of his takings was paid into the bank.
2. Cheque drawn payable to trade creditors. But not presented at I November 1999 amounted to Sh56000 and at 3I October 2000 Sh.64.000.
3. All dishonoured cheques were re-presented and honoured during the year.
4. The loan interest was paid to the lender who had lent Nzioka Sh.800.000 some years ago at a rate of 3°o p.a. The interest was duly paid half-yearly on 31 January and 31 July and the loan was still outstanding at the close of the year.
5. Discounts allowed by trade creditors amounted to Sh.96.000 and those allowed to debtors were Sh. 104.000.
1.
As at 1 November 1999
31 October 2000
Sh.
Sh.
Stocks
900,000
1,600,000
Trade debtors
560,000
640,000 (includes a bad debt Sh. 40,000)
Accrued general expenses
48,000
38,000 (to be written off)
Rates paid in advance
8,000
10,000
Fixtures valued at
560,000
510,000
Trade creditors
360,000
440,000
Creditors for lighting and heating
16,000
14,000
Required:
(a) A statement of Nzioka''s capital on 1 November 1999. (10 marks)
(b) Profit and loss account for the year ended 31 October 2000 and a balance sheet at that date. (I5 mark) (Total: 25marks)
QUESTION FIVE
(a) Explain giving examples the distinguishing features of liabilities, provisions and reserves. (9 marks),
(b) State how each of these items in (a) above are to be included and shown in the financial statements of a company (6 marks) (Total: 15marks)
More Question Papers