- Emojong, Barmoi and Kimani have been partners sharing profits and losses in the ratios 2:2:1. Accounts have been prepared on an annual basis to 31...(Solved)
Emojong, Barmoi and Kimani have been partners sharing profits and losses in the ratios 2:2:1. Accounts have been prepared on an annual basis to 31 December of each year Emojong the only active partner, died on 31 May 2002 and the remaining partners decided to cease business from that date. The assets are to be realized, outstanding debts paid and the remainder to be shared by the partners (including the executors of Emojong’s estate) in an equitable manner, distributions of cash being made as soon as possible.
A balance sheet prepared as at 31 May 2002 revealed the following position
Date posted: February 11, 2019. Answers (1)
- Ali and Bali are in partnership trading as A and B Retailers. Similarly, Cheche and Dunga are in partnership trading as C and D Traders....(Solved)
Ali and Bali are in partnership trading as A and B Retailers. Similarly, Cheche and Dunga are in partnership trading as C and D Traders. It was mutually agreed that as at 1 January 2004, the partnership businesses be amalgamated into one firm, ABC and D Enterprises. The profit and loss sharing ratios of the partners both in the old and new partnership were as follows:
Date posted: February 11, 2019. Answers (1)
- Jembe and Panga were sole traders manufacturing farm implements. On 31 March 2004, they amalgamated and traded as partners sharing profits and losses in the...(Solved)
Jembe and Panga were sole traders manufacturing farm implements. On 31 March 2004, they amalgamated and traded as partners sharing profits and losses in the ratio of 3:2. One year later on 31 March 2005, they converted the partnership into a limited liability company called Shamba Ltd.
No. adjustments have been made to record the amalgamation and conversion but the balance sheets for the sole traders as at 31 March 2004 and the partnership as at 31 March 2005 were as follows:
Date posted: February 8, 2019. Answers (1)
- Kuni and Moto were partners in a business of logging and saw milling sharing profits and
losses equally. The partnership balance sheet as at 31 December...(Solved)
Date posted: February 8, 2019. Answers (1)
- A and B Advocates and M and N Advocates were practicing firms of advocates. On 1 January 2006, they agreed to amalgamate the partnerships into...(Solved)
A and B Advocates and M and N Advocates were practicing firms of advocates. On 1 January 2006, they agreed to amalgamate the partnerships into one firm Able and Mine Advocates. The accounts of the separate partnerships have been prepared annually to 31
December.
The agreed profit and loss sharing ratios in the old and new firms were as follows
Date posted: February 8, 2019. Answers (1)
- List and briefly explain five attributes of reliable financial statements as promulgated in the IFRSs(International Financial Reporting Standards) framework.(Solved)
List and briefly explain five attributes of reliable financial statements as promulgated in the IFRSs(International Financial Reporting Standards) framework.
Date posted: February 8, 2019. Answers (1)
- Distinguish between relevance and reliability in the context of IFRSs(International Financial Reporting Standards) Framework.
(Solved)
Distinguish between relevance and reliability in the context of IFRSs(International Financial Reporting Standards) Framework.
Date posted: February 8, 2019. Answers (1)
- Ali, Baba and Cheche were in partnership sharing profits and losses in the ratio 2:2:1 respectively. Following serious disagreement, the partners decided to dissolve the...(Solved)
Ali, Baba and Cheche were in partnership sharing profits and losses in the ratio 2:2:1 respectively. Following serious disagreement, the partners decided to dissolve the partnership. The proceeds from sale of assets were to be paid to the individual partners after all expenses and liabilities had been paid.
The balance sheet as at 30 September 2007 when the partners made the decision to dissolve the partnership was as follows:
Required:
a) Briefly explain the rule in Garner Vs Murray.
b) A statement showing how cash realized would be distributed to the partners.
c) Realization account, cash at bank account and capital accounts to close off the books of the
partnership.
Date posted: February 8, 2019. Answers (1)
- Meme, Noni and Zenah are partners sharing profits and losses in the ratio 3:2:1 respectively, after allowing for interest on fixed capitals t the rate...(Solved)
Meme, Noni and Zenah are partners sharing profits and losses in the ratio 3:2:1 respectively, after allowing for interest on fixed capitals t the rate of 5% per annum. The partners prepare their partnership accounts annually to 30 September.
The balance sheet of the partnership as at 31 March 2008 was as follows:
Date posted: February 8, 2019. Answers (1)
- X and Y are partners with equal capital contributions in a wholesale business and sharing profits and losses among X,Y and Z in the ratio...(Solved)
X and Y are partners with equal capital contributions in a wholesale business and sharing profits and losses among X,Y and Z in the ratio of 2:2:1respectively. The partners however disagreed after six months of operation and dissolved the partnership on 30th November 2009. No adjustment has been made to record the amalgamation. The following statements of financial position as at 31st May 2009 and 30th November 2009 are provided.
Date posted: February 8, 2019. Answers (1)
- Michael and Stella were in partnership sharing profits and losses equally until 30 April 2011 when they decided to convert the partnership into a limited...(Solved)
Michael and Stella were in partnership sharing profits and losses equally until 30 April 2011 when they decided to convert the partnership into a limited company, Michelle Ltd. The company was registered immediately
The following trial balance was extracted on 30 April 2012; one year after the conversion
Date posted: February 8, 2019. Answers (1)
- Able, Patient and Hastine were in partnership sharing profits and losses in the ratio of 5:3:2 respectively. Due to irreconcilable differences they agreed to dissolve...(Solved)
Able, Patient and Hastine were in partnership sharing profits and losses in the ratio of 5:3:2 respectively. Due to irreconcilable differences they agreed to dissolve the partnership. Any realisation of assets was distributed to the partners on realization after all expenses and liabilities were paid.
The following is the statement of financial position as at 31 August 2012 when the resolution to dissolve the partnership was effected
Required;-
(i) Statement of cash distribution to the partners.
(ii) Realization account,
(iii) Bank account.
(iv) Partners' capital accounts.
Date posted: February 8, 2019. Answers (1)
- Alice and Benard Advocates and Maneno and Neno Advocates were practicing firms of Advocates. On 1 July 2012, they agreed to amalgamate their partnership businesses...(Solved)
Alice and Benard Advocates and Maneno and Neno Advocates were practicing firms of Advocates. On 1 July 2012, they agreed to amalgamate their partnership businesses into one firm and called it Abliman advocates. The accounts of the separate partnerships have been prepared annually to 30 June 2012.
The agreed profit and loss sharing ratios in the old and new firms are as follows:
Date posted: February 8, 2019. Answers (1)
- Kamili Ltd leased a machine from Super Machines Ltd. The terms of the lease were as follows:
(Solved)
Kamili Ltd leased a machine from Super Machines Ltd. The terms of the lease were as follows:
Date posted: February 8, 2019. Answers (1)
- Capps Ltd.., a manufacturing company, leased production equipment from Deux Ltd On 1st January 2008. The lease provided for an immediate rental payment of sh....(Solved)
Capps Ltd.., a manufacturing company, leased production equipment from Deux Ltd On 1st January 2008. The lease provided for an immediate rental payment of sh. 10 million and three other annual rentals of shs. 10 million commencing 1 January 2009. The equipment has an estimated useful life of four years with a nil residual value. The cash selling price of equipment is shs.32.1 million. Interest rate implicit in the lease is 17 per cent per annum.
Required:-
For the years ended 31 December 2008, 2009, 2010 and 2011, show in the books of Capps Ltd:-
i) Extracts of the profit and loss account.
ii) Extracts of the balance sheet.
Date posted: February 8, 2019. Answers (1)
- On 1 November 2008, Apple Ltd sold a plant with a book value of Sh. 10 million to Mango Ltd. The fair value and the...(Solved)
On 1 November 2008, Apple Ltd sold a plant with a book value of Sh. 10 million to Mango Ltd. The fair value and the selling price of the plant at the date of sale was Sh. 15.2 million. The plant was immediately leased back over a lease term of four years which the assets is remaining useful life. The residual value at the end of the lease period is estimated to be a
negligible amount. Apple Ltd can purchase the plant at the end of the lease period for a nominal amount of sh. 1000. The lease is non-cancellable and requires equal annual rental payments of sh. 4.35 million at the commencement of each financial year. The implicit interest in the lease is 10% per annum. The plant is depreciated on straight line basis. The present value of an ordinary annuity of Sh.1 per year for 3 years at 10% interest is Sh.2.49.
Required:
Explain the classification of the above lease and show how the lease should be accounted for in the financial statements of Apple Ltd for the year ended 31 October 2009 in accordance with IAS 17(Leases).
Date posted: February 8, 2019. Answers (1)
- A lessor leases out an asset on terms which constitute a finance lease. The primary period is five years commencing 1 July 2010 and the...(Solved)
A lessor leases out an asset on terms which constitute a finance lease. The primary period is five years commencing 1 July 2010 and the rental payable is Sh.3, 000,000 per annum (in arrears). The lessee has the right to continue the lease after the five-year period referred to an indefinite period at a nominal rent. The cash price of the asset in question as at 1 July 2010 can be assumed to be Sh.11, 372,000. The rate of interest implicit in the lease is 10%.
Required:
Show the accounting entries in the leaser’s books (Apply the requirements of IAS 17- Leases).
Date posted: February 8, 2019. Answers (1)
- Madini Ltd. has entered into an agreement with a finance company to lease a machine for a four-year period. Under the terms of the agreement,...(Solved)
Madini Ltd. has entered into an agreement with a finance company to lease a machine for a four-year period. Under the terms of the agreement, the machine is to be made available, to Madini Ltd. on 1 January 2012'; when an immediate payment of Sh.2,550,000 will be made, followed by seven semi-annual payments of an equal amount. The fair market price of the machine on 1 January 2012 is expected to be Sh. 16,320,000. The estimated useful life of this type of machine is 4 years. The implicit rate of interest in the transaction is 6.94% payable annually. The corporate tax rate is 30%. Madini Ltd.'s policy is to depreciate machines of this type over four-year period using the straight line basis.
Required:
Show how the above transaction would be reflected in the income statement of Madini Ltd for each of the four years ending 31 December 2012,2013,2014 and 2015.
(Assume that the lease is to be capitalised: Use the actuarial method to allocate the interest
charge)
Date posted: February 8, 2019. Answers (1)
- Discuss the reasons why IAS 12 (revised) requires enterprises to provide for deferred taxation on revaluations of assets and fair value adjustments on business combination.(Solved)
IAS 12 (revised) “Income Taxes” requires an enterprise to provide for deferred tax in full for all deferred tax liabilities with only limited expectations. The original IAS 12, and the equivalent Kenyan Accounting Standard, allowed an enterprise not to recognize deferred tax assets and liabilities where there was reasonable evidence that timing differences would not reverse for some considerable period ahead; this was known as the partial provision method.
The original IAS 12 did not refer explicitly to fair value adjustments made on a business combination and did not require an enterprise to recognize a deferred tax liability in respect of asset revaluations. The revised IAS 12 now requires deferred tax adjustments for these items and classifies them as temporary differences.
Discuss the reasons why IAS 12 (revised) requires enterprises to provide for deferred taxation on revaluations of assets and fair value adjustments on business combination.
Date posted: February 8, 2019. Answers (1)
- IAS 12 (revised) “Income Taxes” requires an enterprise to provide for deferred tax in full for all deferred tax liabilities with only limited expectations. The...(Solved)
IAS 12 (revised) “Income Taxes” requires an enterprise to provide for deferred tax in full for all deferred tax liabilities with only limited expectations. The original IAS 12, and the equivalent Kenyan Accounting Standard, allowed an enterprise not to recognize deferred tax assets and liabilities where there was reasonable evidence that timing differences would not reverse for some considerable period ahead; this was known as the partial provision method.
The original IAS 12 did not refer explicitly to fair value adjustments made on a business combination and did not require an enterprise to recognize a deferred tax liability in respect of asset revaluations. The revised IAS 12 now requires deferred tax adjustments for these items and classifies them as temporary differences.
Explain why the IASC decided to require recognition of the deferred tax liability for all temporary differences (with certain exceptions) rather than allowing the partial provision method.
Date posted: February 8, 2019. Answers (1)