Lecturer: Trizah Kamanja

Email: wanjeri@kca.ac.ke
Phone No: 0722 239 093

 Unit Discussion Forum

 CAA 304-A Course OutlineFile
 Specialized Accounting Techniques Draft Module

Assignment
ASSIGNMENT

QUESTION ONE

ABC Ltd. Obtained a 20 year lease of land from GHL Ltd. Effective from 1 January 1999, for the purposes of
extracting marble.  The lease provided for the payment of a royalty of Sh.100 for every ton of marble extracted
with a minimum rent of Sh.200,000 per year, payable annually on the 31 March of the year following that to
which the payment relates.  Provision was made for short-workings to be recouped out of subsequent excess
workings during the fist four years.

ABC Ltd. Granted a sub-lease of one third of the area of land in question to XYZ Ltd. For 12 years effective
from 1 January 2000.  XYZ Ltd. Was to pay a royalty of Sh.125 per ton of marble extracted merging into a
minimum rent of Sh.80,000 per year.  This royalty was to be payable on the 31 January following the year end
to which the royalty related.  The sub-lease provided for short-workings to be recouped out of any subsequent
excess workings within two years of the end of the year in which the short-workings occurred.  The financial
years of ABC Ltd., GHL Ltd. And XYZ Ltd. End on 31 December.

The quantities of marble extracted were as follows:

Year ended 31 December ABC Ltd. XYZ Ltd.

Tons Tons
1999 1,200 -

2000 1,300 560

2001 1,700 680

 2002 1,800 660

2003 2,000 720

 

Required:

The following accounts in the books of ABC Ltd. For each of the five years ended 31 December 1999, 2000,
2001, 2002 and 2003:

(a)        Royalties payable account                                                                   (4 marks)

(b)        GHL Ltd. Account                                                                              (4 marks)

(c)        Royalties receivable account                                                               (4 marks)

(d)        Short-workings accounts.                                                                    (4 marks)

(e)        XYZ Ltd. Account.                                                                             (4 marks)

                                                                                                            (Total: 20 marks)

CAT

Submission status

Submission status No attempt

Grading status Not graded

Due date Tuesday, 27 February 2018, 12:00 AM

Time remaining 4 days 4 hours

Last modified -

Submission comments Comments (0)

CAT
CAT
 

QUESTION ONE

ABC Ltd purchases gas cookers at Sh.3,500 each and sells them through consigners as Sh. 5,000 each.  Each
consignee is entitled to a commission of 5% on sales from consigned goods and full recovery from sales made
of any expenses incurred on the consigned goods.

            The following transactions took place between ABC Ltd and Xyz Ltd, a consignee, during 5he three-
month period ended 30 June 2006:

            1.          ABC Ltd sent 200 gas cookers to XYZ Ltd. and incurred the following costs:

                        Packing             –          Sh16,000

                        Insurance          -           Sh. 30,000

                         Transport        -           Sh. 42,000

2.          On receipt of the cookers, XYZ Ltd. incurred Sh. 12,000 on unpacking and preparing the cookers for
sale.

3.          XZ Ltd, sold 160 cookers and incurred carriage out costs of Sh. 18,000.  Other incurred by XYZ Ltd.
in the period included casual wages Sh. 15,000, advertising expenses Sh. 5,000 and storage cost Sh.12,000.

4.          Some customers returned gas cookers to XYZ Ltd. after experiencing gas leakage. XYZ Ltd. spent Sh.
10,000 to repair the cookers.

5.          In order to sell 40 cookers, they were all fitted with additional safety gadgets at a total cost of Sh.
12,000 which was paid by XYZ Ltd.

6.          XYZ Ltd. sold 30 of the cookers fitted with the additional safety gadgets at Sh.6,000 each.

7.          XYZ Ltd sent ABC Ltd. an account sales on 30 June 2006 enclosing a cheque for Sh.800,000.

Required:

The accounts listed below in the books of ABC Ltd. for the three-month period ended

30 June 2006.
 

(i)                   Goods sent on consignment account.                                             (5 marks)

(ii)                 XYZ Ltd. account                                                                         (6 marks)     

(iii)                Profit and loss account for the three-month period ended 30 June 2006.

    (4 marks)

                                                                                                  (Total: 15 marks)

QUESTION TWO

Boresha  is a wholesale business and it takes insurance cover against consequential loss with an insurance
company.  The sum insured is sh.457,600 and the period of indemnity is four months.

 On 1 July 2002, a fire occurred in the premises of the business and disrupted the trading activities up to 30
September 2002 when normal operations resumed.

1. The financial year of the business ends on 31 December.

2. Net profit for the financial year ended 31 December 2001 was Sh.210,000
3. Insured standing charges sh.240,000
4. Uninsured standing charges Sh.10,000
5. Reduction in turnover avoided through increase in cost of working Sh.125,000
6. Increased cost of working sh.57,500
7. Savings in insured standing charges sh.5,000.
8. Turnover of the business for three month periods for the two financial years ended 31 December are as
follows:

  2001 2002

Sh. Sh.
1 January to 31 March 450,000 500,000
1 April to 30 June 600,000 650,000

1 July to 30 September 750,000 225,000

1 October to 31 December 700,000 800,000

 

9.         With the insurer’s permission, the special circumstances clause provided for:

 Increase in standard and annual turnover by 10%

 Increase in rate of gross profit of 2%

Required:

The value of claim from the insurance company for the loss of gross profit from 1 July 2002 to 30 September
2002.                                                                                       (15 marks)

                                                                                                (Total: 15  marks)

Submission status

Submission status No attempt

Grading status Not graded

Due date Tuesday, 27 February 2018, 12:00 AM

Time remaining 4 days 4 hours