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Fin Accounting 3-A1-12-2022
Fin Accounting 3-A1-12-2022
FINANCIAL ACCOUNTING 3
BBAC 321
Email: fmusweu@webmail.co.za
INSTRUCTIONS
The following Trial Balance was extracted from the books of Hillside Plc at 31st March 2006:
K’000 K’000
K1 000 ordinary shares 200 000
8% K1 000 preference shares 70 000
7% debentures 100 000
Land and buildings: cost 130 000
Accumulated depreciation on buildings on 1st April 2005 30 000
Plant and machinery (K348 million cost) 262 500
Motor vans at cost 140 000
Accumulated depreciation on vans on 1st April 2005 56 800
Profit and loss account b/f 20 000
Share premium account 60 200
Inventory at 1st April 2005 35 000
Sales 344 600
Trade Receivables and Payables 45 000 27 000
Bank 5 800
Purchases 166 100
Distribution costs 18 000
General administration expenses 44 900
Debenture interest 7 000
Interim dividends:
Ordinary 10 000
Preference 2 800
Allowance for doubtful debts 1 500
890 100 890 100
a) A new motor van was purchased on 1st January 2006 on credit for K24 million. The
amount was still due to the supplier on 31st March 2006.
b) A motor van which had cost K16 million four years ago when new was sold for
K6.6 million. The proceeds from the sale had not yet been received on 31st March
2006.
None of the above matters had been recorded in the books of the company.
2. Depreciation on motor vans has been and is to be provided at the rate of 20% per annum on
cost and is charged in full in the year of acquisition and none in the year of disposal.
5. On 31st March 2006 the company issued bonus shares to the ordinary shareholders on a one
(1) to ten (10) basis. No entry relating to this has yet been made in the books.
7. A bill for administrative expenses for K150 000 was unsettled as at 31st March 2006.
8. Distribution costs include an insurance premium for delivery vans of K200 000 which relates
to the period 1st July 2005 to 30th June 2006.
9. The allowance for doubtful debts is to be 21/2% of receivables outstanding on 31st March
2006.
Required:
a) Using additional information (1) and (2), prepare the following ledger accounts:
Mupeto Ltd drilled an oil well whose works were completed and production started on 1 March
2016 at a cost of K20, 000. The terms of the license granting permission to drill the oil well are
that Mupeto Ltd will have to ‘return the land to the state it was in before drilling commenced’.
The estimated cost of this in 20 years’ time will be K10, 000. Mupeto Ltd uses a discount rate of
10%.
Calculate the values at which the new oil well will be recognized in the financial statements of
Mupeto Ltd on 28 February 2017, giving explanation for your values. 9 Marks
Question Three
The audit for 2009 for MK Ltd has not yet commenced. The estimated audit fee for the audit of
the 2009 financial statements amounts to K 3, 000. The Finance manager was not sure whether
or not this fee should be provided for in the 2009 financial statement.
Required
Write a memorandum to the directors of MK Ltd explaining the query above. Your answer
should refer to the relevant definitions and the necessary legal and accounting requirements.
6 Marks
Good Luck