CPA 1 – Financial Accounting

Solution 2

(i) Manufacturing statement Mtaki Ltd Statement of manufacturing For the year
ended 31 December 2021.
Shs ‘000’ Shs ‘000’ Shs ‘000’
Opening inventory of raw materials 45,600
Add: Purchase of raw materials 54,600
Discount received on raw materials 2,750
Return of raw materials 600 51,250
96,850
Less: Closing inventory of raw materials 25,000 71,850
Add: Direct costs
Direct expenses 21,300
Depreciation on Plant & machinery 56,000 77,300
Prime costs 149,150
Add: Factory overhead costs
Depreciation:
Building (50%*15% *220,000) 16,500
Furniture & Fittings (20% *12% *24,000) 576
Motor vehicles (40%*25%(200,000-50,000) 15,000
Salaries & wages (50%*(24,750+250)) 12,500
Utilities (80%*(8,450-450) 6,400
Repairs & maintenance (60%*(21,960+8,050) 18,000 68,976
Total cost of goods to be consumed 218,126
Add: Opening work in progress 13,800
Less: Closing work in progress 18,200
Cost of goods fully manufactured 213,726

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(ii) Mtaki Ltd statement of profit or loss for the year ended 31 December, 2021.
Shs ‘000’ Shs ‘000’
Sales 341,200
Less: Return inwards 1,200
Net sales 340,000
Less: Cost of sales
Opening inventory for finished goods 32,200
Add: Cost of goods fully manufactured 213,726
Less: Closing inventory of finished goods 62,800 183,126
Gross profit 156,874
Less: Administration costs
Building (30%*15% *220,000) 9,900
Furniture & Fittings (80% *12% *24,000) 2,304
Motor vehicles (20%*25%(200,000-50,000) 7,500
Interest on bank loan (5,523,783-1,857,116) 3,666.67
Salaries & wages (10%*(24,750+250)) 2,500
Utilities (5%*(8,450-450) 400
Repairs & maintenance (10%*(21,960+8,050) 3,000 29,270.67
Less: Selling & distribution
Building (20%*15% *220,000) 6,600
Motor vehicles (40%*25%(200,000-50,000) 15,000
Salaries & wages (40%*(24,750+250)) 10,000
Utilities (15%*(8,450-450) 1,200
Repairs & maintenance (30%*(21,960+8,050) 9,000
Increase in provision for doubtful debts 1,840 43,640
Net Profit 83,693.33

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Solution 3

(a) Guidelines the entrepreneur can use in choosing a business opportunity

 Make an honest evaluation of yourself and your abilities.
 You should have the ability to run your business enthusiastically.
 You must have complete knowledge of the product or service with which
you are involved.
 Make a market evaluation of the product or service to be offered.
 The rate of return on the investment should be maximum and attractive
and can be accepted.
 Check the training and experience required to run the business properly
 Check with current operators to see how they are making out.

(b)
Pathways Construction Company-Depreciation of non-current assets
(i) Combined non-current asset account
Date Details Shs ‘000’ Date Details Shs ‘000’
1 April ,2019 Bank-Excavators 1,400,000
30 June, 2019 Bank-Compactors 1,540,000
31 Dec, 2019 Bank-wheel loader 800,000 31-Dec-19 Bal c/d 3,740,000
3,740,000 3,740,000
1 Jan, 2020 Bal b/d 3,740,000 31-Mar-20 Disposal 800,000
1 Jan, 2020 Bank-Grader 480,000 31-Dec-20 Bal c/d 3,420,000
4,220,000 4,220,000
1 Jan, 2021 Bal b/d 3,420,000 30-Sep-21 Disposal 480,000
31 Sept, 2021 Bank-New Grader 250,000
Part exchange 380,000 31-Dec-21 Bal c/d 3,570,000
4,050,000 4,050,000
1-Jan-22 Bal b/d 3,570,000

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(ii) Combined accumulated depreciation
Date Details Shs ‘000’ Date Details Shs ‘000’
31-Dec-19 Deprn-Excavators 262,500
Deprn-Compactors 192,500
31-Dec-19 Bal c/f 505,000 Deprn-wheel loader 50,000
505,000 505,000
2020
1-Jul disposal 187,500 01-Jan Balance b/f 505,000
Depreciation
01-Jul Compactor being 87,500
disposed
31-Dec Excavator 284,375
Compactor-remaining 161,875
Wheel Loader 187,500
31-Dec Bal c/f 1,158,750 Grader 120,000
1,346,250 1,346,250
2021 2021
30-Sep Disposal 187,500 01-Jan Bal b/f 1,158,750
Depreciation
30-Sep Grader being disposed 67,500
30-Sep Excavator 213,281.25
Compactor 121,406.25
Wheel Loader 140,625
31-Dec bal c/f 1,553,437.5 Grader 39,375
1,740,937.5 1,740,937.5

(iii) Combined disposal account.

Shs ‘000’ Shs ‘000’
1-Jul-20 Compactor 800,000 1-Jul-20 Acc. Depr. 187,500
Bank a/c 305,000
Loss on disposal 307,500
800,000 800,000
30-Sep-21 Grader 480,000 30-Sep-21 Acc. Depr. 187,500
Gain on disposal 87,500 Exchange 380,000
567,500 567,500

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Additional Workings
Compactor- disposed of Shs ‘000’
Cost 800,000
Depreciation (1/04/2019- 800,000 x25% x(6/12) 100,000
31/12/19)
Depreciation (1/01/2020- 800,000-100,000)x25% x(6/12) 87,500
1/07/2020)
187,500
Depreciation on the remaining 740,000)
compactor (Cost)
Depreciation (1/04/2019- 740000 x25% x(6/12) 92,500
31/12/19)
Depreciation (1/01/2020- 740,000-92,500)x25% 161,875
1/07/2020)

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 Solution 4

(i) Corrected trial balance

Trial balance Adjustments Corrected Trial balance
Account title Debits Credits Debits Credits Debits Credits
Shs ‘000’ Shs ‘000’ Shs ‘000’ Shs ‘000’ Shs ‘000’ Shs ‘000’
Motor vehicles 350,000 350,000
Machinery 400,000 400,000
Equipment 180,000 180,000
Land 150,000 150,000
Capital 530,500 530,500
Retained earnings on 1
January 2020 64,505 64,505
Accounts payable 61,500 61,500
Accounts receivable 34,200 34,200
8,400+49,21
8.75+51,200
+18,000+47
5+
3,250=
Profit for the year 114,600 130,543.75 1,710 14,234
Accrued rent 2,500 2,500
Prepaid Utilities 10,800 10,800
8% SACCO loan 120,000 120,000
Accrued Interest on bank
loan 8,400 8,400
Cash 89,550 2,500 87,050
Drawings 2,500 2,500
Bank 15,450 19,250 3,800
Acc. Depreciation:
Motor vehicles 153,125 49,218 202,344
Machinery 144,000 51,200 195,200
Equipment 36,000 18,000 54,000
Furniture 3,450 2,500 475 1,425
Provision for doubtful debts 3,420 1,710 1,710
Furniture 34,500 25,000 9,500
Disposal 25,000 25,000 0
Totals 1,249,050 1,249,050 1,242,084 1,242,084

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Deriving adjusted figure for profit or loss for the year
Shs ‘000’ Shs ‘000’
Profit for the year before 114600
adjustment
Add:
Reduction in Provision 1710
116310
Less:
Loss on disposal (25,000- 3250
(19250+2500)
Deprn- M/vehicle 49218
Deprn- Machinery 51200
Deprn- Equipment 18000
Deprn- Furniture 475
Accrued interest 8400 130543
Loss for the year -14233
Loss on disposal of furniture
Shs ‘000’
Cost 25,000
Acc. Deprn to date of (25,000/34500) x 3,450 (2,500)
disposal
NBV 22,500
Proceeds 19250
Loss 3,250

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(ii) HEHE traders Corrected statement of financial position as at 30 June 2020.
Non-current assets Cost Acc. Depr. NBV
Shs ‘000’ Shs ‘000’ Shs ‘000’
Land 150,000 150,000
Furniture 9,500 1,425 8,075
Motor vehicles 350,000 202,343.75 147,656.25
Machinery 400,000 195,200 204,800
Equipment 180,000 54,000 126,000
1,089,500 452,969 636,531.25
Current assets
Accounts receivable 34,200
Less: provision for doubtful debts 1,710 32,490
Bank 3,800
Prepaid Utilities 10,800
Cash 87,050 134,140
Total assets 770,671.25
Total equity & Liabilities
Equity
Capital 530,500
Less: Drawings (2,500) 528,000
Retained earnings on 1 January
2020 64,505
Loss for the year (14,233.75) 50,271.25
578,271.25
Non-current liabilities
8% SACCO loan 120,000
Current liabilities
Accounts payable 61,500
Accrued rent 2,500
Accrued Interest on bank loan 8,400 72,400
Total equity & Liabilities 770,671.25

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Solution 5

(i) Mama Kabete Children’s Home Statement of profit or loss for the year ended
31 December 2021.
Shs ‘000’ Shs ‘000’
Sales revenue
Credit sales (w3) 49,300
cash sales 32,450 81,750
Less: Cost of sales
Opening inventory 17,900
Add: Purchases
Credit purchases (w4) 14,000
cash purchases 45,000
Less: Closing inventory 25,500 51,400
Gross profit 30,350
Less: Operating expenses
Depreciation
Motor vehicles-(15%*37,500) 5,625
Equipment- (15%*4,800) 720
Furniture – (15%*600) 90
Office expense (w2) 570
Bookshop adverts 3,500
Utilities (w1) 3,660
Salary & wages – (20%*6,200) 1240
Transport – (80%*8,500) 6,800 22,205
Net profit for the year 8,145

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 (ii) Mama Kabete Children’s Home Statement of income and expenditure for the
year ended 31 December 2021
Incomes: Shs ‘000’ Shs ‘000’
Volunteers contributions 60,500
Grants 56,480
Investment income 43,550
Entrance fees 21,200
Short term member fee (w6) 56,700
Long term member fee (w5) 1,600
Net profit for the year 8,145 248,175
Less: Expenditures
Depreciation
Motor vehicles-85%*37,500 31,875
Equipment- 85%%*4,800 4,080
Furniture - 85%*600 510
Utilities (w1) 2,440
Office expenses (w2) 1,330
Salary & wages – (80%*6,200) 4,960
Transport – (20%*8,500) 1,700
Insurance 1,800
Club printing & stationery 560
Ground rent 4,800 54,055
Income over expenditure 194,120
Workings
W1-Utilities A/c W2-Office expenses A/c
Details Shs ‘000’ Details Shs ‘000’ Details Shs ‘000’ Details Shs ‘000’
income & Exp
Bal b/f 1,200 (6,100x40%) 2,440 Bal b/f 650
Income &
Reciept& Book shop Receipt & Exp (1,900
payments 2,500 (6,100 x60%) 3,660 payments 1,750 x0%) 1,330
Book shop
Bal c/f 2,400 Bal c/f 800 (1,900x70%) 570
6,100 6,100 2,550 2,550

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 W3- Debtors Control Account W4-Creditors Control account
Details Shs ‘000’ Details Shs ‘000’ Details Shs ‘000’ Details Shs ‘000’
Receipts Receipts
and and
Bal b/f 31,500 Payments 64,600 Payments 26,500 Bal b/f 26,000
Refund 2,000
Credit
purchases
Bal c/f 18,200 Bal c/f 13,500 (bal fig) 14,000
Credit sales
(bal fig) 49,300 40,000 40,000
82,800 82,800

Determination of Life Subscription

Shs ‘000’ Shs ‘000’
Total for the year 80,000
Life membership (80,000 x 20%) 16,000
Life membership amortized for the year
(16000/10) 1,600
Therefore; Ordinary subscription received during
the year (80,000-16,000) 64,000
W6-Ordinary membership A/c
Details Shs ‘000’ Details Shs ‘000’
Bal b/f 20,000 Bal b/f 10,500
64,000
Income & Exp (bal fig) 56,700 Income & Exp (bal fig) 11,000
Bal c/f 8,800 Bal c/f
85,500 85,500

Solution 6

(a) Preparing ledger accounts

Cash book
Date Details D/Allowed Cash Bank Date Details D/received Cash Bank
Shs ‘000’ Shs ‘000’ Shs ‘000’ Shs ‘000’
01-Jul Bal b/d 48,215 112,643 2-Jul Purchases 5,450 5,000
16-Jul Sales 1,250 3,200 15-Jul M/vehicle 35,000
Rental
18 Jul income 5,450 19 Jul A/c payable 500 9,500
A/c
22-Jul receivable 400 4,600 20-Jul Utilities 2,250
Bal c/d 46,365 71,793
400 54,065 121,293 500 54,065 121,293

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 Accounts receivable account
Date Details Shs ‘000’ Date Details Shs ‘000’
01-Jul Bal b/d 34,850 22-Jul D/A 400
16-Jul Sales 2,462 Cash 4,600
Bal c/d 32,312
37,312 37,312

Accounts payable account

Date Details Shs ‘000’ Date Details Shs ‘000’
19-Jul Bank 9,500 1-Jul Bal b/d 27,500
D/R 500 2-Jul Purchases 2,050
Bal c/d 19,550
29,550 29,550

Rental income account

Date Details Shs ‘000’ Date Details Shs ‘000’
01-Jul Bal b/d 39,150 18-Jul Bank 5,450
Bal c/d 33,700
39,150 39,150

Utilities account
Date Details Shs ‘000’ Date Details Shs ‘000’
20-Jul Cash 2,250 1-Jul Bal b/d 8,900
Bal c/d 6,650
8,900 8,900

Capital account
Date Details Shs ‘000’ Date Details Shs ‘000’
1-Jan Bal b/d 239,408
Bal c/d 252,208 31-Jul Furniture 12,800
252,208 252,208

Motor vehicle account

Date Details Shs ‘000’ Date Details Shs ‘000’
1-Jul Bal b/d 45,500
15-Jul Bank 35,000 31Jul Bal c/d 80,500
80,500 80,500

Purchases account
Date Details Shs ‘000’ Date Details Shs ‘000’
2-Jul Cash 5,450
Bank 5,000
payable 2,050 Bal c/d 12,500
12,500 12,500

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 Sales account
Date Details Shs ‘000’ Date Details Shs ‘000’
16-Jul Cash 1,250
Bal c/d 6,912 Bank 3,200
receivable 2,462
6,912 6,912

Furniture account
Date Details Shs ‘000’ Date Details Shs ‘000’
31-Jul Capital 12,800 Bal c/d 12,800
12,800 12,800

Accumulated Depreciation-M/vehicle account

Date Details Shs ‘000’ Date Details Shs ‘000’
31-Jul Balance c/f 4,550 Bal b/d 4,550
4,550 4,550
(b) Bwata Ltd.’s Trial balance for the month ended 31 July 2022
A/c title Debit Credit
Shs ‘000’ Shs ‘000’
Cash 46,365
Bank 71,793
Accounts receivable 32,312
Accounts payable 19,550
Purchases 12,500
Sales 6,912
Motor vehicle 80,500
Furniture 12,800
Rental income 33,700
Accrued-utilities 6,650
Capital 252,208
Discount allowed 400
Discount received 500
Acc. Depreciation-M/V 4,550
290,370 290,370

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