PRACTICE QUESTIONS

QUESTION ONE
(a) Outline four objectives of accounting regulatory bodies.
(4 marks)
(b) The following trial balance was extracted from the books of Pelpex Limited as at 31
December 2013:
Share capital (sh.100 ordinary shares)
Share premium
10% loan notes
Non-current assets:
Freehold land
Buildings
Plant and equipment
Motor vehicles
Accumulated depreciation (1 January 2013):
Buildings
Plant and equipment
Motor vehicles
Sales
Purchases
Trade receivables and trade payables
Bad debts
Provision for doubtful debts (1 January 2013):
Salaries and wages
Rent and rates
10% loan note interest
Revenue reserves (1 January 2013)
Director's salaries
Motor vehicle running expenses
General expenses
Inventory (1 January 2013)
Balance at bank

Sh. '000'

Sh. '000'
300,000
100,000
300,000

280,000
300,000
80,000
300,000

634,800
71,200
3,800
92,400
14,200
30,000
72,000
33,600
2,400
149,000
2,063,400

40,000
32,000
40,000
1,053,000
41,400
3,200

150,200

3,600
2,063,400

Additional information:
1. Share capital is divided into 3,000,000 ordinary shares of sh.100 each, all of which were
issued and fully paid.
2. Inventory as at 31 December 2013 was valued at sh.162,400,000.
3. The provision for doubtful debts is to be adjusted to sh.3,600,000.
4. Motor vehicle running expenses due but unpaid as at 31 December 2013 amounted to
sh.4,200,000.
5. Rent and rates paid in advance as at 31 December 2013 amounted to sh.3,000,000
6. Depreciation is charged as follows:
Plant and equipment 10% per annum at cost.
Motor vehicles 20% per annum on cost
Buildings to be depreciated by sh.8,000,000
Required:
(i)
(ii)

Income statement for the year ended 31 December 2013.

Statement of financial position as ta 31 December 2013.

Page 1 of 2

(8 marks)
(8 marks)

QUESTION TWO
Lydia and Jacob are in partnership sharing profits and losses in the ratio of 3:2 respectively. The
partnerships trial balance as at 31 December 2014 was as follows:
Gross profit
Accounts receivable
Accounts payables
Capital accounts:
Lydia
Jacob
Current accounts:
Lydia
Jacob
Drawings:
Lydia
Jacob
Allowance for doubtful debts (1 January 2014)
Bank balance
Discount allowed and discount received
Inventory (31 December 2014)
Buildings
Insurance
Motor Van (at cost)
Motor Van running expenses
Furniture and Fittings (at cost)
Salaries

Sh.

Sh.
12,960,000

9,720,000

6,196,500
56,700,000
40,500,000
9,882,000
10,692,000

4,050,000
6,480,000
6,488,100
1,976,400
20,088,000
54,270,000
2,025,000
12,150,000
2,025,000
8,100,000
10,935,000
138,307,500

688,500
688,500

138,307,500

Additional information:
1. Interest on capital accounts should be provided for at the rate of 5% per annum
2. Interest on drawings is to be charged at the rate of 8% per annum
3. Depreciation is to be provided for as follows:
Non-current asset
Motor van
Furniture and Fittings
4. Motor van running expenses include:

Rate per annum

10% on cost
15% on cost

Inventory of unused spare parts

Pre-paid insurance for the year 2015
5. Allowance for doubtful debts is to be adjusted to 5% of the accounts receivable.

Sh.
243,000
405,000

Required:
(a) Income statement for the year ended 31 December 2014.
(b) Partners current accounts as at 31 December 2014.
(c) Statement of financial position as at 31 December 2014.

Page 2 of 2

(8 marks)
(6 marks)
(6 marks)