ADVANCED ACCOUNTING TEST 1 TIME : 45 MINUTES

a) Distinguish between accounting bases and accounting standards (2Marks)

b) The following trial balance was extracted from the books of Ceri Ltd as at 31 October 2018:
Items Note Dr (Shs'000') Cr (Shs'000')
Accumulated profits 248,400
Administration expenses 239,200
Advertising Costs 73,600
Cash and cash equivalents 380,868
Costs of Rent for warehouse 54,900
Deferred tax 55,200
Distribution costs 64,400
Dividends paid on equity shares 18,400
Income tax 3 1,840
Interest expense on interest bearing borrowings 27600
Inventories 31 October 2017 1 167,440
Issued equity capital 5 460,000
10% Long-term interest bearing borrowings 368,000
Accumulated depreciation on property ,plant 4 143,428
and equipment at 31 October 2017
Production costs 521,000
Property, plant and equipment at cost 4 524,400
Provisions 23,000
Revenue 1,168,400
Suspense account 4 11,040
Accounts payables 124,200
Accounts receivables 2 559,300
Totals 2,603,508 2,603,508

Notes:
1. The carrying value of inventories at 31 October 2018 was Shs 200 million valued using
NRV Method of Inventory Valuation but its cost was estimated at Shs 220 Million.
2. The figure for Accounts receivables includes an amount receivable from KC Ltd of Shs
59.3 million, of this, about 30% is considered incollectible.
3. Taxation:
(i) The estimated corporation tax on the profits for the year to 31 October 2018 is Shs 12
million.
(ii) During the year, Shs 17.48 million was paid as full and final settlement for
corporation tax on the profits for the year ended 31 October 2017. The statement of
financial position as at 31 October 2017 had included Shs 19.32 million in respect of
this liability.
4. Property, plant and equipment:
(i) Cost and accumulated depreciation
Details Property
Land Buildings Plant & equipment
Shs’000 Shs’000 Shs’000
Cost at 31 October 2018 110,400 165,600 248,400
Estimate of useful economic life Infinite 50 years 8 years
(at date of purchase)
Accumulated depreciation at 31 0 41,400 102,028
October 2017

(ii) For all tangible non-current assets depreciation is charged in full in the year of purchase, with
no depreciation being charged in the year of sale. None of the non-current assets were fully
depreciated at 31 October 2018. Depreciation is charged under administration costs.

(iii) During the year plant and equipment costing Shs 56 million and having been depreciated by
a cumulative amount of Shs 42 million at 31 October 2018 was disposed of and the proceeds
credited to a suspense account.

5. On 2 November 2018, Ceri Ltd issued a further 10 million ordinary shares for Shs 140 million.
The share issue has not been reflected in the above trial balance.

Required: In so far as the above information permits and in accordance with IAS1: Presentation
of Financial Statements excluding notes (but provide workings) Prepare, for Ceri Ltd for the
year ended 31 October 2018,
(a) A statement of Profit or Loss and other comprehensive income. (12 marks)
(b) A statement of changes in equity. (4marks)
(c) A statement of financial position. (12 marks)
REMEDIAL TEST FOR ADVANCED ACCOUNTING
Hannah Company Limited is a quoted company with authorized share capital of 500,000
ordinary shares of shs.1,000. The company deals in the business of producing soft drinks. The
following information has been provided for the period ended 31/12/2020.
Details Amount „shs 000‟
Turnover 1,013,000
Raw Materials cost 366,238
100,000,000 authorized and fully paid Ordinary Shares 2 200,000
1,400,000, 5% redeemable Preference Shares 10 14,000
9% Bond issued 20,000
Office Furniture and equipment 15,000
Distribution cost 152,571
Manufacturing Overhead expenses 159,302
Wages of production employee 98,789
Salaries of Sales and distribution staff 56,400
Wages of Cleaners at the Admin/Head office 10,560
Depreciation of Factory machines 7.300
Admin and Management remuneration 91,100
Legal and accountancy fee 750
Interest on bank overdraft 1,680
Interest from investment in insurance Scheme 2,000
Tax on the interest from Insurance scheme 350
Utilities 1,600
Audit fee 1,500

The following information is also provided:

1. Hannah Company Ltd closed one of its branches in Nakawa and incurred a loss of
UGX1,000,000.
2. There was under provision for taxes in the year amounting to UGX 564,000. Corporation
Tax rate is 30%.
3. Office furniture and equipment are depreciated at 20% per annum on straight line basis.
4. Of the total interest on bond, UGX900,000 was paid during the year and balance accrued.
5. Hannah Company Ltd received UGX3,000,000 after tax from investment in another
company.
 6. Utilities to be allocated 30% factory, 50% Sales & Distribution and 20% Admin.
7. Admin and Management remuneration is to be allocated as follows:
a. Cost of Sales 20%
b. Distribution cost 30%
c. Admin Expenses 50%
8. Redeemable Preference Shares qualify as a liability and are treated as such, its dividends
paid annually.
9. Foreign Exchange fluctuation during the year resulted in to a gain of UGX 200,000.

Required;
In a form suitable for publication and in conformity with the provision of IAS 1, prepare a
statement of comprehensive income.
QUESTION
The following information relates to KK Limited Company as at 31/10/2021
Details (Shs '000) (Shs '000)
Sales and Purchases 1,400,000 1,900,000
Discounts 70,000 10,000
Plant and Equipment 100,000
Land 880,000
Motor Vehicles 500,000
Accounts Payable 30,000
Investments 100,000
Accounts Receivable 50,000
Share Capital 1,500,000
Share Premium 140,000
Revaluation Surplus 120,000
General Reserves 495,000
13% Debentures 550,000
Utilities 170,000
Office Salaries and Wages 430,000
Salesmen Commission 70,000
Bad Debts written off 50,000
Returns 15,000 35,000
Inventory at Start 85,000
Cashbook Balance 1,088,000
Repairs of Delivery Van 80,000
Total 5,090,000 5,090,000

Notes
a) Inventory at close was Shs 79,000,000 at cost but Fair Value was Shs 50,000,000
b) At 28 October 2021 Government provided assistance to KK Ltd purchase additional plant
of Shs 34,000,000. This should be accounted for as an assistance for assets.
c) Included in investments is an asset worth Shs 23,000,000 for which management is
actively seeking for a buyer within the next four months.
 d) The fair value of Plant and Equipment was Shs 90,000,000; the Plant and Equipment
would generate the net cash inflow of: Shs 30,000,000; Shs 40,000,000; Shs 35,000,000
and Shs 20,000,000 in the remaining estimated useful life of four years. The Bank rate is
currently 16% and is expected to stay at this level for the next four years. Revaluation
Surplus Account does not relate to Plant and Equipment
e) Provide for depreciation on: noncurrent assets at 25% and Provide for bad debts at 5%
f) Additional 5,000 Shares of Shs 1,000 each were issued for cash at Shs 1,500 each
g) On 23 November 2021 it was discovered that a client with a balance of Shs 9,000,000
was bankrupt
h) The cashbook balance was overstated by Shs. 3,000,000; while purchases were
understated by Shs 3,000,000

Required
Prepare the Statements of comprehensive income and Financial Position as required by
IAS 1 using the information above. (25 marks)
COURSEWORK QUESTION
The following trial balance has been extracted from the books of Nanah Company as at
31/03/2018

Details Dr Cr
UGX “000” UGX “000”
Land at cost 120
Building at cost 250
Equipment at cost 196
Vehicle at cost 284
Goodwill cost 300
Accumulated Depreciation at 1/4/2017
Buildings 90
Equipment 76
Vehicles 132
Inventory at 1/4/2017 107
Trade receivables and payables 183 117
Allowance for allowance 8
Bank Balance 57
Corporation Tax 6
Ordinary Shares of 1/= each 200
Retained Earnings at 1/4/2017 503
Sales 1,432
Purchases 488
Directors Fees 150
Wages and Salaries 276
General distribution costs 101
General Administrative expenses 186
Dividend Paid 20
Dividend Received 30
Disposal Of vehicle 10
2,661 2,661

The following information is also available:

1) The company’s non-depreciable land was valued at 300,000/= on 31/3/2018 and this
valuation is to be incorporated into the accounts for the year to 31/3/2018
2) The company’s depreciation policy is as follows
Buildings 4% P.a straight line
Equipment 40% P.a reducing balance
Vehicles 25% P.a straight line
 3) On 1st February 2018, a vehicle used entirely for administrative purposes was sold for
10,000/=. The sale proceeds were banked and credited to a disposal account but no other
entries were made in relation to the disposal. The vehicle had cost 44,000/= in august
2014. This was the only disposal of non-current asset made during the year to 31st march
2018
4) Depreciation is apportioned as follows

Details Distribution costs Administrative expenses

Buildings 50% 50%
Equipment 25% 75%
Vehicles 70% 30%
5) The company’s inventory at 31 March 2018 is valued at 119,000
6) Trade receivables include a debt of 8,000/= which is to be written off. the allowance for
receivables is to be adjusted to 4% of the receivables which remain after this debt has
been written off
7) Corporation tax for the year to 31 March 2017 was over estimated by 6,000/=. The
corporation tax liability for the year to 31 march 2018 is estimated to be 30,000/=
8) One-quarter of wages and salaries were paid to distribution staff and the remaining three-
Quarters were to administrative staff
9) General administrative expenses include bank overdraft interest of 9,000/=
10) A dividend of 10% per ordinary share was paid on 31 December 2017. No further
dividends are proposed for the year 31 March 2018

Required

Prepare the following financial statements for Nanah Company in accordance with the
requirements of international accounting standards.

a) A statement of comprehensive income for the year to 31 March 2018

b) A statement of financial position as at 31 March 2018
c) Statement of changes in equity for the year 31 March 2018