Question

QUESTION ONE

Masaba Company Ltd. is a retail provider with an authorised share capital of

800,000 Sh.20 ordinary shares and 250,000 8% Sh.20 redeemable preference shares.

The following financial information reflects the position of the company as at 31 December 2018 after preparing the Trading, profit and loss account:

	Sh.
	`000'
Provision for depreciation    Fittings	1,500,
Motor vehicles	3,740
Goodwill	1,200
Issued share capital: 600,000 Sh.20 Ordinary shares	12,000
250,000 Sh.20 Redeemable preference shares	5,000
Share premium account	400
Trade debtors and prepayments	1,708
Land and buildings at valuation (Cost Sh.4, 400,000)	18,400
Capital redemption reserve fund	3,000
Fittings at cost	3,000
Motor vehicles at cost	7,940
10`% Debentures	1,600
Trade creditors and accruals	960
Short-term investments (Market value Sh.860,000)	7 8 0
Stock at 31 December 2018	2,960
Bank overdraft	540
Revaluation reserve	1,000
Net profit for the year	1,440
Retained profit at 1 January 2018	4,460
General Reserve	1,100
Provision for doubtful debts	48
Interim dividend paid - Ordinary	600
- Preference	200

The following resolutions relating to year ended 31 December 2018 have been passed by the board of directors of the company

1.    Transfer Sh.500,000 to General Reserve.

2.     Provide for 5% final dividend and final preference dividend on shares issued and outstanding on 31 December 2018.

3.      Make a bonus issue of 100,000 fully paid ordinary shares from the retained profits account.

Required:

1. The appropriations account of Masaba Company Ltd. for the year ended 31 December 2018. (4 marks)                                                                                            

(ii) Statement of financial position of Masaba Company Ltd. as at 31 December 2018.   (8 marks)

Answer 1

MASABA COMPANY LTD
APPROPRIATION ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2018
	Sh'000	Sh'000
Net profit for the year		1,440
Retained profit at 1 January 2018		4,460
Transfer to general reserve	500
Preference dividend	400
Ordinary share dividend	600
Bonus issue	2,000	-3,500
Retained profit c/d		2,400
MASABA COMPANY LTD
BALANCE SHEET
AS AT 31 DECEMBER 2018
	Sh'000	Sh'000
Non Current Assets
Land and buildings		18,400
Motor vehicles less of provision for depreciation		4,200
Fittings less of provision for depreciation		1,500
Intangible asset - Goodwill		1,200
Current Assets
Trade debtors and prepayments less of provision for doubtful debts	1,660
Short-term investments	780
Stock	2,960	5,400
Total Assets		30,700
Equity & Liabilities
Capital
Issued share capital: 600,000 Sh.20 Ordinary shares	12,000
Add : Bonus issue 100,000 Sh 20 Ordinary shares	2,000	14,000
Issued Share Capital - 250,000 Sh.20 Redeemable preference shares		5,000
Share premium		400
Capital redemption reserve fund		3,000
General Reserve including transfer during the year		1,600
Retained Profits		2,400
		26,400
Revaluation Reserve		1,000
Long term liability
10% Debenture		1,600
Current Liabilities
Trade creditors and accruals		960
Bank Overdraft		540
Outstanding preference interim dividend		200
Total Equity & Liabilities		30,700