Question

You are provided with the information for Mwape Mulenga and co. Ltd at 31 December 2018: к Ordinary share capital (K500 shares) 5% preference share capital K100 shares Freehold land and buildings at cost Provision for depreciation - buildings Debtors Creditors Cash at bank Stock at 14 January 2018 Sales Discounts allowed Discounts received Purchases Carriage inwards Carriage outwards 10% debentures Debenture interest paid Administrative expenses Salaries (excluding directors) Preference dividend paid Retained Earnings b/f 120 000 40 000 460 000 200 000 20 000 4000 10 000 20 000 160 000 800 400 98 000 2 000 1 600 100 000 10 000 8 000 8 000 2 000 16 000 Adjustments are required for 1. Inventory at 31 December 2018, at cost K30 000 2. Directors' salaries not yet paid K10 000 3. Corporation tax for the year K10 000 4. Proposed ordinary dividend K25 per share 5. Depreciation on buildings is charged at 2% per annum on cost 6. Accrued audit fee K2 000 7. Creation of a plant replacement reserve of K2 000 You are required to prepare a) A trial balance. b) Statement of Profit or Loss. c) Statement of Financial Position for the Company. (5 Marks) 12 Marks) (8 Marks) [Total:25 marks]

Answer 1

Account Title	Trial balance
	Dr	Cr
Ordinary Share Capital		120,000
5 % preference share capital		40,000
Freehold land and building	460,000
Provision for depreciation- Building		209,200
Debtors	20,000
Creditors		4,000
Cash at Bank	10,000
Stock at 1st January 2018	20,000
Sales		160,000
Discount allowed	800
Discount received		400
Purchase	98,000
Carriage inward	2,000
Carriage outward	1,600
10% debenture		100,000
Debenture interest paid	10,000
Administrative Expenses	8,000
Salaries	8,000
Preference Dividend	2,000
Retained earning		16,000
Director salary	10,000
Director salary payable		10,000
Corporate Tax	10,000
Corporate tax payable		10,000
Audit fee	2,000
Audit fee payable		2,000
Plant replacement reserve expense	2,000
Plant replacement reserve		2,000
Depreciation	9,200
Total	673,600	673,600

Income Statement for the year 2018
Revenue
Sales (net of discounts)	159,200
Discount received	400
Total (A)	159,600
Expenses
Cost of Goods Sold	91,600
Wages and Salary Expenses	18,000
Administrative Expenses	8,000
Interest Expenses	10,000
Preference Dividend	2,000
Audit Fee	2,000
Plant replacement reserve expense	2,000
Depreciation	9,200
Total (B)	142,800
Net Income before tax	16,800
Less:- Corporate Tax	10,000
Net Income after tax	6,800

Balance Sheet for the year ended 2018
Assets
Non Current Asset
Free hold Land and building (net of depreciation)	250,800
Current Asset
Accounts receivable	20,000
Inventory	30,000
Cash in Bank	10,000
Total	310,800
Equity & Liabilities
Equity
Ordinary Share Capital	120,000
5 % preference share capital	40,000
	22,800
Non Current liabilities	-
10 % Debentures	100,000
Provision for plant replacement	2,000
Current liabilities
Accounts payable	4,000
Wages and salary payable	10,000
Corporate tax payable	10,000
Audit fee payable	2,000
Total	310,800