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EXERCISE No 2
This exercise is divided into two sections (a) and (b); both sections must be answered.
a) Tom and Jerry are in partnership as architects. They have prepared the Trading and Profit and Loss account of their practice for the year ended 31/12/13 and the net profit before the apportionment between them is shown in the trial balance below.
Debit £ Credit £
Building 200000
Office equipment 25000
Stock 50000
Debtors 23500
Bank balance 1500
Partner’s Capital account - Tom 100000
Partner’s Capital account - Jerry 80000
Further Capital introduced by Jerry (see note 1) 10000
Current account - Tom 16340
Current account - Jerry 28290
Drawings - Tom : On 01/04/13 4000
“ “ 31/08/13 6000
“ “ 30/09/13 8000
Drawings - Jerry : On 01/04/13 8000
“ “ 31/08/13 9000
Long Term Loan to the business –Tom (see note 2) 20000
Net Profit for the year before appropriation 78700
Creditors 1670
335000 335000
You are also given the following information:
1. Jerry introduced the £10,000 further capital on 01/01/13.
2. Tom lent the £20,000 Long Term Loan to the business on 01/07/13.
3 .The net profit (loss if any) is shared as follows:
Tom Jerry
Salaries for year 20000 25000
Interest on capital is calculated at 10%pa 10%pa
Interest is calculated monthly on Drawings at 5%pa 5%pa
Interest is calculated on the Long term loan at 10%pa -
Remaining profit/loss is shared 2/3rds 1/3rd
You are required to prepare the Appropriation Account, showing the apportionment of the profit/loss between the partners, the partners’ Current Accounts starting with the balance at 01/01/13 showing the relevant entries and the final closing balance, and the Balance Sheet as at the 31/12/13. (Allocated marks 40).
b) The following Trial Balance has been extracted from the books of ABC Ltd, as at the 31/12/13.
Share Capital, Authorized, Issued and fully paid:
Ordinary Shares of £1 each 100000
5% Debentures 25000
Purchases 150430
Sales 188590
Stock at 01/01/13 15325
Freehold property at cost 115000
Furniture and Equipment at cost 15000
Debenture interest to 30/06/13 625
Bank overdraft 5525
Trade Debtors 16440
Trade Creditors 9870
Interim dividend 3000
Wages and Salaries 16200
Rent and Rates 1850
General Expenses 3950
Bad Debts 1360
Profit and Loss Account- balance at 01/01/13 10195
339180 339180
You are also given the following information:
a) The Stock at 31/12/13 amounted to £15500 b) The debtors include £440 which has gone bad and must be written off with the bad debts.
c) Provision must be made for depreciation for Furniture and equipment at 10%pa on cost
d) The directors have decided to recommend a final dividend on the Ordinary shares of 7% (ignore taxation).
e) An invoice from a supplier for Purchases (of goods for resale) for £1,785 was received after
the books were closed, and it must be accrued.
You are required to prepare the Trading and profit and Loss Account, the Profit and Loss Appropriation Account for the year ended 31/12/13 and the Balance Sheet as at the 31/12.13. (Allocated marks 60).
TEST No 3
YOU MUST ANSWER BOTH SECTIONS.
a) You are required to prepare the Cash Budget of ABC Ltd for the six months from 1/6/02 to 30/11/02 (showing details of how the totals were arrived at, together with the opening, closing and cumulative cash balance) from the following extracts from the company’s budgets. (Allocated marks 65). Please do not combine any items because they happen to be called, for example, overheads.
Budgets April May June July August September October November
Sales on credit 88500 84000 93000 72000 82500 98600 92800 104400
Selling overheads (excluding. Commission payable) 3250 4100 3710 3210 3600 3450 3210 3200
Purchases 37000 40000 39060 39900 35000 36400 36574 32800
Wages 8000 8400 8800 6000 9600 8000 8400 7600
Factory overheads 5680 5920 5440 5880 6000 5680 5360 5850
Administration overheads 2500 2760 2480 2600 2520 2700 2560 2620
Computer dept. costs 2400 2400 2400 2400 2600 2600 2600 2400
You are also given the following information: 1) Cash at 1/6/02 amounts to £110,000
2) A Sales commission of 5% is paid by ABC Ltd (on Sales on credit), two months after the sales. 3) The planned Capital expenditure is: Plant for £38,000 to be paid on delivery in June, and £80,000 for a building to be paid for in two equal half-yearly installments, the first on 1/7/02.
4) A Dividend of £10,000 will be paid out by ABC Ltd in September 2002 to its shareholders
5) The period of credit which is allowed to customers and received from suppliers, is two months.
6) One eighth (1/8) of the Wages is paid one month in arrears.
7) The Factory overheads; Administration overheads; Computer dept. costs, and the Selling overheads have one month delay in payment.
b) From the following Balance Sheets, and the Profit and Loss Account for the year ended 31/12/01, prepare the Sources and Applications of Funds statement. (Allocated marks 35).
BALANCE SHEEET AS AT 31/12/2000 BALANCE SHEET AS AT 31/12/01 PROFIT AND LOSS ACCOUNT
Brown’s Capital 2600 Fixed assets : Brown’s capital 2600 Fixed assets : Cost of sales 7000 Sales 10000
Fittings -cost 1500 Less : Drawings (500) Building 2000 Gross profit 3000
Current Liabilities Less Depreciation 450 Add : Profit 1000 Fittings-cost 1500 10000 10000
Creditors 1100 1050 3100 Less Dept’n 600 900 Wages 850 Gross profit 3000
Bank overdraft 750 1850 Current assets Long term Loan 2000 Current assets: Rent 1000
Stock 2600 Current Liabilities Stock 2300 Depreciation 150
Debtors 800 3400 Creditors 1200 Debtors 900 Net Profit 1000
4450 4450 Cash 200 3400 3000 3000
6300 6300 Net Profit 1000

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