Four munyaka and opiyo commenced trading on 1 may

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QUESTION FOUR Munyaka and Opiyo commenced trading on 1 May 2010 as wholesalers, sharing profits and losses in the ratio 2:1, after allowing interest on the capital introduced by the partners at the rate of 10% per annum. Opiyo was to receive a salary of Kshs. 440,000 per annum. Munyaka and Opiyo do not operate a complete set of accounting records. The following summary of the bank statements for the year ended 30 April 2003 has been provided: Receipts: Cash introduced as capital on 1 May 2010: Munyaka Kshs. 3,500,000 and Opiyo Kshs. 2,000,000. Balance of receipts from customers amounted to Kshs. 12,700,000. Payments: Equipment Kshs. 2,500,000: Pick-up Kshs. 1,000,000; furniture and fittings Kshs. 375,000; go-down rental Kshs. 375,000; wages Kshs. 1,772,000; salary of Sales Manager Kshs.1,200,000; purchases for resale Kshs. 9,900,000; rates Kshs. 200,000; repairs Kshs. 62,500; insurance Ksh.55,000; motor expenses Kshs.186,500. The following cash payments were made before banking the balance of the takings: Motor expenses Kshs. 129,000; wages Kshs. 148,000; Sundry expenses Kshs. 25,000; Drawings Munyaka Kshs. 7,500 per week and Opiyo Kshs. 6,000 per week. Additional information:(i)The partners had taken goods for their domestic use as follows: Munyaka Kshs. 50,000; Opiyo Kshs. 75,000 (both at selling price) (ii)During the year to 30 April 2011, discounts allowed to customers amounted to Kshs. 122,500 while discounts received from suppliers amounted to Kshs. 55,000. (iii)At 30 April 2011, the amounts owing to suppliers amounted to Kshs. 750,000 and the amount owing by customers was Kshs. 1,550,000. (iv)An amount of Kshs. 200,000 owing by a customer proved irrecoverable and was treated as a bad debt. (v)For the year ended30 April 2011, rates and insurance were prepaid to the extent of Kshs. 25,000 and Kshs. 5,000 respectively. Inventory on hand at cost amounted to Kshs. 1,205,000. (vi)The go-down had been occupied since 1 May 2010 at an annual rental of Kshs. 500,000. (vii)Depreciation is to be provided on a straight-line basis as follows: Motor vehicle 20% per annum; Equipment, furniture and fittings at the rate of 10% per annum. Required:(i)Income Statement and appropriation accounts for the year ended 30 April 2011. (12 Marks) (ii)Statement of Financial Position for the year ended30 April 2011. (8 Marks)(Assume a 52-week year) (Total: 20 Marks)
16 CPA BURUDI M. JOSEPH KCA UNIVERSITY CAA 101 AND DAA 101 COURSE MATERIALS SUGGESTED SOLUTION MUNYAKA AND OPIYO PARTNERSHIP TRADING, PROFIT AND APPROPRIATION ACCOUNT FOR THE YEAR ENDED 30THAPRIL 2010 Sales 15,576,500 Less: Cost of sales Purchases 10,580,000 Less: Closing stock (1,205,000) Cost of sales 9,375,000 Gross profit 6,201,500 Add: Discount received 55,000 6,256,500 Less: Expenses Bad debts 200,000 Salary - Sales manager 1,200,000 Rates 175,000 Repairs 62,500 Go-down rental 500,000 Wages 1,920,000 Discount allowed 122,500 Insurance 50,000 Motor expenses 315,000 Sundry expenses 25,000 Depreciation Motor vehicles Equipment 250,000 Furniture and fittings 37,500 (5,058,000) Net profit 1,198,500 Less: Appropriations MUNYAKA OPIYO TOTALS Salary to partners - 440,000 440,000 Interest on capital 350,000 200,000 550,000 Share of profits (2:1) 139,000 69,500 208,500 Total appropriations 489,000 709,500 1,198,500 MUNYAKA AND OPIYO PARTNERSHIP STATEMENT OF FINANCIAL POSITION AS AT 30THAPRIL 2010 Kshs. Kshs. Kshs. Cost Depr. NBV Non-Current Assets
17 CPA BURUDI M. JOSEPH KCA UNIVERSITY CAA 101 AND DAA 101 COURSE MATERIALS Equipment 2,500,000 250,000 2,250,000 Furniture and fittings 375,000 37,500 337,500

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