NUMBER TWO Kariuki Mamba and Richards have carried on partnership for several

Number two kariuki mamba and richards have carried on

This preview shows page 3 - 6 out of 29 pages.

NUMBER TWO Kariuki, Mamba and Richards have carried on partnership for several years, sharing profits and losses equally after allowing for annual salaries as follows: Kariuki Sh. 1,500,000 Mamba Richards 900,000 900,000 They decided to convert the partnership into limited company; Kamari Ltd.as at 30 November 2001, the following terms: 1. Goodwill to be valued at Sh.13,500,000 2. Other assets to be valued as follows: Download more at
Image of page 3
Shs. Freehold property Furniture and fittings Motor Vehicles 27,000,000 2,400,000 6,000,000 3. Each partner is becoming director of the company at the same salary as that previously allowed in the partnership. 1.Mamba’s loan is to converted into share capital at par. 5. Shares are to be issued to each partner at parin respect of the amounts of their equity holdings at 30 November 2001. 6. The financial year of partnership ends on 30 May .No action has been taken to carryout the terms of conversion of partnership into the limited company in the books of accounts. On 31 May 2002, the trial balance showed the following position: Sh ‘000’Sh ‘000’Capital accounts at 1 June 2001 Kariuki Mamba Richards Stock -31 May 2002 Cost of sales Sales Administrative expenses Selling expenses Accounting &Audit expense Incorporation expenses Drawings: Kariuki Mamba Richards Freehold property at cost Furniture and fittings at cost Accumulated depreciation Debtors and Creditors Prepayments and Accruals Loan from Mamba(10% interest per annum) Motor Vehicles at cost Accumulated depreciation Bank balance 14,400 36,000 6,000 3,000 1,200 600 1,500 900 900 25,800 6,000 9,000 600 12,000 ______ 117,90018,000 9,000 6,000 60,000 3,600 7,200 300 9,000 3,600 1,200117,900Additional information; i.The sales during the second half of the year were 60% of the total sales though the gross profit percentage remained the same throughout the year. Download more at
Image of page 4
ii.The selling expenses were proportional to the sales for each period. All the expenses were incurred evenly throughout the year. iii.Salary drawings were made evenly. Drawing made after incorporation were to be treated as director’s salaries.iv.There were no purchases or sales of fixed assets during the year .Depreciation is to be provided on cost as follows; Furniture and fittings 10% per annum Motor vehicles 20% per annum v.No dividends are paid or proposed but it is decided to write off the incorporation expenses and also Sh.3,500,000 of the goodwill. Required (a)Trading and profit and loss account for Kamari Ltd. for the six months ended 31 May 2002 (8 marks) (b)Calculation showing the value of shares to be issued to each partner. (4 marks) (c) Balance sheet as at 31 May 2002. (8 marks) (Total: 20 marks)
Image of page 5
Image of page 6

You've reached the end of your free preview.

Want to read all 29 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture