the allowance for irrecoverable debts is to be maintained at 6% of trade receivables.

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

1)    Inventory at 31 December 2020 amounted to Rs 180 000.

2)    General Insurance of Rs 5 000 had been prepaid and motor expenses of Rs 16 000 were outstanding at year end.

3)    Furniture is to be depreciated at the rate of 10% per annum reducing balance method and motor vehicles at the rate of 20% on cost. Furniture is used solely for administrative purposes and vehicles are used exclusively for delivery of goods.

4)    Taxation of Rs 55 000 is to be charged for the current year.

5)    On 01 January 2020, land was revalued at Rs 1 900 000. No entries have been made yet to record the revaluation.

6)    Rs 100 000 is to be transferred to general reserves.

7)    No entries have been made for a bonus issue of 1 share for every 10 shares held effected on 30 June 2020.

8)    The market price of an ordinary share is Rs 2.40.

9)    The allowance for irrecoverable debts is to be maintained at 6% of trade receivables.

10)  A final dividend of Rs 1.20 per ordinary share has been recommended for payment at 31 December 2020.

 REQUIRED:

a)   Prepare an Income Statement for the year ended 31 December 2020 for publication in accordance with IAS 1.                                                                                           [18 marks]                                                                          

b)    Prepare a Statement of changes in equity for the year ended 31 December 2020 suitable for publication in accordance with IAS 1.                                            [4 marks]

c)    Prepare a Statement of Financial Position as at 31 December 2020 in accordance with IAS 1.                                                                                                                                   [12 marks]

d)   Calculate the following ratios for Alicante Ltd for the year ended 31 December 2020.

     i.    Inventory turnover (times)

     ii.    Return on Capital Employed

      iii.    Gearing rati

      iv.    Current ratio

       v.    Dividend yield

    vi.    Price earnings ratio (times)                                                             [ 6 marks]

[In case of decimal, give your answer to 2 decimal places]

 

QUESTION 2: [ 30 marks]

The Golden Club is a not for profit organization. Accounts are prepared annually on 31

December. Below are the assets and liabilities of the club at the beginning of the year 2018.

	Assets and liabilities as at 1 Jan 2018
Assets		$					Liabilities			$
Building		40000				Accumulated fund			79605
Furniture		10000				Life Membership			5600
Sport Equipment		15000				Old People’s Welfare			2100
Inventory– Refreshments		3500				Needy Students			4440
Bank Deposit		25000				Refreshments Trade payable			2750
Cash in hand		1000				Subscriptions in advance			170
Subscription in arrears		375				Expenses accrued(Elec & Water)			210
		94875							94875
Receipts & Payments Account for the year ended 31 Dec 2018
Receipts				$		Payments						$
Subscriptions			14440			Purchases of Refreshments					29880
Subscriptions  Life Membership fees ( 5 members)			3500			General Expenses					18770
Profit on Fancy fair			15220			Old people’s Welfare activities					9990
Donations			18600			Needy Students Welfare activities					10710
Sale of Refreshments			47680			Electricity & Water					2975
						Annual Dinner & Ball					6800
						Bank Deposits					16000
						New Sports Equipment					3000

 

1. Life Membership Scheme was launched for the first time during the year ended 31 Dec 2017,

the life membership fee being $700 per member. It was then decided to write off the life

membership fee over five years and this policy is to be continued.

2. Subscriptions received in advance and in arrears were $430 and $370 respectively on 31 Dec

2018.

3. The electricity and water bill for December 2018, $270, has not yet been settled yet.

 

4. The donations are to be utilized as follows:

Attachments:

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