QUESTION 1:

The Alpha Company Ltd was registered with Nominal Capital of 60,000 Equity shares of Rs.10 each. The following were the ledger balances on 31st March 2011.

Additional Information:

1. A machine acquired on 1st April, 2009 at a cost of Rs 25,000 and depreciated every year at 10% on written down value, was sold at the end of the year for Rs 20,000. Its written down value is included in the plant and machinery of Rs 240,250.

2. Provide depreciation on plant and machinery, furniture, vehicle and patents at 10% per annum.

3. Transfer Rs 10,000 to sinking fund for Redemption of Debentures.

4. Maintain a provision for Doubtful Debts at 5% on Sundry Debtors.

5. Closing Stock was valued at Rs 80,750

Required:

(a) The profit and loss account for the period ending 31st March 2011 as per the function format' of the International Accounting Standard (IAS) 1.

(b) The Balance Sheet as at 31st March 2011 as per the IAS 1, showing the Statement of Changes in Equity.

SECTION B:

QUESTION 2:

The following information has been extracted from the books of Total Controls Ltd for the month of April 2011.

The directors of Total Controls Ltd have decided that the provision for doubtful debts should be adjusted to 5% of debtors at 30 April 2011.

Required:

The Sales Ledger Control account and the Purchases Ledger Control account for the month ended 30 April 2011 for Total Controls Ltd.

QUESTION 3:

The trading and profit and loss accounts and balance sheets of Laurel, a sole trader, and Hardy Ltd at 30th June 2011 were as follows:

Both Laurel and Hardy Ltd are in the same line of business. All purchases and sales of both businesses are on credit.

Laurel has been offered a position with another company at a salary of Rs 15,000 per annum. He manages his own business and if he were to employ somebody to manage it for him, he estimates he would have to pay the manager Rs 10,000 per annum. If Laurel sold his business he could reinvest his capital at 15 per cent per annum.

Required:

a) Compute three ratios to compare the profitability of the two businesses.

b) Compute three ratios to compare the liquidity of the two businesses.

c) Comment on the businesses, using the ratios computed in (a) and (b) above.

d) Advise Laurel on the best way of maximizing his income in the future.

QUESTION 4:

The financial year of Jack and Jill Ltd will end on 31 May 2008. At 1 June 2007, the company had in use equipment with a total accumulated cost of Rs 135,620 which had been depreciated by a total of Rs 81,734. During the year ended 31 May 2008, Jack and Jill Ltd purchased new equipment costing Rs 47,800 and sold off equipment which had originally cost Rs 36,000 and which had been depreciated by Rs 28,224, for Rs 5,700. No further purchases or sales of equipment are planned for May. The policy of the company is to depreciate equipment at 40% using the diminishing balance method. A full year's depreciation is provided for on all equipment in use by the company at the end of each year.

Required:

a) Show the following ledger accounts for the year ended 31 May 2008:

• The equipment account
• The provision for depreciation on equipment account
• The asset disposal account

b) Give four reasons why depreciation might occur.

c) Explain briefly two methods of calculating depreciation.