UKAF 1083 Financial Accounting II- May 2012 Trimester Mid Term Test (1.

5 hr)
Name: ..Student I.D. No.Tut. Grp... Answer ALL questions. Question 1 The Potter Leisure Clubs Receipts and Payments Account for the year ended 30 September 2011 was as follows: Receipts Bal at 1/10/2010 Subscriptions received Donations Cash taken at door Grant from local council Annual dance receipts Shop takings Bal at 30/09/2011 RM 8,400 6,435 600 3,500 6,000 1,400 7,168 3,232 36,735 Payments Purchases for shop Shop wages General expenses Cost of annual dance Transfer to deposit account New equipment Rent RM 3,745 4,000 1,500 1,490 16,000 2,000 8,000

36,735 Additional information: In order to increase funds, the Club has a shop which sells magic tricks. In addition to an annual membership subscription, members pay RM1 each time they visit the shop. This is referred to as Cash taken at door. The annual membership subscription was RM40 until 30 September 2011. Subsequent to 30 September 2011, the subscription will be raised to RM45. There were 150 members at 1 October 2010. On this date, 15 of them had not paid their subscriptions for the year ended 30 September 2010 and 12 had already paid their subscriptions for the year ended 30 September 2011. By 30 September 2011, all members had paid their due subscriptions and some had paid in advance, for the year ending 30 September 2012, but the treasurer had not yet calculated how many. Other balances were as follows: Shop inventories Cash float for shop Accounts payable for shop Deposit account Equipment, at cost 1 Oct 2010 RM 500 50 1,450 15,000 8,000 30 Sept 2011 RM 850 70 1,260 31,000 10,000

The equipment at 1 October 2010 had been depreciated by RM1,600 per annum for 5 years. The new equipment is to be depreciated at the same annual percentage rate. The local councils grant was for RM10,000 and the remainder of this has yet to be received. This will be treated as revenue income in the books. Interest of RM800 is due on the deposit account for the year ended 30 September 2011. At 30 September 2011, general expenses of RM65 were due and unpaid. Required:
(i)

Prepare the shop trading account for the year ended 30 September 2011. (5 marks)

Prepare the Income and Expenditure Statement for the year ended 30 September 2011. (12 marks) (iii) State two accounting treatments for donations received for non-profit organizations. (3 marks) (Sub-Total: 20 marks) Question 2
(ii)

Farid and Erni had been in partnership for some years, sharing profits and losses in the ratio of 2:1. The partnership Statement of Financial Position as at 31 January 2011 was as follows: Statement of Financial Position as at 31 January 2011 Assets RM Non-Current assets Motor vehicles 58,200 Equipment 35,400 Fixtures and fittings 39,000 Goodwill Current assets Inventory Trade receivables Bank and cash Total assets Capital and liabilities Capital accounts Farid Erni Current accounts Farid Erni Current liabilities Trade payables 64,000 45,600 19,200 RM

132,600 10,000 142,600

128,800 271,400

80,000 120,000 35,400 13,600

200,000

49,000

22,400 271,400 Farid and Erni, who had been renting business premises, accepted an offer by David to move to his premises on 1 February 2011 on condition that he would be admitted as a partner into the partnership on that date. Additional information: The new partnership commenced on 1 February 2011 with Farid, Erni and David sharing profits and losses in the ratio 2:1:1. The new partnership took ownership of Davids premises on 1 February 2011 at a valuation of RM196,000. Goodwill was revalued at 1 February 2011 at RM30,000 but would not be shown in the partnerships books. Equipment was revalued at RM34,100 on 1 February 2011. Inventory at 1 February 2011 was valued at RM63,000. Current accounts will remain separate from Capital accounts. Required:
(i)

Prepare the partnerships revaluation account as at 1 February 2011.

(3

marks) Prepare the Partners Capital Accounts (in columnar format), reflecting the adjustments for goodwill. (7 marks)
(ii) 2

(iii) Prepare the Statement of Financial Position of Farid, Erni and David as at 1 February 2011. (5 marks) (iv) Discuss the treatment of goodwill in partnership accounts, with particular reference to retiring and incoming partners. (5 marks) (Sub-Total: 20 marks) ~ Good Luck ~ [Total: 40 marks] Suggested solutions Question 1 (i) Sales Add: difference in cash float Less: Cost of Sales Opening inventory Purchases [3745+1260-1450] Closing inventory Bar Profits Less: Wages LOSS ON SHOP (ii) 500 3,555 4,055 850

[ = 0.5 marks] Shop Trading Account for the year ended 30/09/2011 RM RM 7,168 20 7,188

3,205 3,983 4,000 (17) (5 marks)

Potter Leisure Club Income & Expenditure Statement for the year ended 30/09/2011 RM RM Income Subscription revenue (w1) 6,000 Cash at door 3,500 Grant 10,000 Donations 600 Interest on deposit account 800 20,900 Expenditures Loss on Shop 17 Loss on annual dance (1400-1490) 90 General expenses (1500+65) 1,565 Rent 8,000 # Depreciation (2000*20%) 400 10,072 SURPLUS 10,828
[# for not providing depreciation expense for the old equipment (1 mark)]

W1 Bal b/d (15*40) I & E account (150*40) Bal c/d

Subscriptions A/c 600 Bal b/d (12*40) 6,000 Cash/Bank 315 Bal c/d 6,915

(4.5 marks) 480 6,435 6,915

(iii)

(12 marks) Treatments for donations received: (@ 1.5 marks each, with elaborations) As income in the Income & Expenditure a/c Show separately in the Statement of Financial Position (3 marks) (Sub-Total: 20 marks)

Question 2 (i) Equipment Inventory Capital a/c: Farid 2/3 Erni 1/3 Revaluation A/c RM 1,300 Goodwill 1,000 11,800 5,900 20,000 Capital Account of Partners
Farid RM 15,000 76,800 91,800 Erni RM 7,500 118,400 125,900 David RM 7,500 188,500 196,000 Bal b/d Premises Profit on revaluation

[ = 0.5 marks] RM 20,000

20,000 (3 marks) (7 marks)

David RM 196,000 11,800 91,800 5,900 125,900 196,000 Farid Erni RM RM 80,000 120,000

(ii)
Goodwill adj Bal c/d

(iii) Statement of financial Position as at 1 February 2011 Assets RM'000 RM'000 Non-Current assets Premises 196,000 Motor vehicles 58,200 Equipment 34,100 Fixtures & fittings 39,000 327,300 Current assets Inventory 63,000 Trade receivables 45,600 Bank 19,200 127,800 Total assets 455,100 Capital and liabilities Capital accounts: Farid Erni David Current accounts: Farid Erni Current liabilities Accounts payable Total capital and liabilities

76,800 ) 118,400 ) 188,500 ) 35,400 ) 13,600 )

383,700

49,000 22,400 455,100 (5 marks)

(iv)

Goodwill is taken into account on the retirement of a partner, who must be credited with his/her share of goodwill. An incoming partner must compensate the existing partners for his/her acquired share of goodwill. In these situations, goodwill may be raised in the books as an intangible asset, but it is considered prudent to adjust individual capital accounts of the partners in order to compensate each partner when retiring/admitting a partner. (5 marks) (Sub-Total: 20 marks) [Total: 40 marks]