Question 1: Cash Flow statement (42 marks)
|Easy Fit LTD
Statements of Financial Position
as at 30 June
|Cash at bank||20,000||257,495|
|Furniture and fittings||100,000||61,385|
|Acc. depn – furniture and fittings||-30,000||70,000||-20,000||41,385|
|Acc. depn – buildings||-80,000||250,000||-110,000||320,000|
|Current tax liability||7,500||17,000|
|Loan due 2017||—||255,008|
|Total liabilities and equity||487,000||882,279|
|Easy Fit LTD
Statement of Profit or Loss
for the year ended 30 June 2017
|Cost of sales||340,000|
|Salaries and wages||39,000|
|Loss on sale of equipment||6,119|
|Profit before income tax||64,511|
|Income tax expense||-19,353|
(a) New buildings were purchased for cash.
(b) During the year, a dividend was paid to shareholders.
(c) A loan was raised during the year to provide cash for working capital needs.
(d) Furniture that had cost $38,615 and been depreciated by $20,000, was sold for cash of $12,496.
(e) Bad debts written off was $4,500
1. Prepare the statement of cash flows based on the direct method of presentation. (30 marks)
(Show a negative amount preceded by a minus sign or in brackets.)
2. Prepare the T-account for the following accounts:
(a) Furniture and Fittings (6 marks)
(b)Accumulated depreciation – Furniture and Fittings (6 marks)
Question 2: Shares (28 marks)
On 1 April 2017, South Ltd was incorporated and a prospectus was issued inviting applications for
80,000 ordinary shares, at an issue price of $10, payable $5 on application, $2.50 on allotment and $1.25
on each of two calls to be made at intervals of 4 months after the date of allotment.
By 30 April, applications were received for 85,000 shares. On 3 May, the directors allotted 80,000
ordinary shares to the applicants in proportion to the number of shares for which applications had been
made. The surplus application money was offset against the amount payable on allotment. The balance
of the allotment money was received by 10 May.
The first call (Call 1) was made on 3 September; however, 5,000 shares did not pay this call. The
balance of money for call 1 was received on 5 September. The second call (Call 2) was made on 3
January, however, 8,000 shares did not pay this call. The balance of money for call 2 was received on 15
On 10 March 2018, as provided by the company’s constitution, the directors forfeited the 13,000
shares on which calls were unpaid.
On 25 March 2017, the forfeited shares were reissued as fully paid for a consideration of $7 per share.
Costs of forfeiture and reissue amounted to $510. The constitution does not provide for refund of any
balance in the forfeited shares account after reissue to former shareholders.
Required: Prepare general journal entries to record the above transactions. Include narrations for each
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