Question

Kate Limited acquired an asset on 1 Jan 2001 for its administrative use. The
useful and economic life of the asset was 5 years. Cost of the asset was Rs
600,000. Cost incurred on its acquisition Rs 40,000. On 1 Jan 2002 the asset
was leased out to Japan Limited on the following terms:

lease term Remaining life of the asset

Interest rate 16%
Down payment 20%
Fair Value of the asset 580,000
Initial direct cost
By Lessor 28,000
By lessee 12,500

Required
1 Prepare journal entries for the year ended 31 December 2001 and 31
December 2002

2 Prepare disclosures for Kate Limited

3 Prepare disclosures for Japan Limited
 tive use. The
asset was Rs
002 the asset

ber 2001 and 31

Question 1

Cost of purchase 500,800

Transportation cost 28,450
Import Duty 25,040
Octroi 18,780
Disposal of scrap cans (14,250)
Value of Inventory 558,820

Question 2

Raw material used

Other cost of acquisition
Direct labor cost
Variable production overheads
Fixed production overheads actual
Cost of goods manufactured

Cost of goods sold

Closing inventory

Profit and Loss Account

Sales (391,280+125400)
Cost of goods sold
Gross profit

When overheads are overabsorbed the expenditure is restricted to

actual cost rather than applied.

Question 3

Joint Cost
Raw material
Labor
Variable production OH
Fixed over heads - applied
Joint Cost

Total Joint cost

NPV of By product D (.5 x 50,000)
To be allocated to Main products
 Qty
Product A 12,500
Product B 24,000
Product C 10,500
47,000
Sales

Product A 7,500
Product B 14,400
Product C 6,300
28,200

Date Account Amount Account

Raw Material 300,000 Cash
D. Labour 650,000
Var Overheads 125,000
Fixed Overheads 175,000
Joint Cost 1,200,000 Raw Material
Profit and Loss 50,000 D. Labour
Var Overheads
Fixed Overheads
Product A 312,500 Joint Cost
Product B 600,000
Product C 262,500
Product D 25,000
Account Rece 1,302,600 Sales
Cost of GS 705,000 Product A
Product B
Product C
Product D 60,000 Cash
Cash 80,000 Product D

Closing Stock Qty Cost

Product A 5,000 125,000
Product B 9,600 240,000
Product C 4,200 105,000
Product D 10,000 5,000
475,000
Impr Loss 12,600 Product D
Question 4

Opening Raw Material 450,000

Purchases 1,200,500
Other Cost 10,500
Closing Raw Material (495,000)
Raw material Consumed 1,166,000

Raw material Consumed 1,166,000

Direct Labour 600,000
Overheads 364,500
Manufacturing Cost 2,130,500

Opening WIP 125,000

Manufacturing Cost 2,130,500
Closing WIP (150,000)
Cost of Goods Manufcatured 2,105,500

Opening Finished goods 460,000

Cost of Goods Manufcatured 2,105,500
Closing Finished goods (598,000)
Cost of Goods Sold 1,967,500

Gross profit 393,500

Sales 2,361,000

Profit and Loss Account

Sales 2,361,000
Cost of Goods Sold (1,967,500)
Gross Profit 393,500

Alternatively
Sales 2,361,000
Cost of goods sold
Opening Stock - FG 460,000
Cost of Goods Manufctrd 2,105,500
Closing Stock - FG (598,000) (1,967,500)
Gross Profit 393,500
 250,000
12,500
86,800
44,800
87,500
481,600

385,280
96,320

516,680
(385,280)
131,400

300,000
650,000
125,000
125,000
1,200,000

1,200,000
 (25,000)
1,175,000
Cost
312,500
600,000
262,500
1,175,000

Sales COGS
300,000 187,500
864,000 360,000
138,600 157,500
1,302,600 705,000

Amount
1,250,000

300,000
650,000
125,000
175,000
1,200,000

1,302,600
187,500
360,000
157,500
60,000
80,000

NRV Valued at
200,000 Cost
576,000 COst
92,400 NRV
5,000 COst
12,600