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Elijah, Elisha and Emmanuel sharing profits and losses in the ratio 2:3:2 respectively, statement
of financial position as at 31st December 2015 stood as follows
Creditors 50,000
Capital accounts
Elijah 100,000
Elisha 150,000
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Emmanuel 50,000 400,000
Additional information
On 31st December 2015, Elisha desired to retire from the firm and the remaining partners decided
to carry on the same business on the following conditions
A company leased a colliery on 1/1/2012 at a minimum rent of shs20,000 per year, merging into
royalty of shs1.50 per tonne, with a power to recoup shortworkings over the first three years of
the lease. The output for the first four years was as follows
Year Tonnes
2012 9,000
2013 12,000
2014 16,000
2015 20,000
Required
(a) Royalty payable account (8marks)
(b) Landlords Account (10marks)
(c) Short workings account (2marks)
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QUESTION THREE (20 marks)
T.G ltd acquired a car under Hire purchase agreements, details of which are as follows
a) XY ltd bought 10,000 ordinary shares of shs1 each in Excell ltd on 1-1-2014 at a cost of
shs15,000. On 1-7-2014 Excell ltd announced a rights issue of two ordinary shares for
every five held on that date at shs1.25 per share. XY ltd took up 50% of the entitlement
and sold the remaining 50% at shs0.60 per share.
XY ltd received a Dividend of 20% on ordinary shares in Excell Ltd on 31/12/2014
Required
Record these transactions in the books of XY ltd for the year ended 31/12/2014
(10marks)
b) During the year ended 31/12/2014, an asset was acquired at a cost of shs40,000. By
31/12/2014, its replacement cost had risen to shs60,000. It was sold during the year ended
31/12/2015 for shs 100,000 and at the time of sale, its replacement cost was shs65,000
Required
Calculate
i) Accounting profits (5marks)
ii) Holding gains for the year ended 31/12/2014 (5marks)
iii) Holding gains for the year ended 31/12/2015 (5marks)
iv) Operating gains (5marks)
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