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accounting principles

Accounting Principles And Practice 1st Edition S. Hall, N. Skene Smith - Solutions

=+One quarters rent, £50, is due at 31st December, 1959, and £10 for a coal bill is not paid. Subscriptions received include £25 in advance for 1960. Rates in advance at 31st December, 1959, were £15.You are asked to prepare the Association's Income and Expenditure Account for the year and its
=+2. *The following is a summary of the Cash Book of Benworth Social Club for the year to 31st December, 1962:Cash Book Balance at bank, 1 Jan.1962 Bar & Restaurant Sales Members' Subscriptions:for 1962 £2,660 for 1963 100 360 8,000 2,760
=+Restaurant and Bar Supplies Wages Printing, Stationery and Postages General Expenses Balance at bank, 31st Dec., 1962£11,120 Additional information is obtained as follows: 31st Dec.1961£5,000 3,620 618 450 6,000 2,120 140 1,830 1,030£11,120 31st Dec.1962£5,000 3,620 548 Freehold Premises
=+Furniture Stock of Restaurant and Bar Supplies Creditors for Restaurant and Bar Supplies 450 490 You are required to prepare:(a) A Trading Account for the Restaurant and Bar for 1962.(b) An Income and Expenditure Account for the year 1962.(c) A Balance Sheet on 31st December, 1962.Note: Ignore
=+£Buildings Extension and Renovation Fund 2,500 Accumulated Fund 5,945*Re-printed by courtesy of the Royal Society of Arts (R.S.A.).tRe-printed by courtesy of the Society of Incorporated Accountants(S.A.A.).Entrance Fees 180 Annual Subscriptions 1,072 Crockery, Glassware, Plate, etc. 765
=+Repairs and Replacements 455 Profit on Bar and Catering 1,265 Receipts—Annual Outing 450 Entertainments 290 Creditors 781 Honorarium, Secretary 200 Salaries and Wages 873 Heating, Lighting and Cleaning 305 Deposit, Exton Building Society 2,000 Audit Fee 52
=+Club Premises (Freehold) 4,000 Cost of Annual Outing 363 Interest on Investments—Building Society Deposit 50 Bank Deposit 11
=+Newspapers and Magazines 121 Stocks of Wines, Spirits, Tobacco, etc. 810 Cost of Entertainments 210 Donations to Building Extension Fund 200 Subscriptions amounting to £104 have been paid in advance, and there were arrears of £24. Insurances paid in advance amounted to £15.Depreciation is to
=+Crockery etc. 10 per cent.Club Premises 2 per cent.A sum of £500 is to be transferred to Buildings Extension and Renovation Fund. The charge for Repairs and Replacements included cost of a Television Set, £120.
=+Prepare Income and Expenditure Account for the year ended 31st December, 1962 and Balance Sheet at that date.
=+1.* A Trader commenced business on 1st January, 1960, his position then being:Assets £Land and Buildings 7,500 Fixtures and Fittings 550 Balance at Bank 1,750 Liabilities Loan on Mortgage of Land and Buildings 5,000
=+He traded for a year, drawing nothing out of the business for his personal use and paying in no additional capital. His position on 31st Dec. 1960 was:Assets £Land and Buildings 7,500 Fixtures and Fittings 550 Delivery Van 650 Sundry Debtors 445 Stock 970 Balance at Bank 1,445 Cash in Hand 115
=+Prepare a statement of profit or loss for the year.
=+2.t Ben White, a retailer, adds 25 % to the cost of goods purchased for resale to arrive at his selling prices.His financial position at 30th June, 1961 was:£Assets: Plant & Machinery 5,000 Stock 3,825 Debtors 7,175 Cash at Bank 2,200 Liabilities: Creditors 3,000 Loan from Z. 2,000 During the
=+a) paid £11,675 for Goods for Resale.(b) repaid £500 of the Loan from Z.(c) purchased a van for £700.(d) withdrew from the bank £80 per month for personal expenses.
=+(e) paid into the Bank a legacy of £300.(f) paid income tax £600 (treat as Drawings).At 30th June, 1962, Stock at cost was £4,000, Debtors totalled £7,000 and creditors were £3,500; the balance at bank amounted to £1,950.Ascertain Ben White's Gross and Net Profits or Losses for the year
=+3. B. Letitslide is in business but does not keep proper books of account.In order to prepare his Trading and Profit & Loss Account for the Year ended 31st December, 1960 you are given the following information:1st Jan. 31st Dec.1960 1960£ £Stock on Hand 1,310 1,623
=+Debtors 268 412 Creditors for Goods 712 914 Creditors for Expenses 116 103 In addition, you are able to prepare the following summary accounts for the year:Dr. Cash Account Cr,
=+£ £Balance, 1st Jan. 62 Payments into Bank 3,050 Shop Takings 4,317 Purchases 316 Cheques cashed 200 Expenses 584 Drawings 600 Balance, 31st Dec. 29£4,579 £4,579 Dr, Balance, 1st Jan.Cheques from Customers Cash paid in Bank Account£840 1,416 3,050£5,306
=+Cash withdrawn Purchases Expenses Drawings Delivery Van(purchased 1st Sept.)Balance, 31st Dec.Cr,£200 2,715 519 400 900 572£5,306
=+In addition, Mr. Letitslide says that he has taken goods for personal consumption and estimates that those goods cost £100.In considering the debtors, Mr. Letitslide suggests that there is no hope of receiving an amount of £30 from one customer. There are other doubtful debts and a provision is
=+4.1[Eric Stupher was trading as a furniture manufacturer and he submits to you the following information relating to the year ended 30th September, 1961.1st Oct. 30th Sept.1960 1961£ £Capital Accoimt 5,750 Sundry Debtors 4,200 5,100 Trade Creditors 2,400 2,600 Stock 1,250 1,520 Plant and
=+Summary of Cash Book £ Cash Balance, 1/10/60 27 Received from Debtors 14,000 Paid in by E.S. 1,000 Bank Balance, 1/10/60 £727 Paid to Trade Creditors 9,400 General Expenses 1,240 Wages and Salaries 1,970 Drawings: E.S. 1,500 Cash Balance, 30/9/61 20 Bank Balance, 30/9/61 170 £15,027
=+Mr. Stupher pays his manager a commission of 5% of the trading profits after charging such commission. Depreciation is to be provided on assets as follows:Plant and Machinery 10 %Fixtures and Fittings 5 %Motor Vehicles 20%Included in the debtors is a debt for £175 which Mr. Stupher considers
=+From the foregoing information you are required to prepare a Balance Sheet as at 30th September, 1961 and Trading and Profit & Loss Accounts for the year ended on that date. Calculations may be made to the nearest £.
=+1.* On 1st January, 1961, Black, White and Brown were in partnership and, at that date, their capital accounts showed credit balances of £5,000,£4,000 and £1,000 respectively.The partnership agreement provided that interest at the rate of 5 per cent per annum should be allowed on capital but
=+Before making any adjustments required by the agreement, the profit for the year ending 31st December, 1961, amounted to £5,440 and, during the year, each partner had drawn £100 per month.Prepare the Profit and Loss Appropriation Account and the partners'Current Accounts for the year ending
=+2. *Two friends, Guppy and Jobling, are engaged in preliminary discussions with a view to setting up in business as retailers. It is agreed that Net Profits and Losses are to be shared between them in the ratio of two-thirds to Guppy and one-third to Jobling, and they further estimate that:
=+1. The net profit for the first year will be sufficient for Jobling to get£500 as his share of it.
=+2. Rent, assistant's wages, and other expenses will amount to £1,800 for the first year.
=+3. The rate of Gross Profit will be 20 per cent of the sales.4. Stock at the end of the first year will be £1,500.You are asked to show (giving your calculations)(a) The value of sales necessary to produce the required net profit.(b) The amount of purchases for the year.
=+3. *Peele and Mellis conduct a merchanting business in partnership on the following terms:(a) Interest is to be allowed on partners' capital accounts at 6 per cent per annum.
=+(b) Peele is to be credited with a partnership salary of £750 per annum.(c) The balance of profit in any year is to be shared equally by the partners.After preparing their Trading and Profit & Loss Account for the year ended 31st March, 1960, but before making any provision for Interest on
=+Dr. Cr.£ £Capital Accounts: Peele (as on 1st April, 1959) 1,000 Mellis (as on 1st April, 1959) 2,000 Current Accounts: Peele 220 Mellis 100 Drawings Accounts: Peele 890 MeUis 500 Profit & Loss Account—Net Profit for Year 4,500 Stock—31st March, 1960 1,400 Goodwill Account 1,000 Plant and
=+It is agreed by the partners to reduce the book value of Goodwill by writing off £250 at 31st March, 1960 (to be charged to the Appropriation Section of the Profit and Loss Account).
=+You are asked to prepare the Appropriation Section of the firm's Profit& Loss Account and the partners' current accounts for the year ended 31st March, 1960, together with the Balance Sheet as on that date.
=+4. Green and Blue agree to admit Brown into partnership as from 1st January, 1961. Brown is to receive a one-fifth share of the profits, Green and Blue receivmg equal shares as before. Goodwill does not appear in the books but is valued at £5,000. Brown introduces £7,000 into the business as
=+5. In 1955, A set up in business as a sole trader. On 1st January, 1956, B. joined him as a partner taking one-third of the profits and paying£1,200 as a premium for Goodwill.
=+On 1st January, 1958, C was admitted as a new partner. It was decided to raise a Goodwill Account in the books of the firm and the value placed upon this asset was £6,000. The profit sharing ratio of the new firm was A: one-half, B: one-third and C: one-sixth.
=+From 1958 to 1961, the Goodwill balance was written down in the books of the firm and on 31st December 1961, it stood at £3,000. The business was then sold and the amount received for Goodwill was £3,600.Prepare a statement showing the net amount gained or lost by each of the partners on
=+6. tTwo professional firms agree to amalgamate their practices. The first firm consists of three partners. A, Β and C, who share profits in the ratio 5:4:3 with a total capital of £6,000 shared in the same proportions.The second firm has two partners, D and E, sharing profits and a total
=+For the puφoses of adjustment between the partners it is agreed that the goodwill of each of the old practices shall be valued at four years purchase of the average profits of the firm for the previous five years.No Goodwill is to appear in the books of the new firm, and partners are to bring in
=+The first year's profits before charging partners' salaries amounted to£16,200. The profits of the five years preceding the amalgamation were:A, Β and C, £9,070, £9,500, £10,850, £10,330 and £10,495. D and E,£4,120, £5,215, £6,125, £6,375 and £6,140.Prepare the Capital Account of each
=+7.TIX, Y and Ζ were in partnership as retailers sharing profits as follows:X one-half Y one-third one-sixth with a proviso that Z's share should be guaranteed by Y at a minimum rate of £1,500 per annum.
=+Interest was to be allowed on fixed capitals and allowed or charged on current account balances at the beginning of each year at the rate of 5 per cent per annum.Particulars regarding the partners' accounts were:Fixed Current Drawings Capitals as Account balances for the year to at 1st April,
=+The draft acx:oimts for the year to 31st March, 1960 showed a net profit of £9,155 and on examination the following facts were revealed and decisions made:(a) Partners during the year had been supplied with goods from stock and these were to be charged to them as follows:£X 90 Y 155 60
=+(b) A staff bonus of £1,200 was to be paid of which £130 was payable to X's son and was to be charged against X's share of the profit.(c) W, the manager, was to receive a bonus of 2 per cent of the net profits, after charging the staff bonus, but before taking into account partners' interest.
=+(d) The sums credited and debited to partners for interest had been posted to an Interest Account, the balance on which had been written off to Profit & Loss Account in arriving at the profit of£9,155.It was agreed to take W into partnership on 1st April, 1960 and that thereafter profits should
=+W was to bring in £4,000 as his share of the firm's fixed capital, the total of which was to remain at £18,000, and to purchase his share of Goodwill, valued at £27,000 for the business as a whole, from the other partners in the proportion in which they previously shared profits. No account
=+revised shares of profits.You are required to prepare:1. The Profit and Loss Appropriation Account for the Year ended 31st March, 1960 (adjusted to the correct net profit before allocation to partners); and
=+8. IPC and Y are equal partners. On 1st July, 1962, they agree to admit Ζas partner. Ζ is to pay £2,000 as a premium—the money to be left in the business—and to contribute £5,000 as capital. The Balance Sheet of the old firm as at 30th June, 1962, was as follows:Balance Sheet 30th June,
=+It was agreed, after negotiation between the parties, that the following adjustments in book values were to be made:£(a) Freehold Property to be valued at 11,000(b) Plant and Machinery to be reduced to 5,750(c) Bad Debts to be written off" 850
=+(d) Stock revalued at 5,750 Reserve Account to be transferred to Revaluation Account.Prepare Revaluation Account and Balance Sheet of new firm as at 1st July, 1962.
=+9. •Up to 31st March, 1959, Henry, John and Kenneth had been trading in partnership and sharing profits in the respective proportions of 8, 7 and 5, and the firm's balance sheet drawn up as on that date was as follows:£ £5,500 4,100 26,600 10,700 Capital Accounts—Henry £17,000 John 14,000
=+Henry having given notice that he wished to retire on the date mentioned, and it having been determined to admit Lambert as a new partner on the following day, the following terms were agreed:(a) The balance sheet was to be revised, before the change, by writing up the book value of the freehold
=+(b) Henry was to be credited with £3,000 for his share of Goodwill.He was to be paid £5,000 out of money to be brought in by Lambert, and agreed to leave the balance of the sum remaining due to him as a loan to the firm.
=+(c) Lambert was to bring in £7,000 in cash and to be entitled to one-fifth of the profits, the other partners, as between themselves, sharing the balance in the same proportion as before.
=+(d) Finally, adjustments were to be made between the partners' capital accounts to give effect to their agreement that Lambert should purchase one-fifth of the firm's Goodwill, which was to be valued for this purpose at £9,000. No Goodwill account was to appear in the books of the new firm.
=+Write up the partners' capital accounts, showing the entries recording the foregoing, and draw up an initial balance sheet for the new firm.
=+10. Scott and King, who occupied adjacent shops, became partners as Shop property valued at Fittings and fixtures Stocks on hand Cash in bank Less: Accrued expenses Scott King£ £3,500 1,760 850 490 2,980 1,910 387 980£7,717 £5,140 184 98£7,533 £5,042
=+The partnership agreement provided that profits should be shared threefifths to Scott and two-fifths to King, after provision for salaries at the annual rate of £630 to Scott and £420 to King and interest on the foregoing capitals introduced at 6% per annum. The cash account of the combined
=+Bank lodged 17,356 Cash in hand 31st Dec. 1962 109£38,523 £38,523 King died on 31st August, 1962, and the balance found due to him as at the date of his death based on the accounts for year ending 31st December, 1962, had to carry interest at the rate of 5% per annum until paid over to his
=+11. fA, Β and C are in partnership at Exton and Wyeton sharing profits in the ratio 4:4:2 . Their Balance Sheet at 31st December, 1962, was as follows:Exton Wyeton Total£ £ £Furniture and Equipment 1,000 500 1,500 Motorcars 1,700 800 2,500 Work in Progress 2,800 3,400 6,200 Debtors 2,268
=+Creditors Current Accounts Capital Accounts —Exton 755 Wyeton 398 AΒC AΒC 1,465 947 325 6,400 6,400 3,200 1,153 2,737 16,000£19,890 C retired from the partnership on 1st January, 1963, when it was agreed that:
=+(a) A should take over Exton assets with the exception of a motor car of a book value of £800 which C should have and that Β take over the Wyeton assets; A and Β are to assume the Exton and Wyeton liabilities respectively;
=+(b) C to have £1,500 as his share of the Goodwill of the firm and to forgo any share of profit on the work-in-progress.Draw up statements to show amounts due to and by each partner in the final settlement.
=+12. *Hale, Neath and Redcar, who had been carrying on business in partnership, sharing profits and losses in the proportions of one-half, one-third and one-sixth respectively, decided to dissolve partnership on 30th June, 1962.The balance sheet of the firm immediately before the dissolution was
=+In the realisation, the Debtors produced £2,492; the Furniture £149;the Stock £2,085; and the Goodwill £360. The expenses of the realisation amounted to £130. All the partners were solvent and any deficiency on capital account was made good.
=+Prepare the Realisation Account, Cash Book and the Partners' Capital Accounts to show the final distribution.13. HX, Y and Ζ are in partnership and their agreement provides:
=+(a) Each partner is to receive a salary of £500 per annum.
=+(b) X, Y and Ζ are to share profits and losses in the proportions of one-half, three-tenths and one-fifth respectively.
=+The partners agreed to dissolve the partnership on 30th June, 1959.As attempts to sell the business as a going concern had failed, the realisation of the assets was likely to be spread over some months and it was agreed that as cash was received it should be distributed. Ζ had no assets outside
=+The balances in the books at 30th June, 1959, before making the necessary transfers to partners' capital accounts for the year ended on that date, were as follows:Dr. Cr.£ £Capital Accounts: X 4,550 Y 2,890 1,060 Loan Account: X 1,000 Goodwill 2,600 Plant and Machinery 3,100 Motor Vehicles 650
=+Assurance Policies for £1,000 on the life of each partner had been entered into, and the premiums had been charged to Profit & Loss Account annually. The surrender values of the policies at 30th June, 1959, were:X £400 Y £300 Ζ £300
=+It was agreed that X and Y should each take over the policies on their own lives, and that the policy on the life of Ζ should be surrendered.Discounts of £100 were received on the payment of creditors. Cash was received on the realisation of assets as follows:Amount Realised 1959 £July —
=+(a) Prepare the accounts showing the entries closing the books of the partnership.
=+(b) Prepare a statement showing the periodical distributions of cash, together with your computations of amounts distributed to partners.14. tJames, John and Williams are equal partners and dissolved partnership on 30th June, 1962, on which date their position is disclosed by the
=+The assets other than cash realised £8,000 and the costs of realisation were £230.Write up the necessary accounts to show the final result of the dissolution and the division of the cash between the partners. Williams has no assets and cannot contribute anything towards his deficiency.
=+15. fRead, White and Blue are in partnership. The following is their Balance sheet as at 31st December, 1961, on which date they dissolve partnership. They share profits in the ratio 5:3:2 .Balance Sheet £ £ Creditors 4,000 Loan Account—Read 1,000 Capital AccountsRead 5,000 White 1,500 Blue
=+Prepare a statement showing how the distribution should be made and write up the Cash Account and Partners' Capital accoimts.
=+1. t Audrey Limited invited applications for 200,000 of its £1 Ordinary Shares on the following terms:Payable on application on 31st January 10/- per share Payable on allotment on 28th February(including the premium of 1/- per share) 6/- per share Payable on first and final call on 30th June 5/-
=+(c) to allot the balance of the available shares pro rata among the other applicants;
=+(d) to utilise excess application money in part payment of allotment money.One applicant to whom shares had been allotted in full did not pay the amount due on call and his 200 shares were forfeited. The shares were re-issued on 31st October, at 18s.Show the Journal and Cash Book entries
=+2. On 1st January, 1960, Cabinet Construction Ltd. offered 100,000 £1 Ordinary Shares to the public at a price of 25/-. The amount per share was payable:On application 5/-On allotment 7/6 (including 2/6 of the Premium)On first call 5/- (including 2/6 of the Premium)On second call 7/6
=+The closing date for applications was on 25th January and, by that date, applications had been received for 120,000 Shares.On 31st January, the directors allotted the shares.Applicants for 5,000 shares had their money returned as they received no allotment. Applicants for 20,000 shares were
=+The shares were forfeited on 20th April and re-issued as fully paid on 15th May for a price of 20/- per share.Record these transactions in the books of the company.
=+3. •The Rotar Company Limited was formed to purchase the business of Roberts and Taring, who share profits, two-thirds and one-third respectively, and whose Balance Sheet was as follows:Balance Sheet—Kohtvis and Taring.Capitals Roberts Taring Creditors Bills Payable Loan Account 12,000 7,000
=+The Company takes over the assets at book values with the exception of freehold property, which is taken over at £10,000. The cash and investments are retained by the firm, and the investments are sold by them for £1,600. They also discharge the loan of £400; but the Company takes over the
=+The purchase consideration for the net assets taken over is fixed at£22,500 payable as follows: 22,000 fully paid ordmary shares of £1 each and the balance in cash. Roberts and Taring agree to divide the shares in the proportion of the balances of their respective Capital Accounts.
=+Show the Ledger Accounts closing the firm's books, and the Journal entries opening the Company's books.
=+4. fEnterprise Ltd. agreed to purchase as at 30th June, 1959, the business of Day and Night whose Balance Sheet at that date was summarised as follows:£ £Goodwill 10,000 Land and Buildings 65,000 Plant and Machinery 28,000 Stocks 24,000 Debtors 67,000 Less:Creditors 28,000 Overdraft at Bank
=+The purchase consideration was agreed at £150,000 and the company took over all the assets and the liability to the creditors, but the bank overdraft was discharged by Day and Night. In arriving at the purchase price, stocks were revalued at £21,000, a reserve of £5,000 was considered
=+To provide funds for the purchase of the business and further working capital Enteφrise Ltd. decided to issue 200,000 new Ordinary Shares of £1 each, at 22/6 per share. Of these new shares Day and Night agreed to accept 50,000 shares in part satisfaction of the purchase consideration for their
=+Enterprise Ltd. offered tlie remaining 150,000 new Ordinary Shares to the public on 1st July, 1959, payment thereof being due as follows:5/- on application, 7/6 on allotment on 15th July (including the premium of 2/6) and 10/- first and final call on 15th August, 1959. The public applied for
=+You are required to show the journal entries (includmg cash items) to record, in the books of Enterprise Ltd., the purchase of the business and the issue of the new Ordinary Shares.
=+5. tNether and Wallop were equal partners and their Balance Sheet at 31st December, 1961, was as follows:Creditors Current Accounts Nether Wallop Capital Accounts Nether WaUop 6,500 4,500 28,000 Balance at Bank Debtors Stock 11,000 Furniture &Fixtures 50,000 Plant 50,000 100,000 Leasehold
=+On 1st January, 1962, they formed a company with an authorised capital of £200,000, half in 6 per cent. Cumulative Preference Shares and half in Ordinary Shares of £1 each, to take over the business. It was agreed that:
=+(a) the purchase consideration should be £150,000, payable by allotment at par of 50,000 Preference Shares and 80,000 Ordinary Shares, and the balance in cash;the assets to be revalued as follows:Furniture and Fittings at £3,000 Plant at £40,000 Premises at £35,000;
=+the vendors should retain the balance at bank and discharge creditors;the Company should collect debts on behalf of the vendors.
=+Shares were allotted to the vendors on 1st January, 1962, and the balance of the purchase consideration was paid to them on 1st March, 1962.The Company completed the collection of debts, with the exception of bad debts amounting to £750, by April 15th, 1962, and paid the net proceeds on that

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