A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 38 - 40 of 53

Passage

The following balances have been extracted from the books of Jennings Company Limited as at 31st December, 2018.

The Following Balances Have Been Extracted from the Books of Jennings Company Limited as at 31st December, 2018
Dr.Cr.
Machinery1,60, 000
Land and Building6,74, 000
Depreciation on Machinery16,000
Purchases (adjusted)4,00, 000
Closing Stock1,50, 000
Wages1,20, 000
Sales10,00, 000
Salaries80,000
Bank overdraft2,00, 000
10 % Debentures (issued on 1.1. 04)1,00, 000
Equity share capital-2000 shares of $ 100 each-fully paid2,00, 000
Preference share capital-1000,6 % shares of $ 100 each- fully paid.1,00, 000
16,00, 00016,00, 000

The board of directors of the Jennings Company Limited has decided to make the following appropriations:

(i) To declare equity dividend on paid-up capital

(ii) To pay dividend on the preference share capital in full

(iii) To transfer $ 2,00, 000 to general reserve

Question 38 (1 of 3 Based on Passage)

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Short Answer▾

Prepare Profit and loss appropriation account for Jennings Company limited.

Explanation

Profit and Loss Appropriation Account for the Year Ended 31st Dec, 2018

Profit and Loss Appropriation Account for the Year Ended 31st Dec, 2018
$$
To General Reserve2,00, 000By balance b/d3,74, 000
To proposed dividend
On Preference share capital 6,00026000
On equity share capital 20,0001,48, 000
To balance of profit c/d3,74, 0003,74, 000

Question 39 (2 of 3 Based on Passage)

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Short Answer▾

Prepare the Profit and loss account for the year ended 31st December, 2018.

Explanation

Profit and Loss Account for the Year Ended 31st December, 2018

Profit and Loss Account for the Year Ended 31st December, 2018
$$
To Purchases4,00, 000By sales10,00, 000
To Wages1,20, 000
To Gross Profit c/d4,80, 000
10,00, 00010,00, 000
To Depreciation16,000By Gross Profit b/d4,80, 000
To Salaries80,000
To Debenture interest outstanding10,000
To Depreciation3,74, 000
4,80, 0004,80, 000

Question 40 (3 of 3 Based on Passage)

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Short Answer▾

Explain why fixed assets appear on the assets side.

Explanation

Assets which are acquired for permanent use in the business and are not meant for resale are called fixed. Such assets are purchased once and last for many years such as goodwill, land, buildings, leaseholds, railway sidings, plant and machinery, furniture, development of property, patents, live-stock, vehicles etc.

  • In case of fixed assets, original cost of each asset, additions made during the year, cost of the asset sold during the year and the total depreciation provided on each asset up to the end of the year are to be stated separately.
  • If all such details cannot be conveniently included in the balance of sheet itself, a separate schedule containing all such details will be annexed to the balance of sheet and it will form a part of the balance sheet.

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