Illustration for preparing final accounts, Financial Accounting

Illustration for preparing final accounts

K Ltd established a branch in Arusha Tanzania on 1.1.X2, when Kshs 1 = TShs 15. PPE costing Kshs 800,000 were purchased on that day. In addition, cash of Shs 500,000 was sent to Arusha on 1.1.X2, together with goods which had cost K Ltd Shs 1m.  The Arusha branch sells HO goods and also goods purchased in Tanzania.

Additional information:
1)    Inventory at 31 December 20X2 was valued at Tsh 6 million, being goods from HO.
2)    Depreciation is to be charged at 10% on the cost of fixed assets.
3)    Accrued expenses amounted to Tsh 1.5 million.
4)    Prepaid expenses amounted to Tsh 1.8 million.
5)    There was no closing inventory of goods purchased in Tanzania.
6)    The remittance was made on 1 Oct 2002 and translated into Ksh 1,650,000.
7)    Exchange rates during the year were:

Required:

Income statements for the year to 31 December X2 and balance sheets as at that date in

a) Tanzanian shillings
b) Kenya shillings:

  • Using the functional currency method of translation;
  • Using the presentation method of translation.

 

Translation of Arusha branch trial balance (functional currency method)

 

Original trial balance

Rate

Translated trial balance

 

Tsh’000

Tsh’000

 

Ksh’000

Ksh’000

PPE

12,000

 

1/15

800

 

Sales

 

48,000

1/12

 

4,000

Goods from head office

15,000

 

1/15

1,000

 

Purchases in Tanzania

15,000

 

1/12

1,250

 

Expenses

17,700

 

1/12

1,475

 

Receivables & Payables

2,000

1,000

1/10

200

100

Cash at bank

2,000

 

1/10

200

 

Remittances to Kenya

19,500

 

ACT

1,650

 

Head office current a/c

 

34,500

ACT

 

2,300

Closing inventory (for balance sheet)

6,000

 

1/15

400

 

Closing inventory (for trading a/c)

 

6,000

1/15

 

400

Depreciation expense (P&L )

1,200

 

1/15

80

 

Provision for depreciation (balance sheet)

 

1,200

1/15

 

80

Accrued expenses (balance sheet)

 

1,500

1/10

 

150

Prepaid expenses (balance sheet)

1,800

 

1/10

180

 

 

92,200

92,200

 

8,105

7,030

Exchange gain

 

 

 

 

205

 

 

 

 

7,235

7,235

 


 

Translation of Arusha branch trial balance ((Presentation method)

 

 

Original trial balance

 

Rate

Translated trial balance

 

Tsh’000

Tsh’000

 

Ksh’000

Ksh’000

PPE

12,000

 

1/10

1,200

 

Sales

 

48,000

1/12

 

4,000

Goods from head office

15,000

 

1/12

1,250

 

Purchases in Tanzania

15,000

 

1/12

1,250

 

Expenses

17,700

 

1/12

1,475

 

Receivables and Payables

2,000

1,000

1/10

200

100

Cash at bank

2,000

 

1/10

200

 

Remittances to Kenya

19,500

 

ACT

1,650

 

Head office current a/c

 

34,500

ACT

 

2,300

Closing inventory (for balance sheet0

6,000

 

1/10

600

 

Closing inventory (for trading a/c)

 

6,000

1/12

 

500

Depreciation expense (P&L )

1,200

 

1/12

100

 

Provision for depreciation (balance sheet)

 

1,200

1/10

 

120

Accrued expenses (balance sheet)

 

1,500

1/10

 

150

Prepaid expenses (balance sheet)

1,800

_____

1/10

180

_____

 

92,200

92,200

 

8,105

7,170

Exchange gain

 

 

 

____

_935

 

 

 

 

8,105

8,105

 

Arusha Branch

Income statement for the year to 31 December X2 (functional currency method)

 

Tsh’000

Tsh’000

Ksh’000

Ksh’000

Sales

 

48,000

 

4,000

Cost of sales:

 

 

 

 

-        Goods from head office

15,000

 

1,000

 

-        Purchases

15,000

 

1,250

 

 

30,000

 

2,250

 

Less closing inventory

(6,000)

 

(400)

 

 

 

(24,000)

 

(1,850)

Gross profit

 

24,000

 

2,150

Exchange gain

 

-

 

205

 

 

24,000

 

2,355

Expenses

 

 

 

 

General expenses

17,700

 

1,475

 

Depreciation

1,200

 

80

 

 

 

(18,900)

 

(1,555)

Net profit

 

5,100

 

800

 


Arusha Branch

Income statement for the year to 31 December X2 (Presentation method)

 

Tsh’000

Tsh’000

Ksh’000

Ksh’000

Sales

 

48,000

 

4,000

Cost of sales:

 

 

 

 

-        Goods from head office

15,000

 

1,250

 

-        Purchases

15,000

 

1,250

 

 

30,000

 

2,500

 

Less closing inventory

(6,000)

 

(500)

 

 

 

(24,000)

 

(2,000)

Gross profit

 

24,000

 

2,000

Expenses

 

 

 

 

General expenses

17,700

 

1,475

 

Depreciation

1,200

 

100

 

 

 

(18,900)

 

(1,575)

Net profit

 

5,100

 

425

 

Arusha Branch

Balance sheet as at 31 December X2 (Functional method)

 

Tsh’000

Tsh’000

Ksh’000

Ksh’000

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Property plant and equipment

 

10,800

 

720

Current Assets

 

 

 

 

Inventory s

6,000

 

400

 

Receivables

2,000

 

200

 

Prepayments

1,800

 

180

 

Bank

2,000

 

200

 

 

 

11,800

 

980

 

 

22,600

 

1,700

CAPITAL AND LIABILITIES

 

 

 

 

Head office current a/c

 

20,100

 

1,450

Current liabilities

 

 

 

 

Payables

1,000

 

100

 

Accruals

1,500

 

150

 

 

 

2,500

 

250

 

 

22,600

 

1,700

 

Head Office Current A/C (In Branch Books): Functional currency method

 

Tsh’000

Ksh’000

 

Tsh’000

Ksh’000

 

 

 

GFHO

15,000

1,000

 

 

 

Fixed Assets

12,000

800

Bal c/d

34,500

2,300

Cash

7,500

500

 

34,500

2,300

 

34,500

2,300

Remittance

19,500

1,650

Bal b/d

34,500

2,300

Bal c/d

20,100

1,450

Branch profit

5,100

800

 

39,600

3,100

 

39,600

3,100

 


Arusha Branch

Balance Sheet as at 31 December X2 (Presentation  method)

 

Tsh’000

Tsh’000

Ksh’000

Ksh’000

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Property plant and equipment

 

10,800

 

1,080

Current Assets

 

 

 

 

Inventory

6,000

 

600

 

Receivables

2,000

 

200

 

Prepayments

1,800

 

180

 

Bank

2,000

 

200

 

 

 

11,800

 

1,180

 

 

22,600

 

2,260

EQUITY AND LIABILITIES

 

 

 

 

Head office current a/c

 

20,100

 

2,010

Current liabilities

 

 

 

 

Payables

1,000

 

100

 

Accruals

1,500

 

150

 

 

 

2,500

 

250

 

 

22,600

 

2,260

 

Head Office Current A/C (in branch books):

 

Tsh’000

Ksh’000

 

Tsh’000

Ksh’000

 

 

 

GFHO

15,000

1,000

 

 

 

PPE

12,000

800

Bal c/d

34,500

2,300

Cash

7,500

500

 

34,500

2,300

 

34,500

2,300

Remittance

19,500

1,650

Bal b/d

34,500

2,300

 

 

 

Branch profit

5,100

425

Bal c/d

20,100

2,010

Exchange gain

        -

935

 

39,600

3,660

 

39,600

3,660

 

Posted Date: 12/12/2012 2:11:38 AM | Location : United States







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