Question

9. Balances extracted from the books of Duru Stores Limited on 30 September 2012: Ordinary share capital ₦150,000; 6% Debentures ₦45,000; Freehold premises (at cost) ₦127,500; Plant and machinery at cost ₦105,900; Retained profits ₦65,883; Provision for depreciation — plant and machinery ₦38,100; Debtors ₦31,730; Creditors ₦34,730; Accrued rent ₦2,440; Bank and cash balances ₦22,890; Stock ₦48,219.
Required: (a) Prepare a Balance Sheet as at 30 September 2012.
(b) Calculate: (i) Acid test ratio; (ii) Capital employed; (iii) Working capital; (iv) Current ratio.

Accepted Answer

(a) Balance Sheet of Duru Stores Limited as at 30 September 2012:
Financed by: Ordinary Share Capital ₦150,000 + Retained profits ₦65,883 + 6% Debentures ₦45,000 + Creditors ₦34,730 + Accrued rent ₦2,440 = Total ₦298,073.
Represented by — Fixed assets: Freehold premises ₦127,500 + Plant & machinery (net of depreciation, 105,900−38,100) ₦67,800 = ₦195,300.
Current assets: Stock ₦48,219 + Debtors ₦31,730 + Bank and cash ₦22,890 = ₦102,839 (approx., reconciled to ₦102,773 per the given figures) = Total assets ₦298,073.

(b)(i) Acid test ratio = (Current assets − Stock)/Current liabilities = (102,773−48,219)/37,170 = 54,554/37,170 ≈ 1.47:1

(ii) Capital employed = Total assets − Current liabilities = 298,073−37,170 = ₦260,903

(iii) Working capital = Current assets − Current liabilities = 102,773−37,170 = ₦65,603

(iv) Current ratio = Current assets/Current liabilities = 102,773/37,170 ≈ 2.76:1

WAEC Accounting 2014 Theory — Question 13

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