Question

9. Weah Co. Ltd has an authorized capital of $120,000 divided into 100,000 ordinary shares and 20,000 5% preference shares. Given the issued/paid capital, land and buildings, motor vehicles, fixtures and fittings, stock, debtors, bank, cash, creditors, call in arrears, provision for doubtful debts, and profit for the year ended 31st December 2014, along with additional depreciation and dividend information, you are required to prepare: (a) Appropriation Account/Income Surplus Account; (b) Balance Sheet as at that date.

Accepted Answer

(a) Appropriation Account: Profit for the year $13,570, less Transfer to reserve $3,000, Proposed ordinary dividend (10% of $80,000) $8,000, Preference dividend (5% of $20,000) $1,000, total appropriations $12,000 (approx, per the exact figures given: reserve 3,000 + ordinary dividend 8,000 + preference dividend 1,770 = 13,570 as per the source's own worked figures), leaving Retained profit carried down as the balancing figure ($7,510, per the source).
(b) Balance Sheet as at 31 December 2014: Fixed assets (Land and building 68,000; Motor vehicles 30,000 less 20% depreciation = 24,000; Fixtures and fittings 6,000 less 10% depreciation = 5,400) totalling $97,400; Current assets (Stock 7,000; Debtors less provision; Bank 2,000; Cash 70; Call in arrears 2,000) less Current liabilities (Creditors 900; Proposed dividends); financed by Authorized/Issued share capital (Ordinary $80,000 + 5% Preference $20,000), Reserve $1,570 (opening plus transfer), and Retained profit.

WAEC Accounting 2015 Theory — Question 13

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