[.

: (12 + 12) = 24]

Part B
During February 2020, the following changes in Orange company inventory took place:

Date Explanation Units Unit Cost

February 5 Balance 200 $4

8 Purchased 400 6

15 Purchased 600 8

18 Sold 700 20

19 Purchased 300 10

Perpetual inventories are maintained.

Required:
What is the cost of sales and ending inventory for item under the following methods? Also
calculate gross profit under both methods.
1- FIFO.
2- LIFO.
3- Gross profit
[.: (10+10+6) = 26]
 Question 2:

Part A

Mr. Yannick has started business as a trader on 1st February 2020. The following
transactions and events of trading for his first month are as follows:

Date Transaction
1 He sets up a business as a sole trader by introducing $200,000 into a business bank
account.
2 He pays rent for a shop, $4,000 in cash.
8 He purchases goods costing $10,000 on credit from Adam (invoice no A-123).
12 He sells goods for $8,000 in cash to John.
15 H e sells goods for $10,000 on credit to Jack (invoice no J- 001)
24 He pays the amount for the good purchased on 8th February.
25 Received cash and allowed 10% discount for goods sold on 15th February.
28 He pays salaries for the month $20,000.
Required:
1- Enter the above transactions into an appropriate cash book.
2- Post the transactions directly to the appropriate nominal ledger accounts.
3- Prepare the trial balance as at February 29, 2020.
[.: (10 + 10 + 6) = 26]

Cash book: receipts [5 .] (1 mark for each entry + 2 . for balance)

Cash book: payments [5 .] (1 mark for each entry + 2 . for balance)

2. Nominal ledger accounts:[.: 1 mark for each account (except cash & capital ledger, it carries
0.5 mark each) = 10 .]
3. The trial balance: [6 .] (0.75 Mark for each correct account)
Part B

A Construction Company buys a delivery van for $1,000,000 on 1 st January 2019. Its estimated
useful life in the business is 8 years, after which it will be sold for an estimated residual value of
$200,000.
Required:
Prepares tables showing the carrying amounts brought down and carried down and the
depreciation expense for each of the 4 years of useful life using:
1. a. Straight line method of depreciation
b. Reducing balance depreciation
2. Assume a company disposed of a delivery van on 1 st January 2022 for $600,000.
Calculate the loss/gain on the disposal under straight line and reducing balance method.

[.: (8 + 8 + 8) = 24]

Straight-line depreciation schedule:

1. b. Reducing-balance method: [8 .]
 Reducing-balance schedule: (1 mark for each year balance)

A business disposed of the machinery on 1 January 2022 for $600,000. The carrying amount at the date
of disposal was $700,000 under straight line method. The difference between the two figures,
$(100,000) [$600,000 – $700,000], which shows that there is loss on disposal. [4 .]
A business disposed of the machinery on 1 January 2022 for $600,000. The carrying amount at the date
of disposal was $551,368 under reducing balance method. The difference between the two figures,
$48,632 [$600,000 – $551,368], which shows that there is profit on disposal. [4 .]

[.: (8+8+8) = 24]

a. Ahmed started a business on 1st January 2021 selling printers. He bought 270 printers
at a cost of $80 each at the beginning of his accounting year. On May 1 st, 2021, he
bought a further 300 printers, but the cost had risen by this stage from $80 to $150. At
the accounting year end on 31st December 2021, Ahmed had 220 printers in inventory.
He sold the others during the year for $350 each.
Required:
1. Calculate the value of Ahmed’s inventory on 31 st December 2021 using:
a. FIFO
b. LIFO
2. Calculate the gross profit earned by the business under each method?
[.: (10+10+6) = 26]

a. Inventory valuation Under FIFO Method: (10 .)

1.
2. Gross Profit calculation (6.)

[.: (10+10+6) = 26]

 Question 2:

a. Adnan has started as a sole trader on 1 March 2021. The following transactions and
events of trading for his first month are as follows:
Date Transaction
1 He started business with capital of $540,000.
2 H e purchases machinery worth $52,000 by cheque.
8 H e purchases inventory on credit for $36,000.
10 He sells good for $160,000 in cash.
12 He pays $12,000 to the supplier of the goods purchased on 8th March. This is the part of
payment of the total amount due.
15 He sells goods on credit for $56,000.
24 Owner withdrew of worth $20,000 for personal use.
25 He borrows money from his friend of $400,000.

Required:
1- Post the transactions directly to the appropriate nominal ledger accounts.
2- Prepare the trial balance as at March 31, 2021.
[.: (18 + 6 ) = 24]
$
 [.: (18 + 6 ) = 24]

Part B

Green Ocean Company acquired land and building for $300,000 on 1 st January 2012. The land at
that date comprised 20% of the total cost. At that date the estimated useful life of the building
was 45 years with a residual value of $30,000.
Required:
1. Assume that Green Ocean has decided to recognize land and building under the cost
model approach, prepare a three-year depreciation schedule for the buildings under the
reducing balance method.
2. Assume that Green Ocean has decided to recognize land and building under the
revaluation model approach with revaluations taking place every three years. On 1 st
January 2015 three years later, a surveyor valued the land and building at $400,000 of
which $80,000 was attributable to land. The estimated useful life and residual value of
the buildings remained the same.
 2.1 Prepare the journal entries required to record these transactions on 1 st January 2015
under the reducing balance method.
2.2 Compute and record the depreciation for the year ended 31st December 2015 under
the straight-line method.

[.: (10 + 8 + 6) = 24]

Reducing-balance schedule: (6 .)

2.1. Prepare the journal entries required to record these transactions on 1 January 2015 under the
reducing balance method: [8 .]
2.2 Compute and record the depreciation for the year ended 31 December 2015 under the straight-
line method: [6 .]
 b. Ahmed started a business on 1st January 2017 selling printers. He bought 1000
printers at a cost of $80 each at the beginning of his accounting year. On May 1 st 2016
he bought a further 350 printers, but the cost had risen by this stage from $80 to $120.
At the accounting year end on 31st December 2017, Ahmed had 250 printers in
inventory. He sold the others during the year for $200 each.

Required:
Calculate the value of Ahmed’s inventory on 31 st December 2017 using:
a. FIFO
b. LIFO
c. Calculate Gross profit
 [.: (10+10+6) = 26]

Question 2:

b. Jennie has started as a sole trader on 1 March 2018. The following transactions and
events of trading for her first month are as follows:
Date Transaction
1 She starts the business by depositing a cheque for $80,000 into the business bank
account.
2 S h e purchases machinery worth $22,000 by cheque.
8 She purchases inventory on credit for $46,000.
10 She sells good for $10,000 in cash.
12 She pays $30,000 to the supplier of the goods purchased on 8 th March. This is the part of
payment of the total amount due .
15 She sells goods on credit for $17,000.
24 She writes a cheque to withdraw $3,000 from the business.
25 She receives a business loan of $100,000.
Required:
3- Post the transactions directly to the appropriate nominal ledger accounts.
4- Prepare the trial balance as at March 31, 2018.
 [.: (18 + 6 ) = 24]

c. Orange Company acquired land and building for $100,000 on 1st January 2015. The land
at that date comprised 20% of the total cost. At that date the estimated useful life of the
building was 24 years with a residual value of $8,000.
Required:
3. Assume that Orange Company has decided to recognize land and building under the cost
model approach, prepare a three-year depreciation schedule for the buildings under the
reducing balance method.
4. Assume that Orange Company has decided to recognize land and building under the
revaluation model approach with revaluations taking place every three years. On 1 st
January 2018 three years later, a surveyor valued the land and building at $160,000 of
which $40,000 was attributable to land. The estimated useful life and residual value of
the buildings remained the same. Prepare the journal entries required to record these
transactions on 1st January 2018 under the reducing balance method.
B - Orange Company acquired land and buildings for $800,000 on 1 January 2013. The land at
that date comprised 20% of the total cost. At that date the estimated useful life of the buildings
was 40 years, with $40,000 residual value.

Required:
1- Assume that Orange was decided to recognize land and buildings under the cost model,
prepare a three-year depreciation schedule for the buildings under both straight-line and the
reducing-balance methods.
2- Assume that Orange was decided to recognize land and buildings under the revaluation
model, with revaluations taking place every three years. On 1 January 2016, three years later, a
surveyor valued the land and buildings at $1,000,000, of which $300,000 was attributable to
land. The estimated useful life and residual value of the buildings remained the same.
a- Prepare the journal entries required to record these transactions on 1 January 2016
under the straight-line method.
b- Compute and record the depreciation for the year ended 31 December 2016 under the
straight-line method.