2011-05-09T22:30:00.000-07:00

The trial balance of Zach Ltd. as at 3I December 2009 was as follows:

	Sh.	Sh.
Share capital (10,000 Sh.20 Ordinary shares)		200,000
Purchases and Sales	1,220,000	2,000,000
Debtors and Creditors	400,000	140,000
Profit and loss 1 January 2009		380,000
Sales returns	40,000
Buildings at cost	800,000
Plant at cost	1,000,000
Provision for depreciation:
Plant		400,000
Buildings		40,000
Purchases returns		80,000
Selling expenses	140,000
Bank		160,000
10% Debentures		600,000
Stock 1 January 2009	300,000
Provision for bad debts		20,000
Operating expenses	180,000
Administrative expenses	140,000
Suspense account	_______	200,000
	4,220,000	4,220,000

Additional information:

1. Stock at 31 December 2009 was Sh.360,000.

2. Sales returns of Sh.20,000 have been entered in the sales day book as if they were sales. When this error was discovered, the debtors account had been corrected but the sales figure was not rectified.

3. 5000 new shares were issued during the year at Sh.32. The proceeds have been credited to the suspense account.

4. A fully depreciated plant which cost Sh.200,000 was sold during the year. No other entries except bank have been made. The remaining balance on the suspense account after (2 and 3) above represents the sale proceeds.

5. A debtor of Sh.20,000 has been declared bankrupt. A general provision is required at 5% of debtors.

6. Rates of Sh.30,000 paid in December covering half year to 31 March 2000 have not been entered in the books.

7. Debenture interest has not been paid.

8. Depreciation on plant is at 10% on cost and buildings at 2% on cost.

9. The directors propose to pay a dividend of Sh.2 per share and transfer Sh.20,000 to the general reserve.

10. Corporation tax at a rate of 32'/₂% on profits is estimated to be Sh.90,000.

Required:

(a)Suspense account for the year ended 3I December 2009 (3 marks)

(b)Trading,profit and loss ccount for the year ended 31December 2009. (10 marks)

fwe