ASSIGNMENT.

Answer all the questions.

QUESTION 1,
Abbey and Bekky are partners sharing profits or losses equally. Cossy and Dammy are partners in another firm. They also share profits equally. The two firms are to amalgamate with Abbey, Bekky, Cossy and Dammy sharing profits or losses in the ratio of 6:6:4:4. The statement prior to the amalgamation and before any of the necessary amalgamation adjustment was as follows:
AB CD
Non-Current Assets 550,000 481,250
Current Assets 275,000 220,000
825,000 701,250
Capital: Abbey 330,000
Bekky 330,000
Cossy 275,000
Dammy 275,000
Current Liabilities: Payables 165,000 151,250
825,000 701,250
The goodwill of AB & Co was agreed to be N275,000 and its Non-current assets were to be revalued by Sh 137,500.The goodwill of CD & Co was agreed at Sh 220,000 and its Non- current assets were also to be revalue by 137,500. The partners in the new firm have decided that the assets will be carried forward at their revalued amounts in the general ledger of the new firm but goodwill is to be eliminated.
Required:
a)-Prepare partner’s capital account in columnar form, recording these transactions. (5 MARKS)

                   b)-The Opening Statement of Financial Position. (5 MARKS)

QUESTION 2.

Caxton Company began operations on January 1, 2010 and reported pre-tax income of
Sh 400,000 and taxable income of Sh 520,000 for their first year. Caxton had a temporary difference relating to accrued product warranty costs that it expected to pay in the following manner: Year 2011, Sh 40,000; Year 2012, Sh 60,000, and Year 2013, Sh 20,000. The enacted tax rates are 30% for 2010 and 2011, and 35% for 2012 and 2013.

REQUIRED.
Prepare a deferred tax account at the end of 2010.(5 MARKS)