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KENYA METHODIST UNIVERSITY

FACULTY OF BUSINESS & MANAGEMENT STUDIES

DEPARTMENT OF BUSINESS ADMINISTRATION

ODLM ASSIGNMENT

COURSE CODE: ACCF: 433

COURSE TITLE: ADVANCED FINANCIAL ACCOUNTING

ASSIGNMENT: 2007/2008 3RDTRIMESTER

INSTRUCTOR:

STUDENTS NAME: ALICE W N!OROGE

REG NO: BUSS "#"0$%#2/2007

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'()*+,- "

Wiper Ltd operates two brances one in te ead o!!ice in Nairobi and te oter in "#sia$

%#rcases o! stoc& are 'ade e(c)#si*e)+ b+ te ead o!!ice branc wic does so'e

'odi!ication to te stoc&s be!ore te+ are so)d$ ,oods are sent to te "#sia branc at

'odi!ied cost p)#s -./ and a)) sa)es b+ bot "#sia and ead o!!ice are 'ade at a 0ross

pro!it o! 12/ on te 'odi!ied cost$

Te tria) ba)ance as at 3. 4#ne 1..5 be!ore ta&in0 acco#nt o! te #nder6'entioned

ad7#st'ents were

N.+,+ .-1 B')+. .-1S 000 S000 S000 S000

8apita) -922.

%#rcases :9;

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3$ Un'odi!ied 0oods costin0 s$ 2..9... were at te Nairobi branc as at 3. 4#ne 1..5$

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E(tracts !ro' Mo0a&as wi)) )e!t beF#ests as !o))ows?

i$ To eac o! '+ sons9 %api 4#nior9 Kar#bandi&a and Ocien0 Dan0er S$ - 'i))ion$

ii$ To '+ wi!e9 Aban7#&a9 I )ea*e '+ !#rnit#re9 o#seo)d and persona) e!!ects and te

resid#e o! '+ estate$

iii$ To '+ da#0ter In*est'ent9 '+ !reeo)d o#se !ree o! a)) d#ties$ Te o#se was

s#b7ect to a 'ort0a0e o! s$ - 'i))ion earnin0 interest at 1

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i$ O0opa cose te To+ota coro))a$

ii$ Mo0a&a so)d is paintin0s o! te Mona Lisa9 #sin0 te proceeds to p#rcase is

o)din0s in S#n0#ra M7an7a Ltd$

iii$ Tere is no s#c in*est'ent as --./ U0anda stoc&$ Te re!erence in te wi)) to --./

is to#0t to be t+pin0 error not pre*io#s)+ noticed$

i*$ Ma&e)e)e rep)ied in writin0 tat e did not want an+tin0 !ro' Mo0a&a beca#se

Mo0a&a was a bad nei0bo#r$

*$ Mo0a&a paid te s$ -..9... d#rin0 is )i!e to is sister Vista to estab)is er

b#siness$

Required:

a@ A state'ent sowin0 te distrib#tion o! Mo0a&as estate on - No*e'ber 1..5

-2 Mar&s@

b@ A )ist o! )e0acies to wic te e(ec#tors so#)d not assent9 brie!)+ 0i*e reasons !orte decision$ 2 Mar&s@

;TOTAL: 20 MAR

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T')*(( i s a )e0a) ter' tat re!ers to a o)der o! propert+ on bea)! o! a

bene!iciar+$ Atr#stcan be set #p eiter to bene!it partic#)ar persons9 or !or

an+ caritab)e p#rposes b#t not 0enera))+ !or non6caritab)e p#rposes@?

t+pica) e(a'p)es are a wi)) tr#st !or te testatorGs ci)dren and !a'i)+9 a

pension tr#st to con!er bene!its on e'p)o+ees and teir !a'i)ies@9 and a

caritab)e tr#st$ In a)) cases9 te tr#stee 'a+ be a person or co'pan+9 weter

or not te+ are a prospecti*e bene!iciar+$

An indi*id#a)oror0aniationwic o)dsor 'ana0es and in*estsassets!or

te bene!it o!anoter$ Te tr#stee is )e0a))+ ob)i0ed to 'a&e a)) tr#st6re)ated

decisionswit te tr#steeGs interestsin 'ind9 and 'a+ be )iab)e!orda'a0esin

te e*ent o! not doin0 so$ Tr#stees 'a+ be entit)ed to a pa+'ent !or teir

ser*ices9 i! speci!ied in te tr#stdeed$ In te speci!ic case o! tebond 'ar&et9

a tr#stee ad'inisters abondiss#e!or a borrower9 and ens#restat te iss#er

'eets a)) te ter'sand conditionsassociated wit teborrowin0$

Te person wo 'ana0es assets owned b+ a tr#st #nder te ter's o! te

tr#st doc#'ent$ A tr#steeGs p#rpose is to sa!e0#ard te tr#st and distrib#te tr#st

inco'e or principa) as directed in te tr#st doc#'ent$ Wit a si'p)eprobate6

a*oidance )i*in0 tr#st9 te person wo creates te tr#st is a)so te tr#stee$

ii$ "an&r#ptc+ and )iF#idation 2 Mar&s@

8apter5 ban&r#pc+9 wic is tota) dis'issa) o! a)) +o#r debts as opposed to

8apter-3 wic is de*isin0 a red#ced a'o#nt pa+'ent p)an@ as 0otten 'ore

di!!ic#)t to !i)e9 b#t it is not 0one

B.-9'>*1? is a )e0a))+ dec)ared inabi)it+ or i'pair'ent o! abi)it+ o! an

indi*id#a) or or0aniation to pa+ teir creditors$

Bankruptcy liquidation also known as Chapter 7 Bankruptcy is a legal processwhere most if not all of your debt can be eliminated. It may take up to six

months.

=

http://en.wikipedia.org/wiki/Legal_termhttp://en.wikipedia.org/wiki/Beneficiary_(trust)http://en.wikipedia.org/wiki/Trust_lawhttp://en.wikipedia.org/wiki/Trust_lawhttp://en.wikipedia.org/wiki/Charitable_trusthttp://en.wikipedia.org/wiki/Charitable_trusthttp://en.wikipedia.org/wiki/Purpose_trusthttp://en.wikipedia.org/wiki/Testamentary_trusthttp://en.wikipedia.org/wiki/Testamentary_trusthttp://en.wikipedia.org/wiki/Testatorhttp://en.wikipedia.org/wiki/Testatorhttp://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Companyhttp://www.businessdictionary.com/definition/individual.htmlhttp://www.investorwords.com/3504/organization.htmlhttp://www.investorwords.com/3504/organization.htmlhttp://www.investorwords.com/2322/hold.htmlhttp://www.investorwords.com/2598/invest.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/6817/for_the_benefit_of.htmlhttp://www.investorwords.com/6817/for_the_benefit_of.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.investorwords.com/2531/interest.htmlhttp://www.investorwords.com/2795/liable.htmlhttp://www.investorwords.com/1278/damages.htmlhttp://www.investorwords.com/1278/damages.htmlhttp://www.businessdictionary.com/definition/event.htmlhttp://www.investorwords.com/3634/payment.htmlhttp://www.investorwords.com/6664/service.htmlhttp://www.investorwords.com/5084/trust.htmlhttp://www.investorwords.com/1341/deed.htmlhttp://www.investorwords.com/530/bond_market.htmlhttp://www.investorwords.com/521/bond.htmlhttp://www.investorwords.com/2651/issue.htmlhttp://www.investorwords.com/1709/ensure.htmlhttp://www.investorwords.com/2654/issuer.htmlhttp://www.investorwords.com/4950/terms.htmlhttp://www.investorwords.com/4950/terms.htmlhttp://www.investorwords.com/6456/condition.htmlhttp://www.businessdictionary.com/definition/borrowing.htmlhttp://www.nolo.com/definition.cfm/term/6E163A78-9FCA-4ABB-9D21412B2C62F097http://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Legal_termhttp://en.wikipedia.org/wiki/Beneficiary_(trust)http://en.wikipedia.org/wiki/Trust_lawhttp://en.wikipedia.org/wiki/Charitable_trusthttp://en.wikipedia.org/wiki/Purpose_trusthttp://en.wikipedia.org/wiki/Testamentary_trusthttp://en.wikipedia.org/wiki/Testatorhttp://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Companyhttp://www.businessdictionary.com/definition/individual.htmlhttp://www.investorwords.com/3504/organization.htmlhttp://www.investorwords.com/2322/hold.htmlhttp://www.investorwords.com/2598/invest.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/6817/for_the_benefit_of.htmlhttp://www.investorwords.com/6817/for_the_benefit_of.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.investorwords.com/2531/interest.htmlhttp://www.investorwords.com/2795/liable.htmlhttp://www.investorwords.com/1278/damages.htmlhttp://www.businessdictionary.com/definition/event.htmlhttp://www.investorwords.com/3634/payment.htmlhttp://www.investorwords.com/6664/service.htmlhttp://www.investorwords.com/5084/trust.htmlhttp://www.investorwords.com/1341/deed.htmlhttp://www.investorwords.com/530/bond_market.htmlhttp://www.investorwords.com/521/bond.htmlhttp://www.investorwords.com/2651/issue.htmlhttp://www.investorwords.com/1709/ensure.htmlhttp://www.investorwords.com/2654/issuer.htmlhttp://www.investorwords.com/4950/terms.htmlhttp://www.investorwords.com/6456/condition.htmlhttp://www.businessdictionary.com/definition/borrowing.htmlhttp://www.nolo.com/definition.cfm/term/6E163A78-9FCA-4ABB-9D21412B2C62F097http://en.wikipedia.org/wiki/Creditor

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In law, liquidationrefers to the process by which a company(or part of a companyis brought to an end, and the assets and property of the company redistributed.

!iquidation can also be referred to as winding-upor dissolution, althoughdissolution technically refers to the last stage of liquidation.

!iquidation may either be compulsory (sometimes referred to as a creditors'liquidation or "oluntary (sometimes referred to as a shareholders' liquidation,

although some "oluntary liquidations are controlled by the creditors, see below.

In finance, liquidationis also sometimes used as con"enient shorthand for con"erting

an assetto cash.

Liquidation

1. When a business or firm is terminated or bankrupt, its assets are sold and theproceeds pay creditors. Any leftovers are distributed to shareholders.

2. Any transaction that offsets or closes out a long or short position.

Creditors liquidate assets to try and get as much of the money owed to them aspossible. hey have first priority to whatever is sold off. After creditors are paid, theshareholders get whatever is left with preferred shareholders having preference overcommon shareholders.

iii$ De'onstrati*e )e0ac+ and ,enera) )e0ac+ 2 Mar&s@

Aspecific legacyis Cso'etin0 wic a testator9 identi!+in0 it b+ a s#!!icient description

and 'ani!estin0 an intention tat it so#)d be en7o+ed in te state and condition indicated

b+ tat description9 separates in !a*o#r o! a partic#)ar )e0atee !ro' te 0enera) 'ass o!

is persona) estate9C e.g.a 0i!t o! C'+ portrait b+ 9C na'in0 te artist$ A general legacy

is a 0i!t not so distin0#isab)e !ro' te 0enera) 'ass o! te persona) estate9 e.g. a 0i!t o!

Jioo or o! a 0o)d rin0$ A demonstrative legacy parta&es o! te nat#re o! bot te

precedin0 &inds o! )e0acies9 e.g.a 0i!t 6 o!-.. pa+ab)e o#t o! a na'ed !#nd is a speci!ic

)e0ac+ so !ar as te !#nd na'ed is a*ai)ab)e to pa+ te )e0ac+ a!ter te !#nd is e(a#stedte ba)ance o! te )e0ac+ is a 0enera) )e0ac+ and reco#rse '#st be ad to te 0enera)

estate to satis!+ s#c ba)ance

A de'onstrati*e )e0ac+ di!!ers !ro' aspeci!ic )e0ac+9 a 0i!t o! partic#)ar persona)

propert+b+ wi))$ A de'onstrati*e )e0ac+ is pa+ab)e !ro' te 0enera) assets o! te estate

5

http://en.wikipedia.org/wiki/Lawhttp://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Dissolution_(law)http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Cashhttp://www.1911encyclopedia.org/Goldhttp://www.1911encyclopedia.org/Goldhttp://www.answers.com/topic/personal-propertyhttp://www.answers.com/topic/personal-propertyhttp://en.wikipedia.org/wiki/Lawhttp://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Dissolution_(law)http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Cashhttp://www.1911encyclopedia.org/Goldhttp://www.answers.com/topic/personal-propertyhttp://www.answers.com/topic/personal-property

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tat a*e not been speci!ica))+ de*ised or beF#eated i! its desi0nated so#rce as been

adee'ed or no )on0er e(ists or i! it is inadeF#ate to satis!+ te 0i!t$

1. A legacy is general, when it is so given as not to amount to a bequest of a specific part of a

testator!s personal estate" as of a sum of money generally, or out of the testator!s personal estate,

or the like. 1 #op. $eg. 2%&" $own. $eg. 1'. A general legacy is relative to the testator!s death" itis a bequest of such a sum or such a thing at that time, or a direction to the e(ecutors, if such a

thing be not in the testator!s possession at that time, to procure it for the legatee. Cas. emp.

alb. 22)" Amb. %)" * +es. r. &)%" ) +es. r. -.

*./2. A specific legacy is a bequest of a particular thing, or money specified and distinguished

from all other things of the same kind" as of a particular horse, a particular piece of plate, a

particular term of years, and the like, which would vest immediately, with the assent of the

e(ecutor. 1 #op. $eg. 1*" $ownd. $eg. 1', 11" 1 Atk. *1%. A specific legacy has relation to the

time of making the will" it is a bequest of some particular thing in the testator!s possession at that

time, if such a thing should be in the testator!s possession at the time of his death. 0f it should notbe in the testator!s possession, the legatee has no claim. here are legacies of quantity in the

nature of specific legacies, as of so much money with reference to a particular fund for their

payment. ouchs. *--" Amb. -1'" * +es. %&%" - +es. ea. %.

%. his kind of legacy is so far general, and differs so much in effect from a specific one, that if

the funds be called in or fail, the legatees will not be deprived of their legacies, but be permitted to

receive them out of the general assets" yet the legacies are go far specific, that they will not be

liable to abate with general legacies upon a deficiency of assets. 2 +es. r. &*'" % +es. r. 2'&" 1

3er. #. 1)4.

&./-. A residuary legacy is a bequest of all the testator!s personal estate, not otherwise

effectually disposed of by his will. $own. $eg, 1'" ac. Abr. $egacies, 0.

). As to the interest given, legacies may be considered, as absolute, for life, or in remainder.

1. A legacy is absolute, when it is given without condition, and is to vest immediately. 5ee 2 +ern.

141" Ambl. )%'" 1 +es. 4&" $ownd. 1%1" 2 +ern. *-'" 1 +ern. 2%*" % +es. *&1" Com. 6ig.

Appendi(, Chancery 07.

4./2. A legacy for life is sometimes given, with an e(ecutory limitation after the death of the

tenant for life to another person" in this case, the tenant for life is entitled to the possession of the

legacy, but when it is of specific article!s, the first legatee must sign and deliver to the second, an

inventory of the chattels e(pressing that they are in his custody for life only, and that afterwards

they are to be delivered and remain to the use and benefit of the second legatee. - 8. Wms. --&"

1 Atk. *)1" 2 Atk. 42" 1 ro. C. C. 2)" 2 +ern. 2*. 5ee 1 #op. $eg. *'*, %, %4'. 0t seems that a

bequest for life, if specific of things quo ipso usu consumuntur, is a gift of the property, and that

there cannot be a limitation over, after a life interest in such articles. - 3eriv. 1*.

$9:AC;, 693

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the estate be not the testator!s property at his death, the legacy will not fail> but be payable out ofgeneral assets. 1 #op. $eg. 1%-" $ownd. $eg 4%" 5winb. *4%" Ward on $eg. -)'.

i*$ %ro*ab)e and non6pro*ab)e debts 2 Mar&s@

A provable debt is a claim which entitles a creditor to share in any dividends and to vote atmeetings in the bankruptcy.

:enerally a creditor with a provable debt is prevented from continuing any recovery proceeding

against a debtor upon their bankruptcy. here are very limited e(ceptions.

Which debts are and arent provable debts?

Secured Debt

A secured debt is where a creditor has a hold over an asset until the debt is paid for. 5hould the

debtor default on payments, the creditor has the right to sell the asset to reduce the debt.

:enerally, nothing in the ankruptcy Act prevents a secured creditor to realise or otherwise deal

with their security. :enerally, any deficiency from the sale of the asset is considered to be a

provable debt.

Unsecured Debts

3ost unsecured debts are provable in bankruptcy.

Common e(amples of provable debts are>/

? Credit card debts and personal loans incurred before bankruptcy"

? rade creditors incurred before bankruptcy"

here are some debts which are not provable and therefore are not @covered by bankruptcy eg.

Court imposed fines, some portions of student loans.

here are also debts which are provable but where the bankrupt is not released from the liability

upon discharge from bankruptcy eg. debts incurred by fraud, maintenance, child support .

here are debts which are provable Band the creditor can vote at meetings and share in any

dividends where the creditor can also continue or commence recovery action against the

:

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debtors non/divisible property andDor income after the date of bankruptcy eg. maintenance, child

support.

here are debts which are provable but which if not paid will cause a service to be terminated for

non/payment eg. supply of electricity, gas, telephone etc or the cancellation of a drivers licence

andDor motor vehicle registration eg. parking and driving infringement notices.

5ome debts have not sufficiently @crystalised for them to be covered by bankruptcy.

9g. A claim for unliquidated damages against a debtor will not be covered unless the dispute as

to whether they are liable and how much they are liable for has been settled prior to bankruptcy

Bie a settlement has been agreed between the parties or udgement has been entered. A

common e(ample of an unliquidated claim for damages is an action for personal inury or property

damage for negligence.

herefore the question of what debts a bankrupt will be released from upon the making of asequestration order or the acceptance of a debtors petition, will depend upon the nature of the

debt.

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Head o!!ice sa)es to "#sia "ranc o! Kss ,6+*

A)) sa)es to e(terna) c#sto'ers o! Kss -12

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Tota) c)osin0 stoc&? Kss %20000=

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A-)( '()*+,- "A

WIPER LIMITED

TRADING PROFIT AND LOSS ACCOUNT

FOR T@E YEAR ENDED 30 !UNE 2007

P.*+1'5.)

N.+,+

B.-1

B')+.

B.-1 C,+-( P.*+1'5.)

N.+,+

B.-1

B')+.

B.-1 C,+-(%#rcases :9;

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pro!it on branc

c)osin0 stoc& 1.9...

Net pro!it =5-9... 1:;9... :=:9...

-95..9...

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@(. ,66+1( ,,9)

"ranc c#rrent acco#nt

Kss Kss

"a)ance "> -9: -9=.292.. "a)ance "> -93.592..

Net pro!it

trans!er to ead

o!!ice 1:;9...

-9=.292.. -9=.292..

A-)( '()*+,- 2A

I*( V.5+ R(.),- 6, 6.+5'(

S>(1+6+1 5(.1+()

ii Aba7#&a wi!e@ #rnit#re persona)

e!!ects 3.19...

Te)e*ision '#sic

-2

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s+ste' -.29...

iii In*est'ent da#0ter@ reeo)d propert+ 3912.9...

i* O0opa To+ota 3=.9...*ii Na)ia&a %aintin0 6 Ade'ption

i( Si'ba U0anda stoc& -=29... Satis!action

(i Disaster 7nr P K# sare =..9...(ii S#p##

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Nissan S#nn+ 11.9...

Debt !ro' Moraa