No. 2(a): Calculation of currents assets and current liabilities using the current ratio:

1. The current ratio formula is Current Assets/Current liabilities.  Therefore the  current assets as at 30th June 2011 can be calculated as follows:

Current Assets/$12,000 = 2
 Current Assets = $12,000 x 2 = $24,000.
     2. The  current liabilities as at 30th June 2012 can be calculated as follows:
$60,000/Current Liabilities = 4
Current Liabilities = $60,000/4 = $15,000.
 

2(b): Calculation of:

    i.   Average Stock = Opening  stock + Closing stock/2 = ($6,800 + $4,400)/2 = $5,600.

    ii.   Stock Turnover = Cost of Sales/Average Stock = $118,400/$5,600 = 21.15 times.

    iii.  Gross Profit Percentage = Gross Profit/Sales = $131,600/$250,000 = 53%.

No. 5(b): Preparation of journal entries to record the issuance of the remaining ordinary shares and preference shares and the redemption of some of the debentures:
Workings:

1. The remaining balance of ordinary shares = Authorized ordinary share capital – Issued ordinary share capital, i.e. 200,000 – 165,000 = 35,000 shares. These shares were issued at a premium as their par value is $1 and they were sold for $1.50.

 

• The par value of the ordinary shares equals $35,000 i.e. (35,000 x $1.00).
• The share premium on the ordinary shares equals $17,500 i.e. (35,000 x $0.50).

 
    2. The remaining balance of preference shares = Authorized preference share capital – Issued preference share           capital, i.e. 100,000 – 83,000 = 17,000 shares. There is no premium on the preference shares as they were
         issued at their par value of $1.

No. 3(a) (i): Preparation of opening entries to record each sole trader’s contribution to the partnership:
Workings
​Calculation of P’s capital:
Capital = Assets – Liabilities
Capital = (14,000+12,600+3,400+10,000+1,800) – (6,000+5,800)
Capital = 41,800 – 11,800 = 30,000.
 
Calculation of G’s capital:
Capital = Assets – Liabilities
Capital = (8,000+700+60,000+1,300) – (34,000)
Capital = 70,000 – 34,000 = 36,000.

No. 3(a) (i): Preparation of journal entries to correct the errors:
Workings and explanations:
Error 1:
The cheque was actually made out for $303 but was record as $330. This resulted in the bank account being understated by $27 ($330-$303), and the purchases account being overstated by $27. To correct this error, a debit entry must be made to the bank account and a credit entry made to the purchases account in the amount of $27.

Error 2:
The cheque of $467 made out to pay R. Sant was only recorded in the creditor’s account. This is a one-sided entry error and would thus affect the suspense account as the Trial Balance would not have balanced. The bank account would have been overstated as the payment was not recorded there. Therefore to correct this error, a debit entry must be made to the suspense account and a credit entry made to the bank account in the amount of $467.

Error 3:
C. Samanah paid V. Cheeseman $290, however the payment was recorded as if V. Cheeseman paid C. Samnah $290. This is a complete reversal of entry. To correct this erroneous entry, a debit entry must be made to the bank account and a credit entry made to the C. Samnah's account in the amount of $290, this will nullify the erroneous entry. Additionally another entry needs to be made to record the payment made by C. Samnah, therefore it is necessary to debit the bank account and credit C. Samnah’s account a second time to accurately reflect the original payment made by the debtor. 
There are two ways in which this correction can be made:
Method One:
Debit – Bank a/c - $290
        Credit – C. Samnah's a/c - $290
To nullify erroneous entry.
Debit – Bank a/c - $290
        Credit – C. Samnah's a/c - $290
To record payment of $290 made by C. Samnah.

Or Method 2:
​Debit – Bank a/c - $580
                               Credit – C. Samnah's a/c - $580
To nullify erroneous entry and to record the payment of $290 made by C. Samnah.