Accounting Answers

Amerax Ltd sells tablets for cash at Ksh 80,000 each inclusive of a one-year unlimited international warranty for any manufacturers defects. The manager is concerned about the rising cost of warranties compensations and have recommend provisions to be created with effect from 2019. Estimates from the sales department indicates the following

Defect type

Percentage of units sold

Estimated cost per unit

Minor

2%

2,300

Major

0.5%

6,000

Replacement

0.1%

18,600

Summary of cash book and warranty contracts indicate the following information

Year ended

31st March

2019

31st March

2020

31st March

2021

Warranties paid (Ksh)

654,000

450,900

346,200

Warranty contract in force (units)

15,000

24,800

18,400

Required

Compute the warranty provisions required at the end of each year (6 marks)

Prepare the provisions for product warranty account

Marta City's school district is a legally separate entity, but two of its seven board members are also City Council members and the district is financially dependent upon the city. The school district should be reported as a:

• Discrete Presentation

Can you provide me a simple explanation why the answer is Discrete Presentation? Thank you.

Lyons Youth Association (LYA) is a sports youth organization for boys serving the Lyons Township community for the past 75 years. The five elected members of the Lyons Township town council serve as the board of governance of the LYA is approved by the town council. Assuming the LYA is a separate legal entity, the Lyon's Township financial statements would most likely address the relationship between the Township and the LYA as:

• A component unit and the LYA would be displayed using blended presentation.

Why would this be considered a blended presentation? Can you provide me simple explanation? Thank you.

What is the inventory conversion period for O'Brian's if it has sales of $320,000,

an average inventory of $5,333 and a cash conversion cycle of 20 days?

Assume the cost of sales is 55% of sales.

How is Under Writing of Shares/Debentures beneficial for the issuing company? What are the provisions regarding Underwriting of Securities in the Companies Act 2013?

The management of WorldCom managed the company with the following philosophy in mind: “The executive management of WorldCom did not want the company to fail. If the company failed, there reputation would be harmed and they would lose their high paying jobs.” This philosophy is called… (select one)

• A. Egoism
•  B. Altruism
•  C. Utilitarianism
•  D. Deontology
•  E. None of the above

• Which one of the following considerations generally influences your own behaviour the most? (Select one) A. What my friends and family will think of my behaviour
•  B. Whether others will be aware of my behaviour or not
•  C. Whether I will benefit from my behaviour despite any possible consequences for others
•  D. Whether my behaviour will result in me breaking a commitment that I willingly agreed to
•  E. Whether I will be caught and punished as a result of my behaviour
•  F. Whether my behaviour will cause others to respect and trust my choices