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Bin Mashaakil, an accountant for Kazingumu Limited, prepared year-end financial statements for the corporation including all ratios and agreed to bring them along during the end of year management retreat in Bagoria. To his embarrassment, he found out that only certain fragmentary information had been put in his briefcase by his newly appointed confused secretary. All the completed financial statements had been left in his office and the internet link in Bagoria was down. One hour before Bin Mashaakil was to present the financial statements to management, he was able to come up with the following information:


Kazingumu Limited

Statement of income

For the year ended 31st December 2021


Ksh. “million”



Cost of sales


Gross profit


Operating expenses


Operating profit


Finance costs


Profit before tax


Income tax expense


Profit for the period



Kazingumu Limited

Statement of financial position

As at 31st December 2021


Ksh. “million”



Non-current assets


Property, plant and equipment




Current assets




Accounts receivable






Total assets




Equity and liabilities


Capital and reserves


Ordinary shares of Ksh 5 each


Accumulated profit




Non-current liabilities


Long term financing (8%)




Current liabilities


Total equity and liabilities



Additional information:

  1. The proprietary ratio was 40%, while the debt ratio was 60%.
  2. The only financing cost was on the long term financing.
  3. The beginning inventory was Ksh.150 million
  4. The inventory turnover ratio was 4.8 times
  5. The current ratio for the period was 2: 1, while the quick ratio was 1:1
  6. The beginning balance in accounts receivable was Ksh.80million. The accounts receivable turnover ratio for the year was 12.8 times.
  7. All sales were on credit
  8. The gross margin was 25%
  9. The finance cost cover ratio was 4.571428571 times
  10. The operating profit margin was 10%
  11. The corporate tax rate was 40% based on the profit before tax.  




Prepare the completed statement of income for the period ended and the statement of financial position as at 31st December 2021 for Kazingumu Limited. Show all your workings.

in Accounting & Tax by (105 points) | 452 views

1 Answer

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Best answer
On the Income Statement:

 * Sales: You can derive this from the profit margin i.e. Profit Margin of 10% means Sales = 60/10% = 600

* Use this similar concept to find the missing numbers.


On the Balance Sheet:

*  Assets: Accounts Receivable - all sales were on credit = 600

* Inventory Use the inventory turnover ratio

* Current Assets Total: Use the current ratio i.e. current assets/`current liabilities - this will also help you with the Current Liabilities section.

* Debt: Use the debt ratio
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