MODEL PROBLEMS ON LEVEL III

PROJECT -1

The financial records of AlemTsega share company shows the following data as of Sene 30, 2003:
Sales-----------------------------------------------------------200,000
Sales return and allowance------------------------------ 4,000
Sale discounts----------------------------------------------- 6,000
Costs of goods sold---------------------------------------- 40,000
Operating expenses--------------------------------------- 30,000
Interest expenses---------------------------------------- 3,000
Assume that entertainment and uncollectible accounts expense includes Br 2,000 and 6,000
respectively. The company expected to pay 30% of business profit tax during the year. The boards of
directors declared that 60% of income* after income tax to be distributed to shareholders as dividend.
Task 1.1 Prepare income statement for tax purpose as of Sene 30, 2003?
Task 1.2Calculate business profit tax for the year?
Task 1.3Calculate dividends for the year?
Task 1.4 Calculate dividend income tax for the year?

PROJECT-2

Assume that worku private limited company pays salary according to Ethiopian calendar. The
company pays salary at employees’ bank account every month. The details for the month of Sene30,
2003 presented as follows.

Name of employees Position Basic Salary Allowances Overtime

Abush Dagne supervisor 4,800 800 400
Mulualem Hailu manager 5,200 800 300
Getnet Mamo cashier 3,400 500 400
Fikir Asaminew accountant 2,400 300 350
Biniyam Gizaw technician 2,800 400 -
Additional Information

 All employees are permanent.

 All employees allowance is non-taxable?
 The employer and employees are expected to contribute 9% and 7% to pension respectively.
 The company pays Br 20 for the bank for each employee every month.
Required
Task 2.1 Prepare a payroll register as of Sene 30, 2003?
Task 2.2 Calculate the income taxes, pension and service charges?
Task 2.3 Journalize the necessary entries?

PROJECT-3

Assume that ABC agricultural enterprise engaged in import and export trade activities. The enterprise
has at its bank account Br 1,500,000 at the beginning of the month. The enterprise received at its
bank account from its customers USD 30,000 and EURO 100,000. The enterprise imported materials
at FOB value USD 50,000 BR 20,000, 60,000 and 80,000 for insurance, transport and customs
respectively.
BUYING SELLING
USD 19.5 20
EURO 26 26.5
Required
Task 3.1 Calculate the total cost of materials assuming that the enterprise charged 3% by the bank
for services?
Task 3.2 Calculate the total amount of fund transferred to the enterprise account in BIRR?

Task 3.3 Calculate the cash balance available at the enterprise bank account assume that there is no
withdrawal except payment for purchase during the month?
Project One

Addis International Bank Bola Branch has five employees whose salaries are paid according to the Ethiopian
calendar month. The following data relates to the month of Megabit.

Employee Name Basic salary Over Time Allowance

Kebede Seman 2,500.00 10 hr then 4 weekend & 4 hr holiday 2hr 1.25 900.00
Girma Mamo 5,000.00 6hr weekend 1,000.00
Alemu Abera 10,000.00 8hr holiday 1,200.00
Abebe Kidus 12,500.00 - 1,400.00
Additional Information

- Allowance tax exempted 400.00 Br all employment.

- All Employees are permanent and 40 hr work a week.

- All employee the month balance are Paid a day for 1 years.

Required

1). Prepare a payroll register (sheet)

2). Calculate OT, Income tax and Journal entries

Project Two

Illustration of A Bank Reconciliation

The following information is available for Marta Company as at January 31, 2014.

Balance Depositor Account ----------------------------------------------------------------------------------- 37,820.00

Balance Bank Statement Account --------------------------------------------------------------------------- 65,040.00

Deposit in transit -------------------------------------------------------------------------------------------------- 9,040.00

Outstanding check ----------------------------------------------------------------------------------------------- 24, 260.00

NSF ------------------------------------------------------------------------------------------------------------------ 20,400.00

Note Collected by bank ---------------------------------------------------------------------------------------- 24,000.00

Interest Income ----------------------------------------------------------------------------------------------------- 500.00

Box Rent Expense ------------------------------------------------------------------------------------------------- 240.00

Service Charge ----------------------------------------------------------------------------------------------------- 160.00

Payment made by Depositor --------------------------------------------------------------------------------- 10,160.00

if received integrated 18,460.00.

Required

1). Prepare bank reconciliation of Marta Company as at January 31, 2014.

2). Prepare the necessary entries in the general journal form. The accounts have not been closed the voucher
system is used.

Project Three

On October 1, 2014, the firm of W, X and Y Decide to liquidate their partnership. The partners have capital
balances of $ 140,000, $100,000 and $100,000, respectively. The cash balance is 40,000, the book values of
non- cash assets total 680,000, and liability total $ 380,000. The partners share income and losses in the ratio
of 5:3:2.

Between October 1 and October 18, the Non Cash assets were sold for $356,000, and the liabilities were
paid.

Required

1). Assuming that the availability cash is to be distributed to the partners, prepare a statement of partnership
liquidation.

2). Prepare entries to record (a) the sale of the assets, (b) the division of loss on the sale of the assets, (c) the
payment of the liabilities, and (d) the distribution of cash to the partners.

Project Four

A/to Binda is A shareholder in Dashen bank S.C. he

Project Five
Cash ---------------------------------------------------------------------------------------------------------- 87,500.00
Account Receivable ------------------------------------------------------------------------------------- 192,300.00
Merchandize Inventory --------------------------------------------------------------------------------- 290,500.00
Prepaid Insurance ---------------------------------------------------------------------------------------- 25,380.00
Store Supply ----------------------------------------------------------------------------------------------- 16,500.00
Store Equipment ----------------------------------------------------------------------------------------- 179,000.00
Accumulated Depreciation ------------------------------------------------------------------------------ 50,600.00
Account Payable ------------------------------------------------------------------------------------------ 89,480.00
Salary Payable --------------------------------------------------------------------------------------------- 8200.00
Capital Stock --------------------------------------------------------------------------------------------- 360,000.00
Retained earnings --------------------------------------------------------------------------------------- 162,890.00
Dividend ---------------------------------------------------------------------------------------------------- 120,000.00
Sales ------------------------------------------------------------------------------------------------------ 1,890,000.00
Purchase ------------------------------------------------------------------------------------------------- 1,220,100.00
Sales salaries Expense ------------------------------------------------------------------------------ 154,800.00
Advertising Expense ----------------------------------------------------------------------------------- 49,600.00
Depreciation Expense --------------------------------------------------------------------------------- 38,400.00
Store supplies Expense ---------------------------------------------------------------------------------- 12,200.00
Miscellaneous ---------------------------------------------------------------------------------------------- 8800.00
Office Salary Expense ----------------------------------------------------------------------------------- 79,690.00
Rent Expense ---------------------------------------------------------------------------------------------- 80,000.00
Utilities Expense ------------------------------------------------------------------------------------------ 32,200.00
Taxes Expense -------------------------------------------------------------------------------------------- 17,000.00
General Expense ----------------------------------------------------------------------------------------- 7,200.00
Other Income ---------------------------------------------------------------------------------------------- 7,600.00
Additional Information
Insurance Expense --------------------------------------------------------------------------------------- 12,800.00
Merchandise Inventory --------------------------------------------------------------------------------- 301,000.00
Store Supplies ------------------------------------------------------------------------------------------- 4,300.00
Depreciation Expense - Store Supplies --------------------------------------------------------- 38,400.00
Sales Salary Expense ------------------------------------------------------------------------------- 5,600.00
Office Salary Expense -------------------------------------------------------------------------------- 2,600.00
Necessary Entries
1). Adjusting Entries
2). Income Statement
3). Balance Sheet
MODEL EXERCISES LEVEL II

PROJECT-1

Assume that you are working at BUNA International Bank Share Company as a senior bank clerk with
different responsibility. Based on that perform the following tasks.

Task 1.1- Demonstrate how you open and maintain current account?

Task 1.2- Demonstrate how you open and maintain saving account?

Task 1.3- Who purchases bond in Ethiopian financial markets?

Government
Non- government
Individuals
Bank
Insurance
Other financial institution

Task 1.4- Identify the roles of National Bank of Ethiopia?

Maintain financial stability

Regulate payment system
Regulate bank and other financial institution
Manage governmental debt

Task 1.5- Demonstrate how you transfer or close customer account?

PROJECT -2

Task 2.1- Demonstrate advantages and risks related to investment?

Task 2.2- Identify business opportunities that are available in order to establish a business?

Task 2.3- Demonstrate sources of business idea and equipment used to gather information?
PROJECT -3

Assume that Abebe’s budget data for upcoming six month, the difference between income and
expenses become saving.

Items January February March April May June Total

Housing operation 1,200 1,250 1,300 1,000 1,400 1,100

Transport 600 700 500 550 450 600

Food expenses 1,680 1,800 1,700 1,900 1,750 1,850

Utility expense 450 500 480 600 750 650

Salary 4,000 4,500 4,000 4,000 4750 4000

Overtime 280 400 300 450 - 680

Miscellaneous expense 350 400 250 300 400 380

Saving

Required

Task 3.1 Based on the above data prepare six month budget for Abebe?

PROJECT 4

The accounting records of Nebil Plc shows the following accounts as of January 1, 2010

Cash------------------------20,000

Supplies-------------------- 6,000

Prepaid insurance-------12,000

Equipment----------------60,000

Building--------------------80,000

Accounts payable-------10,000
Notes payable----------- 8,000

Assume that the company wants to introduce a new product with the required capital of Br 400,000.
The company applied for credit at Addis International Bank Share Company in order to finance the
required capital. The bank accepted the application and agreed with 10% interest semi-annually with
equal instalment semi-annually for five years. The bank charged Br 2,000 for facilitating the loan. The
company estimates a profit of Br 100,000.

Task 4.1- Calculate the amount to borrowing financed by Abay Bank?

Task 4.2- Determine the total expense related to the credit?

Task 4.3. Record the amount borrowed on the book of the compay?

Task 4.4- Record the disbursement of principal and interest on the books of the company ?

Task 4.5- Calculate the rate of return?

Project 5

The National Bank of Ethiopia increased borrowing interest rate from 10% to 12% and saving interest rate from
4% to 5%.If XYZ Company borrows Br 200000.

Required

5.1- Record the interest to be paid after one year?

PROJECT 6

 Tax on Interest Income on Deposits-----------------------------------------------------10,000

 Dividend Income Tax -------------------------------------------------------------------------6,000
 Tax on Income from Royalties--------------------------------------------------------------4,000
 Tax on Income from Games of Chance--------------------------------------------------8,000
 Tax on Gain of Transfer of certain Investment Property-----------------------------6,000
 Tax on Income from Rental of Property-------------------------------------------------12,000
 Rendering of Technical Services outside Ethiopia-----------------------------------16,000
 Agricultural Income Tax --------------------------------------------------------------------14,000
 Land Use Tax----------------------------------------------------------------------------------10,000
 Turnover Tax----------------------------------------------------------------------------------- 5,000
 Excise Tax------------------------------------------------------------------------------------ 15,000
 Value Added Tax ---------------------------------------------------------------------------- 30,000
 Customs Duty--------------------------------------------------------------------------------- 14,000
 Memorandum and articles of association of any business-------------------------- 3,000
 organization, cooperative or any other form of association------------------------ 14,000
 Award; Bonds; Warehouse bond---------------------------------------------------------- 5,000
 Contract and agreements and memoranda--------------------------------------------- 3,000
 Security deeds--------------------------------------------------------------------------------- 7,000
 Collective agreement------------------------------------------------------------------------ 4,000
 Contract of employment-------------------------------------------------------------------- 8,000
 Lease, including sub-lease and transfer of similar rights--------------------------- 6,800
 Notarial acts------------------------------------------------------------------------------------ 4,900
 Power of attorney-----------------------------------------------------------------------------
12,000
 Tax on income from Employment/Personal Income Tax ------------------------- 10,000
 Business Profit Tax -------------------------------------------------------------------------
20,000
 Documentations of title to property ---------------------------------------------------- 10,000
 Tax on income from rental of buildings ------------------------------------------------ 30,000
Required

Task 6.1- Demonstrate/ calculate direct tax liability?

Task 6.2- Demonstrate/ calculate in direct tax liability?

MODEL EXERCISES LEVEL: II

PROJECT-1
DKY Financial Consulting Company maintains current account in united bank and borrowed from the
bank. The company provides financial consulting services to ten saving and credit association in Addis
on credit. The saving and credit association provides trainings to individuals the society on personal
savings.
Task 1.1
Assuming that you are bank ‘clerk of united bank, what is your role in opening and maintain bank
account of DKY?
My major role is to disclose the services offered by my bank such as:-
Transfer money
Deposit money
Types of customer accounts
Task 1.2
Identify the advantages of personal savings, investment and related risks on investment.
Advantages of saving
Personal saving has huge advantages such us:-
 increases the personal wealth
 increases the capacity to do some thing
 minimize financial worst
 to create financial stability
 an opportunity to create business
 it is used for suddenly occurred cases
 it give us some amounts of interest
Advantages of Investment
 increases the personal wealth
 increases the capacity to do some thing
 minimize financial worst
 to create financial stability
 an opportunity to create business
 it is used for suddenly occurred cases
 it gives us the return

Task 1.3
The National Bank raised borrowing interest rate from 12% to 13% and saving interest rate from 5% to 6%.If
DKY Company borrowed Br, 100,000.00. Record the interest expense to be paid after one year?
Interest =present values *Interest rate* time
Interest=100,000*.13*1
Interest =13,000
Interest expenses ----------13,000
Interest payable .................................13,000
Task 1.4
Identify the intermediaries of financial system in Ethiopia

Bank
Insurance
Individuals
Privet limited companies
Brokers and agents
Credit association

PROJECT -2

The following data is given for personal income and expenditures for Abera Abebe from July to
December xx. The difference between income and expenses become saving.

Six month income and expenditure Abera Abebe

Description July August September October November December Total

Clothing’s 1377.00 1377.00 1660.50
Food and other 6120.00 6480.00 6120.00 7038.00 7038.00 7380.00
consumption
Monthly house 2295.00 2430.00 2295.00 2295.00 2639.25 2767.50
rent expense
Overtime work 300.00 300.00 300.00 345.00
Par time work 1200.00 1200.00
Salary 15,000.0 15,000.0 15,000.00 17,250.0 17,250.00 17,250.00
0 0 0
Transport expense 765.00 810.00 765.00 880.00 923.00 880.00
Tuition fee 1530.00 1620.00 1530.00 1759.50 1845.50 1759.50
Utilities expense 306.00 324.00 306.00 351.90 369.00 351.90
Personal saving

Task 2.1

Prepare the personal budget using for listed above

Task 2.2

Identify the business opportunity and related risk for investing personal saving of Abera.

Business opportunity

Location of the business

Compotators
Lack of skilled man power
Population density
Product quality

PROJECT -3

The family of sweet has two children’s husband and wife. The total income of the family for the
month of January is birr 1950.00. During the month of January and February the family has the
following budget allocations and actual expenditures for the month of January.

Description Budget allocation Actual expenditures Budget for

for January for January February

Descreption July August September October November December June Total

Housing operation 1,200 1,250 1,300 1,000 1,400 1,100

Transport 600 700 500 550 450 600

Food expenses 1,680 1,800 1,700 1,900 1,750 1,850

Utility expense 450 500 480 600 750 650

Task 3.1

Prepare the personal budget using excel spreadsheets for data listed above

Task 3.2

Identify the business opportunity and related risk for investing personal saving of Abebe

Project 4. Develop personal Budget and saving plan {1hr}

instruction : under this project you are expected to perform the following tasks based on
information provided

The project covers the following units of competencies

1 Develop and use a personal Budges

2 Develop and use a savings plan

The family of sewnet hes two children s’ husband and wife the total income of the family for
the month of January is birr 1.950.00. during the month of January and February the family
has the following budget allocations and actual expenditures for the month of january

Salary 4,000 4,500 4,000 4,000 4750 4000

Overtime 280 400 300 450 - 680

Miscellaneous expense 350 400 250 300 400 380

Saving

Required

Task 3.1 Based on the above data prepare six month budget for Abebe?

PROJECT 4
The accounting records of Nebil Plc shows the following accounts as of January 1, 2010

Cash------------------------20,000

Supplies-------------------- 6,000

Prepaid insurance-------12,000

Equipment----------------60,000

Building--------------------80,000

Accounts payable-------10,000

Notes payable----------- 8,000

Assume that the company wants to introduce a new product with the required capital of Br 400,000.
The company applied for credit at Addis International Bank Share Company in order to finance the
required capital. The bank accepted the application and agreed with 10% interest semi-annually with
equal instalment semi-annually for five years. The bank charged Br 2,000 for facilitating the loan. The
company estimates a profit of Br 100,000.

Task 4.1- Calculate the amount to borrowing financed by Abay Bank?

Task 4.2- Determine the total expense related to the credit?

Task 4.3. Record the amount borrowed on the book of the company?

Task 4.4- Record the disbursement of principal and interest on the books of the company ?

Task 4.5- Calculate the rate of return?

Project 5

The National Bank of Ethiopia increased borrowing interest rate from 10% to 12% and saving interest rate from
4% to 5%.If XYZ Company borrows Br 200000.

Required

5.1- Record the interest to be paid after one year?

PROJECT 6
 Tax on Interest Income on Deposits-----------------------------------------------------10,000
 Dividend Income Tax -------------------------------------------------------------------------6,000
 Tax on Income from Royalties--------------------------------------------------------------4,000
 Tax on Income from Games of Chance--------------------------------------------------8,000
 Tax on Gain of Transfer of certain Investment Property-----------------------------6,000
 Tax on Income from Rental of Property-------------------------------------------------12,000
 Rendering of Technical Services outside Ethiopia-----------------------------------16,000
 Agricultural Income Tax --------------------------------------------------------------------14,000
 Land Use Tax----------------------------------------------------------------------------------10,000
 Turnover Tax----------------------------------------------------------------------------------- 5,000
 Excise Tax------------------------------------------------------------------------------------ 15,000
 Value Added Tax ---------------------------------------------------------------------------- 30,000
 Customs Duty--------------------------------------------------------------------------------- 14,000
 Memorandum and articles of association of any business-------------------------- 3,000
 organization, cooperative or any other form of association------------------------ 14,000
 Award; Bonds; Warehouse bond---------------------------------------------------------- 5,000
 Contract and agreements and memoranda--------------------------------------------- 3,000
 Security deeds--------------------------------------------------------------------------------- 7,000
 Collective agreement------------------------------------------------------------------------ 4,000
 Contract of employment-------------------------------------------------------------------- 8,000
 Lease, including sub-lease and transfer of similar rights--------------------------- 6,800
 Notarial acts------------------------------------------------------------------------------------ 4,900
 Power of attorney-----------------------------------------------------------------------------
12,000
 Tax on income from Employment/Personal Income Tax ------------------------- 10,000
 Business Profit Tax -------------------------------------------------------------------------
20,000
 Documentations of title to property ---------------------------------------------------- 10,000
 Tax on income from rental of buildings ------------------------------------------------ 30,000
Required

Task 6.1- Demonstrate/ calculate direct tax liability?

Task 6.2- Demonstrate/ calculate direct tax liability?