The following transactions relate to Mpika Ltd a company that operates in the mining industry in the Western Province of Zambia. The company has a 28 February end. Mpika Ltd took a delivery of assorted inventory items from Rivers Stationery valued at 15,000 ZMW on 15 February 2022. Payment for the stationery is only to be made on 15 March 2022. 2. On 14 February 2022, Mpika Ltd. agreed to with Isuzu Zambia to buy a truck for ZMW 900,000. The delivery of the truck and payment for it will be made on 5 March 2022. 3. One of the drivers of Mpika Ltd was involved in accident on 17 February which resulted in injury to a pedestrian. Medical estimates put the potential damages to the victim at ZMW 50,000.00. 4. In order to cushion itself against the rising prices of fuel as a result of the war between Russia and Ukraine, Mpika agreed to buy 10,000 litres of diesel from Puma at the price of 17.00ZMW. The company made the payment on 28 February and the diesel will be delivered at the rate of 2,000 litres a month by Puma. 5. A company in the construction industry made a payment of 100,000.00 on 26 February for sand which they will collect and use in the month of March from Mpika Ltd's mine. For each of the above transactions, indicate if it recognizes in Mpika Ltd’s financial statements in the 2022 financial and year providing reasons for your answer.
QUESTION TWO
The following transactions relate to Mpika Ltd a company that operates in the mining industry in the Western Province of Zambia. The company has a 28 February end.
- Mpika Ltd took a delivery of assorted inventory items from Rivers Stationery valued at 15,000 ZMW on 15 February 2022. Payment for the stationery is only to be made on 15 March 2022.
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2. On 14 February 2022, Mpika Ltd. agreed to with Isuzu Zambia to buy a truck for ZMW 900,000. The delivery of the truck and payment for it will be made on 5 March 2022.
3. One of the drivers of Mpika Ltd was involved in accident on 17 February which resulted in injury to a pedestrian. Medical estimates put the potential damages to the victim at ZMW 50,000.00.
4. In order to cushion itself against the rising prices of fuel as a result of the war between Russia and Ukraine, Mpika agreed to buy 10,000 litres of diesel from Puma at the price of 17.00ZMW. The company made the payment on 28 February and the diesel will be delivered at the rate of 2,000 litres a month by Puma.
5. A company in the construction industry made a payment of 100,000.00 on 26 February for sand which they will collect and use in the month of March from Mpika Ltd's mine. |
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For each of the above transactions, indicate if it recognizes in Mpika Ltd’s financial statements in the 2022 financial and year providing reasons for your answer.
1. The delivery of assorted inventory items valued at 15,000 ZMV has been taken on 15 February, 2022.
This transaction will be recognized in Mpika Ltd's financial statements ending on 28 February, 2022 because even if the payment has not yet been made, the transaction has taken place and according to the rules of Accrual Basis of Accounting, a transaction is recognized when it occurs irrespective of cash payments or receipts.
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