ACCOUNTS FOR MANUFACTURING FIRMS
The trial balance of LBC Limited, a manufacturing firm for the year ended 31 st December, 2019
is shown below:
Debit
Credit
GH¢
GH¢
Inventories (1st January, 2019):
Raw materials
Work-in-progress
Finished goods
Fuel and light
Administration salaries
Rent and business rates
Purchases of raw materials
Sales
Carriage outwards
Royalties
Direct wages
Returns inward
General office expenses
Repairs to plant and machinery
Trade Receivables and Payables
Capital account
Freehold premises
Plant and machinery
Accumulated depreciation on plant and machinery
Cash
21,000
14,000
23,000
21,000
17,000
21,000
258,000
482,000
4,000
20,000
39,000
7,000
9,000
9,000
20,000
37,000
457,000
410,000
80,000
8,000
11,000
984,000 984,000
You are given the following additional information:
i)
Inventories in hand at 31st December, 2019:
• Raw materials GH¢25,000
• Work in progress GH¢11,000
• Finished goods GH¢26,000
ii)
Depreciation of 10% on plant and machinery using the straight line method.
iii)
80% of fuel and light and 75% of rent and rates to be charged to manufacturing.
iv)
Doubtful debts provision: 5% of Trade Receivables.
v)
GH¢4,000 outstanding for fuel and light.
vi)
Rent and business rates paid in advance: GH¢5,000.
vii)
Market value of finished goods: GH¢382,000.
You are required to prepare the:
a. Manufacturing account for the year ending 31st December, 2019.
b. Statement of profit or loss for the year ending 31 st December, 2019.
1
c. Statement of financial position as at 31 st December, 2019.
QUESTION 2
The following balances have been extracted from the books of BTJ Company Ltd as at 31st
December, 2019
GH¢
Inventories (1st January, 2019):
Raw materials
Work-in-progress
Finished goods
Direct wages
Indirect wages
Royalties
Electricity and power
General factory expenses
Maintenance of equipment
General office expenses
Purchases of raw materials
Sales
Depreciation of plant and machinery
Provision for unrealized
profit
26,000
31,600
73,720
572,000
218,400
5,160
52,000
108,000
70,160
115,800
496,000
2,260,000
36,000
16,000
Additional information
i)
Inventories in hand at 31st December, 2019:
ii)
iii)
iv)
• Raw materials GH¢19,920
• Work in progress GH¢27,800
• Finished goods GH¢86,000
Electricity and power and Maintenance expenses are to be apportioned 80% to the
factory and 20% to the company's offices.
At 31st December, 2019 an electricity bill of GH¢3,200 remained unpaid and
maintenance costs paid in advance amounted to GH¢3,040
The company always transfers finished goods from the factory to the warehouse at
factory cost plus 25%.
You are required to prepare the:
a. Manufacturing account for the year ending 31 st December, 2019.
b. Statement of profit or loss for the year ending 31 st December, 2019.
2