Question 2
On December 31, 2016, the following list of balances was extracted from the books of Abrahams
and Sons Manufacturing Limited:
Details/Accounts
$
Rent
1,500,000
Stock, indirect raw materials, January 1, 2016
1,500,000
Stock, direct raw materials, January 1, 2016
10,500,000
Carriage inwards for indirect raw materials
300,000
Insurance
600,000
Purchase of indirect raw materials
2,000,000
Work in progress January 1, 2016
3,000,000
Sales of finished goods
62,500,000
Direct raw materials sent back to suppliers
250,000
Electricity
2,400,000
Purchases of raw materials to make product
14,500,000
Transportation charges for direct raw materials
2,500,000
Wages of workers who produce the product
15,000,000
License fees
4,000,000
Stock finished goods, January 1, 2016
16,000,000
Plant and machinery at cost
12,000,000
Administrative salaries
10,000,000
Indirect factory wages
4,500,000
Accumulated depreciation on plant and machinery
3,000,000
Furniture, fittings, etc. at cost
3,500,000
Notes:
(i)
(ii)
(iii)
(iv)
(v)
Stocks on December 31, 2016 were as follows: Direct raw materials $8,000,000;
Work-in-progress $4,000,000; Finished goods $12,000,000; and Indirect raw
materials $500,000.
Depreciation is charged at 10% per annum reducing balance on plant and machinery;
and 10% on costs for office furniture, fittings, etc.
On December 31, 2016 insurance of $100,000 related to the succeeding financial
year while $150,000 was accrued for rent.
The company adds 15% mark up to its cost of production.
40% of insurance charges are for the office; ¾ of rental charges are for the factory
and 1/5 of electricity charges apply to the office.
Required:
A manufacturing account for the financial year ending December 31, 2016 clearly showing the
following components:
(20 marks)
(i)
Prime costs.
(ii)
Factory overheads.
(iii)
Cost of production.
Market value of finished goods
ANSWER ALL QUESTIONS (TOTAL MARKS = 100)
Question 1
The following Trial Balance was prepared from the books of Maxwell Productions Ltd on
December 31, 2010 and presented to you the Financial Accountant for analysis:
Trial Balance
Details/Accounts
Dr $
Cr $
Insurance
1,200,000
Direct expenses
4,000,000
Bills payable
150,000
Net sales
80,000,000
Office furniture and fittings
4,500,000
Accumulated depreciation on furniture & fittings
900,000
Return outwards of direct raw materials
330,000
Rent
3,000,000
500,000
Bank overdraft
550,000
Direct raw materials purchased
20,330,000
Indirect factory wages
4,000,000
Stock of direct raw materials January 1, 2010
6,500,000
Stationery
1,100,000
Provision for unrealized profit
600,000
Capital
28,940,000
Bad debts
370,000
Provision for bad and doubtful debts
400,000
Production workers’ salaries
12,000,000
Cash in hand
1,500,000
Accounts payable
5,600,000
Electricity
2,400,000
Commission
4,800,000
1,000,000
Stock of finished goods January 1, 2010
6,600,000
Discounts
800,000
750,000
Carriage inwards of direct raw materials
1,600,000
Administrative salaries
8,400,000
Accounts receivable
9,000,000
Motor vehicles
20,000,000
Provision for depreciation on motor vehicles
8,000,000
Work in progress, January 1, 2010
3,500,000
Bills receivable
420,000
Plant and machinery
15,000,000
Accumulated depreciation on plant and machinery
6,000,000
Motor vehicles repair cost
700,000
Cash drawings
2,000,000
133,720,000
133,720,000
Notes:
(i)
Depreciation is to be charged as follows: motor vehicles 20% reducing balance; office
furniture and fittings 10% straight line; and plant and machinery 10% reducing
balance.
(ii)
Insurance amounting to $120,000 was unpaid as at December 31, 2010.
(iii) Motor vehicle expenses are to be apportioned 3:2 between factory and office
respectively.
(iv)
The company adds 10% factory profit to its cost of production.
(v)
Rent payable is to be apportioned 3:1 between factory and office respectively; 60% of
the insurance relates to the factory; and ¾ of the electricity usage relates to the
factory.
(vi)
Commission receivable amounting to $150,000 was due to the company as at
December 31, 2010.
(vii) The provision for bad and doubtful debts is to be adjusted to 1½ % of debtors.
(viii) Indirect factory wages accrued as at December 31, 2010 amounted to $180,000.
(ix)
Stocks as at December 31, 2010 were as follows: Work in progress $4,900,000;
Finished goods, $7,700,000 and direct raw materials, $5,000,000.
Required:
(a) Prepare Manufacturing, Trading and Profit and Loss Account for the year ending
December 31, 2010.
(28 marks)
(b) A Balance Sheet as at December 31, 2010.
(12 marks)