Idayah Limited is a manufacturing company. The following balances were extracted from its records on 31st December 2014. Stock on 01/01/2014 Le Raw material...
Question 1 Report
Idayah Limited is a manufacturing company. The following balances were extracted from its records on 31st December 2014.
| Stock on 01/01/2014 | Le |
| Raw materials | 56,000 |
| Work-in-progress | 60,000 |
| Finished goods | 80,000 |
| Purchases of raw materials | 150,000 |
| Carriage of raw materials | 7500 |
| Manufacturing wages paid | 16,500 |
| Factory wages accrued | 4,000 |
| Direct factory expenses | 11,000 |
| Fuel for factory expenses | 15,400 |
| Depreciation of factory equipment | 12,000 |
| Sales of finished goods | 500,000 |
| Carriage expenses | 7,600 |
| General office goods | 3,800 |
| Office Salaries | 19,200 |
| Stock: 31/12/2014 | |
| Raw materials | 40,000 |
| Work-in-progress | 64,000 |
| Finished goods | 72,000 |
You are required to prepare manufacturing, Trading, and Profit and Account for the year ended 31st December 2014
Answer Details
Approach. A manufacturing concern prepares three linked accounts: the Manufacturing Account (to find cost of production), the Trading Account (to find gross profit on finished goods), and the Profit and Loss Account (to find net profit). Manufacturing wages must include the accrual, and work-in-progress is adjusted inside the manufacturing account.
Manufacturing, Trading, Profit and Loss Account for the year ended 31st December 2014 (all figures in Le)
| Particulars | Le | Le |
|---|---|---|
| Cost of raw materials consumed | ||
| Opening raw materials | 56,000 | |
| Add Purchases of raw materials | 150,000 | |
| Add Carriage on raw materials | 7,500 | |
| Less Closing raw materials | (40,000) | 173,500 |
| Manufacturing wages (16,500 + 4,000 accrued) | 20,500 | |
| Direct factory expenses | 11,000 | |
| Prime cost | 205,000 | |
| Add Factory overheads: | ||
| Fuel for factory | 15,400 | |
| Depreciation of factory equipment | 12,000 | 27,400 |
| 232,400 | ||
| Add Opening work-in-progress | 60,000 | |
| Less Closing work-in-progress | (64,000) | |
| Cost of production (transferred to Trading) | 228,400 |
| Trading Account | Le | Le |
|---|---|---|
| Sales of finished goods | 500,000 | |
| Opening finished goods | 80,000 | |
| Add Cost of production | 228,400 | |
| Goods available | 308,400 | |
| Less Closing finished goods | (72,000) | (236,400) |
| Gross profit | 263,600 |
| Profit and Loss Account | Le | Le |
|---|---|---|
| Gross profit | 263,600 | |
| Less expenses: | ||
| Carriage (outwards) expenses | 7,600 | |
| Office salaries | 19,200 | |
| General office goods | 3,800 | (30,600) |
| Net profit | 233,000 |
Notes. Carriage on raw materials is added to raw-material cost (a manufacturing/prime cost), while carriage expenses (outwards) is a selling cost charged in the Profit and Loss Account. The Le4,000 accrued factory wages is added to the wages paid.
Download The App On Google Playstore
Everything you need to excel in your exams
