Theory question 109
Manufacturing AccountsThe following information was extracted from the books of Okere Manufacturing Company for the year ended 31st December 2016. ($)
Stock (01/01/16): raw materials 61,450; finished goods 84,650; work-in-progress 3,140
Wages 14,150
Carriage inwards of raw materials 650
Purchases of raw materials 42,360
Royalties 1,040
Plant and machinery ($50,000) 40,000
Factory expenses 11,430
Factory power 6,050
Rent 2,400
Insurance 3,000
Discount allowed 1,430
Carriage outwards 610
Sales 292,400
Salesmen salaries 41,200
Office stationery 4,300
Additional information: (i) Closing stock as at 31/12/16: raw materials $30,420; finished goods $7,200; work-in-progress $1,680 (ii) Rent paid in advance $550 (iii) Insurance outstanding $600 (iv) Office stationery accrued $700 (v) Depreciation on plant and machinery at 10% per annum on cost.
You are required to prepare a Manufacturing, Trading, Profit and Loss Account for the year ended 31st December 2016.
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Manufacturing ($): raw materials 61,450 + purchases 42,360 + carriage inwards 650 − closing 30,420 = 74,040; wages 14,150; royalties 1,040; Prime cost 89,230. Factory overheads: factory expenses 11,430; factory power 6,050; depreciation of plant (10% × 50,000) 5,000 = 22,480; total 111,710; add opening WIP 3,140, less closing WIP 1,680; Cost of production 113,170.
Trading: sales 292,400; finished goods 84,650 + 113,170 − 7,200 = cost of sales 190,620; gross profit 101,780.
Profit and loss: rent (2,400 − 550) 1,850; insurance (3,000 + 600) 3,600; discount allowed 1,430; carriage outwards 610; salesmen salaries 41,200; office stationery (4,300 + 700) 5,000 = 53,690. Net profit $48,090.
Depreciate on cost ($50,000), not book value; rent and insurance are treated as office costs here.