Question

EXERCISES Question 1 Tictac Ltd. Manufactured and sold sports shoes. It had also decided to import genuine leather shoes to meet the needs of the local consumers. The following balances were extracted from the books on 31 December 1990: Carriage inwards: shoes imported 62,300 Carriage outwards 6,500 Electricity 5,600 Factory expenses 44,000 Manufacturing wages 137,500 Office expenses 19,700 Office furniture and fixtures at cost 121,000 Opening stocks: Finished goods at cost 52,300 Work in progress at cost 23,800 Plant and machinery at cost 308,000 Purchases: shoes imported 352,000 Rates and insurance 8,300 Raw materials consumed 354,900 Returns inwards: Shoes manufactured 13,400 Office salaries 146,800 Sales: Shoes manufactured 925,300 Shoes imported 538,600 Selling expenses 36,200 Additional information: (i) Closing stocks valued at cost: Shoes manufactured Shoes imported 55,400 Work in progress 36,700 (ii) From 1 January 1990 onwards, the manufactured goods are transferred to the trading account at factory cost plus 25% profit loading. (iii) Depreciation is to be provided at 10% on cost for office furniture and fixtures and plant and machinery (iv) The expenses on electricity, and rates and insurance are chargeable three-fifths to the factory and the balance to the office. (y) On 1 July 1990, the company issued for cash $300,000 10% debentures repayable at the end of June 1995. (vi) On 31 December 1990, accrued office salaries amounted to $13,200 and the prepaid insurance premium was $2,300. REQUIRED: Prepare for Tictac Ltd. The following accounts for the year ended 31 December 1990: (a) A manufacturing account showing the prime cost and the total cost of manufactured shoes transferred to the trading account. (b) A trading and profit and loss account showing separately the gross profit on sales of manufactured shoes and imported shoes.

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Answer 1

354,900 137,500 492,400 Tictac Ltd. Manufacturing Account For the Year Ended December 31, 1990 Raw materils consumed Add: Manufacturing wages Prime Cost Add: Factory Expense Rates and insurance (8300-2300)*3/5 Electricity (5600*3/5) Depreciation of plant and machinery (308000*10%) Factory expense Add: Beginning work-in-progress Less: Ending work-in-progress Factory cost Add: Office Overhead Office Expenses Depreciation on furniture (121000*10%) Rates and insurance (8300-2300)*2/5 Electricity (5600*2/5) Office salaries (146800+13200) Tictac Ltd. Trading and Profit & Loss Account For the Year Ended December 31, 1990 Imported Manufactured Sales revenue 538,600 925,300 Less: Return inward 13,400 Net sales 538,600 911,900 Less: Cost of goods sold 358,9001 701,575 Gross profit on sales 179,700 210,325 Less: Selling expense (36200*538600/1450500) 13,442 22,758 (36200*911900/1450500) Carriage outward (6500*538600/1450500) 2,414 4,086 (6500*911900/1450500) Net income 163,845 $ 183,480 3,600 3,360 30,800 44,000 81,760 23,800 36,700 561,260 19,700 12,100 2,400 2,240 160,000 Explanation: Cost of goods sold for imported = Opening + Purchase + Carriage inward - Closing = 0 + 352000 +62300 - 55400 = 358900 Selling expense and carriage outward is distributed on the basis of net sales. Issue of debenture is not a part of manufacturing and hence not considered. Please give as many likes for the hard work. 196,440 757,700 52,300 Cost of Production Add: Beginning finished goods Less: Ending finished goods Cost of Goods Sold Total cost transferred to trading account (561260*125%) $ $ 810,000 701,575