Question

The following trial balance was extracted from the books of G & E Production Company Ltd on 31 December 2018 and presented to you the Financial Accountant:

Trial Balance

Details/Accounts	Dr $	Cr $
Purchases of direct raw materials	24,200,000
Stock of direct raw materials 1 January 2018	5,500,000
Wages paid to manufacture goods	12,000,000
Insurance	2,000,000
Electricity	1,450,000
Cash at bank	28,000,000
Accounts payable		3,500,000
Discounts	450,000	500,000
Return of direct raw materials		200,000
Cash in hand	600,000
Work-in-progress 1 January 2018	3,000,000
Salaries	3,500,000
Returns inward of finished goods	300,000
Carriage inwards of direct raw materials	1,000,000
Indirect raw materials 1 January 2018	2,500,000
Accounts receivable	7,500,000
Provision for bad and doubtful debts		75,000
Machinery	10,000,000
Accumulated depreciation machinery		4,000,000
Office furniture	2,000,000
Purchase of indirect raw materials	2,500,000
Motor vehicles	14,000,000
Accumulated depreciation motor vehicles		2,800,000
Finished goods 1 January 2018	6,000,000
Provision for unrealized profit		1,000,000
Indirect wages	3,000,000
Bank loan		2,550,000
Rent	2,400,000	500,000
Capital		55,625,000
Stationery	250,000
Bad debts	200,000
Licence fee	4,000,000
Sales		69,300,000
Carriage outwards	2,200,000
Salesmen commission	1,500,000
	140,050,000	140,050,000

Notes:

1. The company adds 20% mark-up to its cost of production.
2. The provision for bad and doubtful debts is to be increased to 1.5% of debtors.
3. $200,000 of the insurance relates to 2019.
4. Rent payable is to be apportioned 75% factory; 25% office.
5. Depreciation is to be charged as follows: Machinery 10% Reducing balance; Motor vehicles 10% Straight line; Office furniture 10% on cost.
6. On 31 December 2018, $50,000 was outstanding for stationery.
7. Stocks as at 31 December 2018 were as follows: Direct raw materials, $4,500,000;
   Work-in-progress, $4,000,000; Finished goods, $4,500,000; Indirect raw materials, $2,000,000   
8. 1/5 of the amount paid for insurance is to be allocated to the office, while 60% of the electricity relates to the factory.
9. The motor vehicles are used equally between the factory and the office.

REQUIRED:

(a) Prepare Manufacturing, Trading and Profit and Loss Account for the year ending
31 December 2018.                   (28 marks

2. A Balance Sheet as at 31 December 2018. (12 marks)

Answer 1

с 느 D E F G H K - M N o P Manufacturing, Trading and Profit and Loss Account For the Year Ended 31 December 2018 Closing Stock: Raw Materials $55,00,000 Work-in-Progress $30,00,000 $85,00,000 Indirect Material $45,00,000 $40,00,000 $20,00,000 $1,05,00,000 Direct Materials Opening Stock: Raw Materials Work-in-Progress Purchases: Raw Materials Carriage Inward (-) Returns Direct Labor Factory wages $2,42,00,000 $10,00,000 -$2,00,000 $2,50,00,000 Cost of goods transferred to Trading Account $5,80,92,000 $1,20,00,000

FOCLOTY wus VIZUpouuoo Direct Expense Indirect Material: Opening Stock Purchases Indirect Wages Rent (75%) Insurance (4/5th) Electricity (60%) Deprec- Machinery Deprec- Motor vehicle Manufacturing Margin $25,00,000 $25,00,000 $50,00,000 $30,00,000 $18,00,000 $14,40,000 $8,70,000 $6,00,000 $7,00,000 $1,34,10,000 $96,82,000 $6,85,92,000 $6,85,92,000 Opening Stock of FG Cost of goods transferred from manufac. Account Gross Profit $60,00,000 Manufacturing Margin Sales $5,80,92,000 (-) Returns $1,90,90,000 Closing Stock of FG $96,82,000 $6,93,00,000 $3,00,000 $6,90,00,000 $45,00,000 $8,31,82,000 $8,31,82,000

D E F G H K M N Insurance Electricity Discounts allowed Salaries Deprec - Office Furniture Deprec-Motor Vehicle Rent $3,60,000 Gross Profit $5,80,000 Prov. For unrealised profit $4,50,000 Discounts reveived $35,00,000 Rent Received $2,00,000 $7,00,000 $6,00,000 $1,90,90,000 $10,00,000 $5,00,000 $5,00,000 $3,00,000 $2,50,000 $50,000 $2,00,000 $37,500 Stationery (+) Outstanding Bad Debts (+) Additional provision Licence fees Carriage Outward Salesmen Commission Net Profit $2,37,500 $40,00,000 $22,00,000 $15,00,000 $64,62,500 $2,10,90,000 $2,10,90,000

Liabilities Current Liabilities: Accounts Payable Outstanding Stationery Non-Current Liabilities: Bank Loan $2,80,00,000 $6,00,000 As at 31 December 2018 Assets Current Assets: $35,00,000 Cash at Bank $50,000 Cash in Hand Accounts Receivable $25,50,000 Less: Provision Prepaid Insurance Closing Stock: $5,56,25,000 Raw Materials $64,62,500 $6,20,87,500 Work-in-Progress Finished Goods Indirect Materials $75,00,000 $1,12,500 $73,87,500 $2,00,000 Capital: Opening Add: Net Profit $45,00,000 $40,00,000 $45,00,000 $20,00,000 $1,50,00,000 $54,00,000 Non-Current Assets: Machinery Less: Accum. Depreciation Office Furniture Less: Accum. Depreciation Motor Vehicles Less: Accum. Depreciation $1,00,00,000 $46,00,000 $20,00,000 $2,00,000 $1,40,00,000 $42,00,000 $18,00,000 $98,00,000 $6,81,87,500 $6,81,87,500

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