Question

QUESTION TWO a. Gawucho Furniture Manufacturing Company (Gawucho) commenced business on 1st January, 2019, preparing account to 31" December each year. The accountant of the business has provided you with the below information. Assets Note Original Cost (GHC) Furniture 424,000 Plywood 2 130,000 Motor Vehicle 3 350,000 Plant and Machinery 4 100,000 Total Assets 1,004,000 Additional Information 1. The Furniture was produced on 1st March, 2019 for sales but Gawucho used GH¢ 20,000 of these Furniture in its Administration offices. No sales was made during the year. 2. Plywood was purchased on 19 January, 2019 for the production of the furniture. 3. Motor Vehicle was acquired on 19 January, 2019 to convey furniture to customers' destination only. 4. Plant and machinery was bought on 1st October, 2019 for production of furniture. 5. The business depreciates its asset at the rate of 20% on straight line method on one month ownership basis. 6. All the above assets existed as of 31" December, 2019. Required Draft an extract showing how the above transactions should be presented in the financial statements of Gawucho Furniture Manufacturing Company at the end of 2019 year. (12 marks) b. Provide notes to support your presentation (18 marks) a.

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Answer 1

Extract of Balance Sheet

Assets:	GH	GH
Current Assets:
Inventory of Finished goods: Furniture	404,000
Inventory of Materials: Pywood	130,000
Total Current Assets		534,000
Non-Current Assets:
Furniture	20,000
Less: Accumulated Depreciation	(3,333)	16,667
Motor Vehciles	350,000
Less: Accumulated Depreciation	(70,000)	280,000
Plant and Machinery	100,000
Less: Accumulated Depreciation	(5,000)	95,000
Total Assets		925,667

1. Furniture: Total Production was of 424,000. Out of this, 20,000 GH was used for business purpose and furniture exists at the end of the year. Hence 20,000 is capitalised as Non-current asset and is depreciable from 1st March, 2019. The Balance ie. 404,000 which is not yet sold is likely to be sold next year. Thus this is treated as inventory under current asset.

2. Plywood is used for production. Hence, treated as a part of inventory.

3. Motor Vehicles used for business purpose is a non-current asset. Hence depreicable @ 20% from 1st January, 2019.

4. Plant and Machinery used for production purpose is a non-current asset. Hence depreicable @ 20% from 1st October, 2019.

5. Depreciation are as follows:

On Furniture (20,000*20%*10/12)	3,333
On Motor Vehicles (350,000*20%)	70,000
On Plant and Machinery (100,000*20%*3/12)	5,000
Total Depreciation	78,333