Question

5. Grape Enterprises makes fruit juice. The following information relates to the year ended 31st December, 2009.
Stock – 1st January 2009: Raw materials ₦336,500; Work-in-progress ₦60,000; Finished goods ₦350,000
Purchases of raw materials ₦6,000,000
Sales ₦6,000,000
Office salaries ₦78,500
Carriage inwards ₦450,000
Royalties ₦925,000
Direct factory wages ₦20,000
Discounts allowed ₦225,000
Indirect wages ₦250,000
Insurance of factory ₦300,000
General expenses ₦310,000
Depreciation of plant ₦62,000
Delivery van expenses ₦300,000
Office expenses ₦65,000
Stock – 31st December 2009: Raw materials ₦245,000; Work-in-progress ₦47,500; Finished goods ₦285,000
Additional information: (i) half of general expenses relates to the factory (ii) one third of the office expenses should be treated as factory cost.
You are required to prepare the Manufacturing, Trading and Profit and Loss Account for the year ended 31st December, 2009. (15 marks)

Accepted Answer

MANUFACTURING, TRADING AND PROFIT AND LOSS ACCOUNT for the year ended 31st December, 2009
Raw materials 1/1/09: ₦336,500
Purchases of raw mat.: ₦5,950,000
Cost of raw mat. available: ₦6,286,500
Less: Raw materials 31/12/09: (₦245,000)
Cost of raw mat. consumed: ₦6,041,500
Add: Carriage inwards: ₦450,000
Cost of raw materials: ₦...
Add: Factory wages (direct): ₦925,000
Prime cost: ₦7,120,000 (approx, per source)
Add Factory Overhead: Royalties ₦450,000; Indirect wages ₦225,000; Insurance of factory ₦250,000; General expenses (half) ₦150,000; Depreciation of plant ₦310,000; Office expenses (one third) ₦100,000 = Total factory overhead ₦1,485,000
Cost of goods started and completed: ₦3,530,000 (approx)
Add: Work-in-progress 1/1: ₦60,000
Less: Work-in-progress 31/12: (₦47,500)
Cost of goods produced: ₦3,542,500
Add: Finished goods 1/1: ₦350,000
Cost of goods available: ₦3,892,500
Less: Finished goods 31/12: (₦285,000)
Cost of goods sold: ₦3,607,500

TRADING SECTION
Sales: ₦6,000,000
Less Cost of goods sold: (₦3,607,500)
Gross profit: ₦2,392,500

PROFIT AND LOSS SECTION
Gross profit: ₦2,392,500
Less: Office salaries ₦78,500; Discount allowed ₦225,000; General expenses (remaining half) ₦150,000; Delivery van expenses ₦300,000; Office expenses (remaining two-thirds) ₦65,000... totalling deductions of approximately ₦811,500
Net profit: approximately ₦1,580,500 to ₦1,592,500 (exact figure depends on final apportionment as per the detailed workings above; per the source total this comes to ₦1,580,500).

WAEC Accounting 2013 Theory — Question 5

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