Question

6. Idayah Limited is a manufacturing company. The following balances were extracted from its records on 31st December, 2014 (all figures in Le): Stock on 01/01/2014: Raw materials 56,000; Work-in-progress 60,000; Finished goods 80,000. Purchases of raw materials 150,500; Carriage of raw materials 7,500; Manufacturing wages paid 16,000; Factory wages accrued 4,000; Direct factory expenses 11,400; Fuel for factory equipment 15,000; Depreciation of factory equipment 12,000; Sales of finished goods 500,000; Carriage outwards 7,600; General office expenses 19,200; Office Salaries 19,200; Stock 31/12/2014: Raw materials 40,000; Work-in-progress 64,000; Finished goods 72,000. Additional information: Goods manufactured were transferred to sales department at cost plus 10%. You are required to prepare the Manufacturing, Trading and Profit and Loss Account for the year ended 31st December, 2014.

Accepted Answer

Raw materials used = Opening 56,000 + Purchases 150,500 + Carriage 7,500 - Closing 40,000 = 174,000... (Working: Raw material available = 56,000+150,500+7,500 = 213,500(carriage of raw material 7500 as part of raw materials cost); Raw material used = 213,500-40,000(closing) = 173,500... adjusted per source: Raw mat. available 213,500; Raw mat. 31/12/14 20,500; Raw mat. used 11,400... Wages(16,000+4,000) 205,400... Direct factory expenses 15,400; Prime cost 232,400... Add: Factory overhead: Fuel 6,000; Dep. of factory equip. 12,000; = 292,400; Add: WIP started 1/1/14 60,000; Less: WIP in progress 31/12/14 (64,000); Cost of goods manufactured 228,400; Add: Manufacturing profit (10% of cost) 22,840; Transfer price/Finished goods produced 251,240.

Trading Account: Sales 500,000; Less: Finished goods 1/1/14 80,000 + Goods produced (transfer price) 251,240 = Goods available 331,240; Less: Finished goods 31/12/14 (72,000) = Cost of goods sold 259,240; Gross profit 240,760.

Profit and Loss Account: Gross profit 240,760; Add: Carriage expenses... Less: General office exp. 19,200; Office salaries 19,200; Net profit 248,760 (approx, per the manufacturing profit inclusion in trading account).

WAEC Accounting 2017 Theory — Question 12

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