Question

9. The following balances were extracted from the books of Emeka Company Limited for the year ended 31st December, 2016 (Departments: Cloth, Dress, Shoes; amounts in N): Sales: Cloth 68,000, Dress 54,000, Shoes 41,000. Purchases: Cloth 44,800, Dress 37,060, Shoes 29,060. Electricity and water 3,570; Sales expenses 1,956; Commission paid 3,260; Printing and Stationery 750; Wages and salaries 27,000; Miscellaneous expenses 6,900. Inventory 01/01/16: Cloth 12,410, Dress 9,550, Shoes 7,750. Inventory 31/12/16: Cloth 10,540, Dress 7,350, Shoes 8,280. Additional information: Expenses are to be apportioned between departments as follows: (i) Sales expenses and commission in proportion to sales; (ii) printing and stationery, wages and salaries in the proportion 6:4:5 respectively; (iii) Other expenses equally. You are required to prepare a Departmental Trading and Profit and Loss Account for the year ended 31st December, 2016.

Accepted Answer

Apportionment workings:
1. Sales expenses (total N1,956) apportioned by sales ratio (68,000:54,000:41,000, total 163,000): Cloth = (68,000/163,000)x1,956=N816; Dress = (54,000/163,000)x1,956=N648; Shoe = (41,000/163,000)x1,956=N492.
2. Commission paid (N3,260) apportioned by sales ratio: Cloth=(68,000/163,000)x3,260=N1,360; Dress=(54,000/163,000)x3,260=N1,080; Shoe=(41,000/163,000)x3,260=N820.
3. Printing and stationery (N750) apportioned 6:4:5 (total 15): Cloth=(6/15)x750=N300; Dress=(4/15)x750=N200; Shoe=(5/15)x750=N250.
4. Wages and salary (N27,000) apportioned 6:4:5: Cloth=(6/15)x27,000=N10,800; Dress=(4/15)x27,000=N7,200; Shoe=(5/15)x27,000=N9,000.
Other expenses (electricity/water N3,570 and miscellaneous N6,900) shared equally among the three departments.

Departmental Trading Account: Sales - Cloth 68,000, Dress 54,000, Shoe 41,000. Less Cost of goods sold (Opening inventory + Purchases - Closing inventory) for each department. Gross profit per department, less apportioned expenses (sales expenses, commission, printing/stationery, wages/salaries, electricity/water, miscellaneous) gives Net profit/loss per department as per the detailed apportionment workings above.

WAEC Accounting 2017 Theory — Question 15

Sign up free to unlock