Question

9. The following information was extracted from the books of Okere Manufacturing Company for the year ended 31st December 2016 (in N): Stock of raw materials (01/01/16) 61,450; Purchases of raw materials 42,360; Carriage inwards of raw materials 6,050; Wages 14,150; Royalties 1,040; Plant and machinery ($50,000) 40,000; Factory expenses 11,430; Factory power 6,050; Rent 2,400; Insurance 3,000; Discount allowed 1,430; Carriage outwards 610; Sales 292,400; Salesmen salaries 41,200; Office stationery 4,300; Finished goods (01/01/16) 84,650; Work-in-progress (01/01/16) 3,140. Additional information: (i) Closing stock as at 31/12/16 — raw materials N30,420, finished goods N7,200, work-in-progress N1,680; (ii) Insurance outstanding N600; (iii) Rent paid in advance N550; (iv) Office stationery accrued N700; (v) Depreciation on plant and machinery at 10% per annum on cost. You are required to prepare a Manufacturing, Trading and Profit and Loss Account for the year ended 31st December 2016.

Accepted Answer

See the Manufacturing, Trading and Profit and Loss Account table in the Diagram column. Prime cost is computed as N94,630 (cost of raw materials used N79,440 + Wages N14,150 + Royalties N1,040). Adding Factory Overhead of N22,480 (Depreciation on plant and machinery N5,000 + Factory expenses N11,430 + Factory power N6,050) gives a Cost of goods manufactured (within the year) of N117,110, which is adjusted for opening and closing work-in-progress to give N118,570. Cost of goods sold is N196,020, giving a Gross profit of N96,380. After deducting adjusted expenses (Rent N1,850, Insurance N3,600, Office stationery N5,000, Discount allowed N1,430, Carriage outwards N610, and Salesmen salaries N41,200, totalling N53,690), the final Profit for the year is N42,690.

WAEC Accounting 2020 Theory — Question 9

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