10 Nov The following Trial Balance was extracted from the
The following Trial Balance was extracted from the books of General Production Company Ltd on December 31, 2011 and presented to you the Financial Accountant:Trial BalanceDetails/AccountsDr $Cr $Purchases of direct raw materials25,200,000Stock of direct raw materials January 1,20115,500,000Wages paid to manufacture goods12,000,000Insurance2,000,000Electricity1,450,000Cash at bank28,000,000Accounts payable3,500,000Discounts450,000500,000Return of direct raw materials200,000Cash in hand600,000Work-in-progress January 1,20113,000,000Salaries3,500,000Returns inward of finished goods300,000Carriage inwards of direct raw materials1,000,000Indirect raw materials January 1,20112,500,000Accounts receivable7,500,000Provision for bad and doubtful debts75,000Machinery10,000,000Accumulated depreciation machinery4,000,000Office furniture2,000,000Purchase of indirect raw materials2,500,000Motor vehicles14,000,000Accumulated depreciation motor vehicles2,800,000Finished goods January 1, 20116,000,000Provision for unrealized profit1,000,000Indirect wages3,000,000Rent payable2,400,000Capital58,175,000Stationery250,000Bad debts200,000Direct expenses4,000,000Sales70,300,000Carriage outwards2,200,000Rent receivable500,000Salesmen commission1,500,000141,050,000141,050,000Notes:(i)The company adds 20% mark-up to its cost of production.(ii)The provision for bad and doubtful debts is to be increased to 1.5% of debtors.(iii)$200,000 of the insurance relates to 2012.(iv)Rent payable is to be apportioned 75% factory; 25% office.(v)Depreciation is to be charged as follows: Machinery 10% Reducing balance; Motor vehicles 10% Straight line; Office furniture 10% on cost.(vi)On December 31, 2011, $50,000 was outstanding for stationery.(vii)Stocks as at December 31, 2011 were as follows: Direct raw materials, $4,500,000; Work-in-progress, $4,000,000; Finished goods, $4,500,000; Indirect raw materials, $2,000,000(viii)1/5 of the amount paid for insurance is to be allocated to the office, while 60% of the electricity relates to the factory.(ix)The motor vehicles are used equally between the factory and the office.AnswerGeneral Production Company Limited Manufacturing, Trading, Profit and Loss Account for the period ending December 31, 2011Details / Account$$Opening Stock of Raw Materials5,500,000Purchases of Raw Materials less Return25,000,000Carriage Inwards of Raw Materials1,000,00031,500,000Less Closing Stock of Raw Materials(4,500,000)27,000,000Direct Wages12,000,000Direct Expenses4,000,000Prime Cost43,000,000Factory OverheadsOpening Stock of Indirect materials2,500,000Purchases of indirect materials2,500,000Indirect wages3,000,000Depreciation on Machinery4,600,000Rent Payable1,800,000Depreciation on Motor vehicle700,000Insurance1,440,000Electricity870,00017,410,000Less Closing Stock of indirect materials(2,000,000)15,410,000Opening WIP3,000,000Closing WIP(4,000,000)(1,000,000)Cost of Production57,410,00020% Factory Mark Up11,482,000Market Value of Finished Goods68,892,000Sales Less Return Inwards70,000,000Less Cost of SalesOpening stock of finished goods6,000,000Add market value of finished goods68,892,00074,892,000Less Closing Stock of finished goods(4,500,000)(70,392,000)Gross Profit/Loss(392,000)Add Factory Profit11,482,000Discount received500,000Rent receivable500,000Decrease in Provision for unrealized profit250,000Total Gross Profit12,340,000Less ExpensesDepreciation on Office Furniture200,000Rent600,000Depreciation on Motor Vehicle700,000Salaries3,500,000Electricity580,000Discount Allowed450,000Insurance360,000Salesman Commission1,500,000Carriage Outwards2,200,000Increase in provision for bad debt37,500Bad Debt200,000Stationery300,00010,627,500Net Profit1,712,500General Production Company Limited Balance Sheet for the period ending December 31, 2011Details/AccountsCostAcc. DepNBVFixed Assets$$$Machinery10,000,0004,600,0005,400,000Office Furniture2,000,000200,0001,800,000Motor Vehicle14,000,0003,920,00010,080,00026,000,0008,720,00017,280,000Current AssetsStock : WIP4,000,000Raw material4,500,000Finished Goods less PFUP3,750,000Indirect Materials2,000,00014,250,000Accounts Receivable less pbd7,387,500Cash at Bank28,000,000Cash in hand600,000Prepaid insurance200,00050,437,500Total Assets67,717,500Financed By:Capital58,175,000Add Net Profit1,712,50059,887,500Current LiabilityAccounts Payable3,500,000Accrued Stationery50,0003,550,00063,437,500Off 4,280,000
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