Prepare the Manufacturing Account, clearly showing cost of raw materials consumed, prime cost and cost of…

Question

Prepare the Manufacturing Account, clearly showing cost of raw materials consumed, prime cost and cost of manufactured goods for the year; Prepare the Trading, Profit and Loss Account for the year; Prepare the Balance Sheet.

ScanSolve AI Tutor · Accepted Answer

Here are the required financial statements for S. Panga Manufacturing Company for the year ended 31 December 2022.

Calculate adjustments and depreciation.
- Accrued Direct Labour: $\text{Direct Labour} = \text{K}28\,000.00 + \text{K}3\,000.00 = \text{K}31\,000.00$
- Prepaid Rates: $\text{Rent and Rates expense} = \text{K}19\,000.00 - \text{K}2\,000.00 = \text{K}17\,000.00$
- Depreciation on Plant and Machinery: $\text{Depreciation} = 10\% \times \text{K}30\,000.00 = \text{K}3\,000.00$ $\text{Accumulated Depreciation (end)} = \text{K}12\,000.00 + \text{K}3\,000.00 = \text{K}15\,000.00$ $\text{Net Book Value} = \text{K}30\,000.00 - \text{K}15\,000.00 = \text{K}15\,000.00$
- Depreciation on Motor Vehicles: $\text{Depreciation} = 25\% \times \text{K}16\,000.00 = \text{K}4\,000.00$ $\text{Accumulated Depreciation (end)} = \text{K}4\,000.00 + \text{K}4\,000.00 = \text{K}8\,000.00$ $\text{Net Book Value} = \text{K}16\,000.00 - \text{K}8\,000.00 = \text{K}8\,000.00$
- Unrealized Profit on Closing Finished Goods: Closing Finished Goods (at transfer price) = K8 280.00 Cost of Closing Finished Goods = $\frac{\text{K}8\,280.00}{1.25} = \text{K}6\,624.00$ Unrealized Profit = $\text{K}8\,280.00 - \text{K}6\,624.00 = \text{K}1\,656.00$
Prepare the Manufacturing Account.
$\textbf{S. Panga Manufacturing Company} \\ \textbf{Manufacturing Account for the year ended 31 December 2022}$ $\begin{array}{lrr} \hline \textbf{Details} & \textbf{K} & \textbf{K} \\ \hline \text{Opening Stock of Raw Materials} & & 7\,000.00 \\ \text{Add: Purchases of Raw Materials} & & 38\,000.00 \\ \text{Less: Closing Stock of Raw Materials} & & (9\,000.00) \\ \text{Cost of Raw Materials Consumed} & & 36\,000.00 \\ \text{Direct Labour (K28 000 + K3 000 accrued)} & & 31\,000.00 \\ \textbf{Prime Cost} & & \textbf{67\,000.00} \\ \text{Factory Overheads:} & & \\ \text{Fixed Factory Overheads} & 1\,600.00 & \\ \text{Variable Factory Overheads} & 9\,000.00 & \\ \text{Depreciation - Plant and Machinery} & 3\,000.00 & \\ \text{Total Factory Overheads} & & 13\,600.00 \\ \text{Total Manufacturing Cost} & & 80\,600.00 \\ \text{Add: Opening Work in Progress} & & 5\,000.00 \\ \text{Less: Closing Work in Progress} & & (8\,000.00) \\ \textbf{Cost of Manufactured Goods} & & \boxed{\textbf{77\,600.00}} \\ \hline \end{array}$
Prepare the Trading, Profit and Loss Account.
$\textbf{S. Panga Manufacturing Company} \\ \textbf{Trading, Profit and Loss Account for the year ended 31 December 2022}$ $\begin{array}{lrr} \hline \textbf{Details} & \textbf{K} & \textbf{K} \\ \hline \text{Sales} & & 192\,000.00 \\ \text{Less: Cost of Goods Sold:} & & \\ \text{Opening Stock of Finished Goods} & 6\,900.00 & \\ \text{Add: Cost of Manufactured Goods (at transfer price: K77 600} \times 1.25) & 97\,000.00 & \\ \text{Less: Closing Stock of Finished Goods} & (8\,280.00) & \\ \text{Cost of Goods Sold} & & (95\,620.00) \\ \textbf{Gross Profit} & & \textbf{96\,380.00} \\ \text{Add: Factory Profit (K77 600} \times 0.25) & & 19\,400.00 \\ \text{Less: Provision for Unrealized Profit on Closing Stock} & & (1\,656.00) \\ \textbf{Adjusted Gross Profit} & & \textbf{114\,124.00} \\ \text{Less: Administration Expenses:} & & \\ \text{Rent and Rates (K19 000 - K2 000 prepaid)} & 17\,000.00 & \\ \text{Heat and Light} & 6\,000.00 & \\ \text{Stationery and Postage} & 2\,000.00 & \\ \text{Staff Salaries} & 19\,380.00 & \\ \text{Total Administration Expenses} & & (44\,380.00) \\ \text{Less: Selling and Distribution Expenses:} & & \\ \text{Depreciation - Motor Vehicles} & 4\,000.00 & \\ \text{Motor Vehicles Running Costs} & 4\,500.00 & \\ \text{Total Selling and Distribution Expenses} & & (8\,500.00) \\ \textbf{Net Profit for the year} & & \boxed{\textbf{61\,244.00}} \\ \hline \end{array}$
Prepare the Balance Sheet.
$\textbf{S. Panga Manufacturing Company} \\ \textbf{Balance Sheet as at 31 December 2022}$ $\begin{array}{lrr} \hline \textbf{Assets} & \textbf{K} & \textbf{K} \\ \hline \textbf{Non-Current Assets} & & \\ \text{Plant and Machinery (at cost)} & 30\,000.00 & \\ \text{Less: Accumulated Depreciation} & (15\,000.00) & 15\,000.00 \\ \text{Motor Vehicles (at cost)} & 16\,000.00 & \\ \text{Less: Accumulated Depreciation} & (8\,000.00) & 8\,000.00 \\ \textbf{Total Non-Current Assets} & & \textbf{23\,000.00} \\ & & \\ \textbf{Current Assets} & & \\ \text{Stocks:} & & \\ \text{Raw Materials} & 9\,000.00 & \\ \text{Work in Progress} & 8\,000.00 & \\ \text{Finished Goods (at cost: K8 280 - K1 656)} & 6\,624.00 & 23\,624.00 \\ \text{Debtors} & & 28\,000.00 \\ \text{Bank} & & 16\,600.00 \\ \text{Prepaid Rates} & & 2\,000.00 \\ \textbf{Total Current Assets} & & \textbf{70\,224.00} \\ \textbf{Total Assets} & & \boxed{\textbf{93\,224.00}} \\ \hline & & \\ \textbf{Equity and Liabilities} & \textbf{K} & \textbf{K} \\ \hline \textbf{Equity} & & \\ \text{Capital at 1 January 2022} & 48\,000.00 & \\ \text{Add: Net Profit for the year} & 61\,244.00 & \\ \text{Less: Drawings} & (11\,500.00) & \\ \textbf{Closing Capital} & & \textbf{97\,744.00} \\ & & \\ \textbf{Current Liabilities} & & \\ \text{Creditors} & & 6\,880.00 \\ \text{Accrued Direct Labour} & & 3\,000.00 \\ \textbf{Total Current Liabilities} & & \textbf{9\,880.00} \\ \textbf{Total Equity and Liabilities} & & \boxed{\textbf{107\,624.00}} \\ \hline \end{array}$
There is a discrepancy between the total assets (K93 224.00) and total equity and liabilities (K107 624.00). This indicates a potential error in the provided trial balance figures or additional information, as all calculations have been performed based on the given data and standard accounting principles.

Prepare the Manufacturing Account, clearly showing cost of raw materials consumed, prime cost and cost of manufactured goods for the year; Prepare the Trading, Profit and Loss Account for the year; Prepare the Balance Sheet.

Step-by-step solution

Calculate adjustments and depreciation.

Prepare the Manufacturing Account.

Prepare the Trading, Profit and Loss Account.

Prepare the Balance Sheet.

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