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Hi Sir,
This is a manufacturing account question and I don’t understand what the question is asking for?
Goods are transferred from the manufacturing Account to the income statement at a factory cost of production plus a markup of 20%.
The transfer prices of the closing inventories of finished goods were as follows:
Year 1: $39600
Year 2: $42000
year 3: $45600
What was the provision for unrealised profit charged against the profit for year 3?
A: $400 B: $600 C: $720 D: $1200
DR GH¢
CR GH¢
Drawing and Capital
11,93036,460
Inventory at 1st July, 2014
Raw Material
1,000
Finished Goods
1,500
Purchases of raw materials
75,000
Factory Wages
5,000
Salaries
9,000
Insurance
10,000
Discounts
2,5703,500
Sales
106,000
Provision for unrealized profit 1st July, 2014
2,040
Land and building:
11,000
(Land element at cost 1,500 and Building at cost 12,000)Plant and Machinery at cost
10,200
Office Equipment (cost 8,000)
6,000
Trade Receivables and Trade Payables
23,00026,700
Cash and Bank
8,500
174,700174,700
The following Trial Balance was extracted from the books of Oliver Twist Manufacturing Ltd as at
30th June, 2015.
The following additional information is also relevant:
i. Inventories at 30th June, 2015:
Raw material GH¢2,000
Finished goods GH¢11,440ii. On the 31st December, 2014, the business purchased Plant and Machinery, GH¢ 2,000. Full value of Office Equipment was sold for GH¢ 6,100 on 31st December, 2014. Provision for depreciation is 10% per annum on cost of fixed assets excluding land.
iii. Three quarter’s Salaries are shown in the Trial Balance, an equal amount is paid for Salaries for each month of the year.
iv. GH¢ 310 represents Insurance prepaid, and Light and heat outstanding is GH¢ 850 at end of the year. GH890 had been charged to Insurance for the owner’s life assurance at the end of the year 30th June, 2015
v. Finished goods manufactured are transferred at a mark-up of 10%.
vi. A customer, owing GH¢ 3,000 has been declared bankrupt. This amount is to be written off in full, and 5% provision for bad debt is to be maintained.
vii. The following expenses are to be allocated as follows:
Factory
Administration
Light and Heat
80%
20%
Salaries
70%
30%
Insurance
20%
80%
Depreciation of Building
40%
60%Required to:
a. Prepare Manufacturing, Trading, Profit or Loss Account for the year ended
30th June, 2015b. Write up the Fixed Asset Schedule as at 30th June, 2015
c. Show up Cash Book balance to be transferred to Statement of Financial Position as at 30th June, 2015
d. Draft the Statement of Financial Position as at 30th June, 2015
Solve it for meNo – I certainly will not solve it for you!!!!
We are not here to provide answers to test questions.
You should be using a Revision Kit from one of the ACCA approved publishers – they contain answers and explanations to the questions. Ask about anything you do not understand in the answer and then I will explain.
In addition, you have clearly not read my earlier reply – manufacturing accounts are not in the syllabus for Paper FA (F3). In addition you cannot be asked to draft SOFP’s or get any questions remotely like the one that you have typed out.
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