Question

The following details were extracted from the books of Konongo Industries Limited a manufacturer of soap for the year ended 31^st March, 1999

                                                                                                              GH¢

Opening Stocks: Raw materials                                                          785,000

                            Work-In-Progress (WIP)                                        K216,000

                              Finished Goods                                                     432,750

Purchases                                                                                            1,871,215

Sales                                                                                                    4,343,680

Return Outwards                                                                                52,100

Return Inwards                                                                                   18,350

Carriage Inwards                                                                                74,180

Discount Allowed                                                                               15,015

Discount Received                                                                              46,780

Plant and Machinery at cost                                                               1,850,000

Freehold Building at cost                                                                    1,610,000

Furniture and Fittings at cost                                                              318,000

Indirect Wages                                                                                    127,125

Lighting and Heating                                                                          74,300

Insurance                                                                                             16,720

Rates                                                                                                   18,000

Salaries-selling and administration                                                     342,180

Motor Vehicle at cost                                                                         1,000,000

Direct wages                                                                                       692,750

Additional Information:

1. Depreciation was charged on cost at the following rates:

Plant and machinery                10% per annum

Furniture and Fittings             12.5% per annum

Freehold Building                   10% per annum

Motor Vehicles                       20% per annum

2. The proportion of use of the fixed assets as at 31^st March, 1999 by the factory and office was as follows:

Factory                                                Office

Plant and machinery                            90%                                                     10%

Furniture and Fittings                         25%                                                     75%

Freehold Building                               80%                                                     20%

Motor Vehicles                                   ***                                                      100%

3. The insurance expense was in respect of the plant and machinery.
4. Light and heating and rates were in respect of the freehold building.
5. Closing stocks of raw material GH¢539,400; closing WIP GH¢363,910 and closing finished goods GH¢244,840

Required: prepare manufacturing, trading and profit and loss account for the year ended 31^st March,1999.

Answer 1

(1) Manufacturing Account for the year ended 31st March, 1999 (amount in GHc)

Particulars	Amount	Particulars	Amount
To Opening Stock of WIP	216,000	By Closing Stock of WIP	363,910
To Raw Material Consumed (Note1)	2,064,715	By Cost of Production of FG	3,077,861
To Direct Wages	692,750
To Factory Overhead (Note 2)	468,306
Total	3,441,771	Total	3,441,771

Note 1: calculation of RM consumed

= Opening stock + Net Purchase - Closing Stock

= 785,000 + (1,871,215 - 52,100) - 539,400

= 2,064,715

Note 2: Factory Overhead

Particulars	Amount
Carriage inward	74,180
Depreciation	305,238
Lighting and heating (74,300 x 80%)	59,440
Insurance (16,720 x 90%)	15,048
Rates (18,000 x 80%)	14,400
Total	468,306

(2) Trading and Profit and loss account for the year ended on 31st March, 1999 (Amount in GHc)

Particulars	Amount	Amount
Sales	4,343,680
Less: Sales Return	18,350
Net sales		4,325,330
Cost of sales (Note 3)		3,265,771
Net Discount		31,765
Gross Profit		1,027,794
Less:
Depreciation	280,513
Indirect Wages	127,125
Lighting and heating (74,300 x 20%)	14,860
Insurance (16,720 x 10%)	1,672
Rates (18,000 x 20%)	3,600
Salaries - Selling & Distribution	342,180	769,950
Net Profit		257,844