Question

Assignment #2

Question #4

National Distributors Ltd is a manufacturing company whose annual financial performance is determined by preparing its final accounts at the end of the financial period which ends on October 31st each. The following Trial Balance was extracted from the company’s books on October 31, 2016:

Trial Balance

Details/Accounts	Dr $	Cr $
Cash at bank	20,000,000
Furniture and office equipment	4,000,000
Provision for depreciation furniture and fittings		800,000
Administrative salaries	12,000,000
Discounts	400,000	320,000
Production supervisors salaries	8,000,000
Net sales		105,000,000
Accounts payable		4,500,000
Direct raw materials inventory, November 1, 2015	4,500,000
Expenses for trucking direct raw materials	2,800,000
Electricity	3,000,000
Purchases of direct raw materials	25,200,000
Janitorial wages	800,000
Finished goods inventory, November 1, 2015	5,500,000
License fees paid to produce goods	2,000,000
Commission	3,600,000
Interest		2,500,000
Capital		30,870,000
Cash in hand	2,400,000
Rent	3,600,000
Direct raw materials sent back to suppliers		200,000
Accounts receivable	7,000,000
Insurance	1,500,000
Bills receivable	400,000
Work-in-progress, November 1, 2015	3,800,000
Bad debts	250,000
Cash drawings	650,000
Motor vehicle repairs	2,200,000
Production workers salaries	18,000,000
Provision for bad and doubtful debts		210,000
Motor vehicles	10,000,000
Accumulated depreciation on motor vehicles		2,000,000
Provision for unrealized profits		500,000
Machinery	12,000,000
Provision for depreciation on machinery		1,200,000
Long term loan	-------------	5,500,000,
Total	153,600,000	153,600,000

Notes:

1. On October 31, 2016, $200,000 due for motor vehicle repairs was still unpaid; interest receivable for $300,000 was not booked to the account and $100,000 was owed for commission.
2. Inventory on October 31, 2016 were as follows: Direct raw materials $3,700,000; work-in-progress $4,700,000; finished goods $6,600,000.
3. The provision for bad and doubtful debts should be moved to 2.5% of debtors while the company has a policy in place that adds 10% mark up to its cost of production.
4. Rent is apportioned 3/5 to the factory while seventy percent of the electricity usage is for the factory; 40% of insurance charges are for the office while the motor vehicles are used equally between the office and the factory.
5. Depreciation is to be charged as follows: machinery 10% reducing balance; motor vehicles 20% reducing balance; furniture and office equipment 10% straight line.

Required:

1. Prepare Manufacturing, Trading and Profit and Loss Accounts for the year ending October 31, 2016.                                                                                                
2. Prepare a Balance Sheet as at October 31, 2016.                                          

Answer 1

Manufacturing & Trading Account
Particular	Notes	Amount	Particular	Notes	Amount
Opening Stock			Sales	10,50,00,000
Raw Material		45,00,000	(-) Discount on Sales	4,00,000
Work in Progress		38,00,000	Net Sales		10,46,00,000
Finished Goods		55,00,000
Purchase of Raw Material	2,52,00,000
(-) Direct RM Sent Beck to Suppliers	2,00,000
(-) Discount on Purchase	3,20,000		Closing Stock
Net Purchases		2,46,80,000	Raw Material		37,00,000
Motor Vehicle Repairs (50%)		12,00,000	Work in Progress		47,00,000
Expenses for Trucking direct RM		28,00,000	Finished Goods		66,00,000
Electricity (70%)		21,00,000
Production supervision salary		80,00,000
Production workers salary		1,80,00,000
Rent (3/5)		21,60,000
Insurance Charges (60%)		9,00,000
Gross Profit to be Transferred to Profit & Loss Account (Bal Fig)		4,59,60,000
TOTAL		11,96,00,000	TOTAL		11,96,00,000

Profit & Loss Account
Particular		Amount	Particular		Amount
			Gross Profit Transferred		4,59,60,000
Depreciation Expenses		30,80,000	Interest Income		28,00,000
Electricity (30%)		9,00,000
Bad Debts		2,25,000
Administrative Salary		1,20,00,000
Rent (2/5)		14,40,000
Commission		37,00,000
Insurance Charges (40%)		6,00,000
Motor Vehicle Repairs (50%)		12,00,000
Janitorial Wages		8,00,000
License Fees Paid to Produce Goods		20,00,000
Unrealised Gain		1,00,000
NET PROFIT Transferred to Captial A/c		2,27,15,000
		4,87,60,000			4,87,60,000

Balance Sheet
Particular		2016	Particular		2016
			Fixed Assets
Capital	3,08,70,000		Machinary	1,20,00,000
Profit for 2015-16	2,27,15,000
Drawings	-6,50,000	5,29,35,000	Motor Vehicle	1,00,00,000
Long term debt		55,00,000	Furniture & Fixture	40,00,000
			Accumulated Depn Fund
			Machinary	-22,80,000
			Motor Vehicle	-36,00,000
			Furniture & Fixture	-12,00,000	1,89,20,000
Current Liablities			Current Assets
Trade Payable		45,00,000	Trade Receivable :
Accrued Liablities		3,00,000	Accounts Receivable	70,00,000
Provision for Doubtful Debts		1,85,000	Bill Receivable	4,00,000	74,00,000
Provision for Unrealised Profit		6,00,000	Cash		2,24,00,000
			Closing Stock
			Raw Material		37,00,000
			Work in Progress		47,00,000
			Finished Goods		66,00,000
			Accrued Income		3,00,000
Total		6,40,20,000			6,40,20,000

	Journal Entries		Amount in $
	Particular	DR/CR	Amount
1	Motor Vehicle Repair	Dr	2,00,000
	Accrued Expenses (B/S)	Cr	2,00,000
2	Accrued Income (B/S)	Dr	3,00,000
	Interest Income	Cr	3,00,000
3	Commission	Dr	1,00,000
	Accrued Expenses (B/S)	Cr	1,00,000

Depreciation
	machinary	Motor Vehicle	Furniture & Fixture
Rate of Depreciation -A	10%	20%	10%
Method of Depreciation	Reducing Method	Reducing Method	Straight Line Method
Balance as on 31st Oct 16 - B	1,08,00,000	80,00,000	40,00,000
Depreciation for 2015-16 (A*B)	10,80,000	16,00,000	4,00,000
Opening Depreciation Fund	12,00,000	20,00,000	8,00,000
Accumulated Deprecation Fund	22,80,000	36,00,000	12,00,000

Provision for Doubtful Debts
Sundry Debtors	2,50,000	Opening	2,10,000
Closing Balance (74 Lakhs * 2.5% )	1,85,000	Charged to P&L	2,25,000
		(Balancing Fig )
	4,35,000		4,35,000
Provision for unrealised Profit
		Opening	5,00,000
Closing Balance (66 Lakhs /110 % )	6,00,000	Charged to P&L	1,00,000
		(Balancing Fig )
	6,00,000		6,00,000

Notes :

1.While Calculating Bad Debts on S. Debtors we have calculated Provision on FULL Amount and not on Cost of Expenses

2.License Fees Paid to Produce Goods is charged to p&L it can also be charged in Trading account but generally License fee are part of Profit & Loss Account