Question
Equipco Machines Limited is a manufacturing firm, specializing in construction equipment. The following balances were extracted from the books at October 31, 2021. Capital 48,000
Equipco Machines Limited is a manufacturing firm, specializing in construction equipment. The following balances were extracted from the books at October 31, 2021.
|
|
Capital | 48,000 |
Provision for unrealized profit | 1,380 |
Stock at November 1, 2020: |
|
Raw materials | 7,000 |
Work-In-Progress | 5,000 |
Finished goods | 6,900 |
Purchases of raw materials | 38,000 |
Direct labour | 28,000 |
Rent & rates | 35,000 |
Electricity | 15,000 |
Postages & stationery | 2,000 |
Administrative staff salary | 19,380 |
Sales | 192,000 |
Plant & Machinery at cost | 30,000 |
Motor vehicles at cost | 16,000 |
Provision for Depreciation: | |
Plant & Machinery | 12,000 |
Motor vehicles | 4,000 |
Creditors | 5,500 |
Debtors | 28,000 |
Drawings | 11,500 |
Bank | 16,600 |
Advertising | 4,500 |
Additional Information:
- 55% of rent and rates relates to the office
- 60% of electricity relates to the factory
- Stock at 31 October 2021 were as follows:
Raw materials $ 9,000
Work in progress $ 8,000
Finished goods $10,350
- Factory cost is transferred to trading at a profit of 25%
- Depreciate plant and machinery at the rate of 10% per annum on the reducing balance method and motor vehicles at 25% per annum on cost
- Direct labour accrued at December 31,2020 amounted to $3,000 and rent and rates prepaid was $2,000
Required:
- Prepare a manufacturing, income statement for the year ended October 31, 2021
(30 marks)
- Prepare a statement of financial position as at October 31, 2021 (20 marks)
Part B
Use the financial statements prepared in Part A and B above to calculate the following accounting ratios for the firm:
- Gross profit percentage.
- Net profit percentage.
- Current ratio.
- Quick/Liquid ratio.
- Stock turnover.
- Average/debtors collection period
- Average Payment period (14 marks)
Use the results obtained in part (B) to prepare a report comparing the performance of the two entities. (16 marks)
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