Question
I am not able to balance can you tell me where I went wrong ? The following Trial Balance was extracted from the books of
I am not able to balance can you tell me where I went wrong ?
The following Trial Balance was extracted from the books of General Production Company Ltd on December 31, 2011 and presented to you the Financial Accountant:
Trial Balance
| Details/Accounts | Dr $ | Cr $ |
| Purchases of direct raw materials | 25,200,000 | |
| Stock of direct raw materials January 1,2011 | 5,500,000 | |
| Wages paid to manufacture goods | 12,000,000 | |
| Insurance | 2,000,000 | |
| Electricity | 1,450,000 | |
| Cash at bank | 28,000,000 | |
| Accounts payable | 3,500,000 | |
| Discounts | 450,000 | 500,000 |
| Return of direct raw materials | 200,000 | |
| Cash in hand | 600,000 | |
| Work-in-progress January 1,2011 | 3,000,000 | |
| Salaries | 3,500,000 | |
| Returns inward of finished goods | 300,000 | |
| Carriage inwards of direct raw materials | 1,000,000 | |
| Indirect raw materials January 1,2011 | 2,500,000 | |
| Accounts receivable | 7,500,000 | |
| Provision for bad and doubtful debts | 75,000 | |
| Machinery | 10,000,000 | |
| Accumulated depreciation machinery | 4,000,000 | |
| Office furniture | 2,000,000 | |
| Purchase of indirect raw materials | 2,500,000 | |
| Motor vehicles | 14,000,000 | |
| Accumulated depreciation motor vehicles | 2,800,000 | |
| Finished goods January 1, 2011 | 6,000,000 | |
| Provision for unrealized profit | 1,000,000 | |
| Indirect wages | 3,000,000 | |
| Rent payable | 2,400,000 | |
| Capital | 58,175,000 | |
| Stationery | 250,000 | |
| Bad debts | 200,000 | |
| Direct expenses | 4,000,000 | |
| Sales | 70,300,000 | |
| Carriage outwards | 2,200,000 | |
| Rent receivable | 500,000 | |
| Salesmen commission | 1,500,000 | |
| 141,050,000 | 141,050,000 |
Notes:
(i)The company adds 20% mark-up to its cost of production.
(ii)The provision for bad and doubtful debts is to be increased to 1.5% of debtors.
(iii)$200,000 of the insurance relates to 2012.
(iv)Rent payable is to be apportioned 75% factory; 25% office.
(v)Depreciation is to be charged as follows: Machinery 10% Reducing balance; Motor vehicles 10% Straight line; Office furniture 10% on cost.
(vi)On December 31, 2011, $50,000 was outstanding for stationery.
(vii)Stocks as at December 31, 2011 were as follows: Direct raw materials, $4,500,000; Work-in-progress, $4,000,000; Finished goods, $4,500,000; Indirect raw materials, $2,000,000
(viii)1/5 of the amount paid for insurance is to be allocated to the office, while 60% of the electricity relates to the factory.
(ix)The motor vehicles are used equally between the factory and the office.
Answer
General Production Company Limited Manufacturing, Trading, Profit and Loss Account for the period ending December 31, 2011
| Details / Account | $ | $ |
| Opening Stock of Raw Materials | 5,500,000 | |
| Purchases of Raw Materials less Return | 25,000,000 | |
| Carriage Inwards of Raw Materials | 1,000,000 | |
| 31,500,000 | ||
| Less Closing Stock of Raw Materials | (4,500,000) | |
| 27,000,000 | ||
| Direct Wages | 12,000,000 | |
| Direct Expenses | 4,000,000 | |
| Prime Cost | 43,000,000 | |
| Factory Overheads | ||
| Opening Stock of Indirect materials | 2,500,000 | |
| Purchases of indirect materials | 2,500,000 | |
| Indirect wages | 3,000,000 | |
| Depreciation on Machinery | 4,600,000 | |
| Rent Payable | 1,800,000 | |
| Depreciation on Motor vehicle | 700,000 | |
| Insurance | 1,440,000 | |
| Electricity | 870,000 | |
| 17,410,000 | ||
| Less Closing Stock of indirect materials | (2,000,000) | 15,410,000 |
| Opening WIP | 3,000,000 | |
| Closing WIP | (4,000,000) | (1,000,000) |
| Cost of Production | 57,410,000 | |
| 20% Factory Mark Up | 11,482,000 | |
| Market Value of Finished Goods | 68,892,000 | |
| Sales Less Return Inwards | 70,000,000 | |
| Less Cost of Sales | ||
| Opening stock of finished goods | 6,000,000 | |
| Add market value of finished goods | 68,892,000 | |
| 74,892,000 | ||
| Less Closing Stock of finished goods | (4,500,000) | (70,392,000) |
| Gross Profit/Loss | (392,000) | |
| Add Factory Profit | 11,482,000 | |
| Discount received | 500,000 | |
| Rent receivable | 500,000 | |
| Decrease in Provision for unrealized profit | 250,000 | |
| Total Gross Profit | 12,340,000 | |
| Less Expenses | ||
| Depreciation on Office Furniture | 200,000 | |
| Rent | 600,000 | |
| Depreciation on Motor Vehicle | 700,000 | |
| Salaries | 3,500,000 | |
| Electricity | 580,000 | |
| Discount Allowed | 450,000 | |
| Insurance | 360,000 | |
| Salesman Commission | 1,500,000 | |
| Carriage Outwards | 2,200,000 | |
| Increase in provision for bad debt | 37,500 | |
| Bad Debt | 200,000 | |
| Stationery | 300,000 | 10,627,500 |
| Net Profit | 1,712,500 |
General Production Company Limited Balance Sheet for the period ending December 31, 2011
| Details/Accounts | Cost | Acc. Dep | NBV |
| Fixed Assets | $ | $ | $ |
| Machinery | 10,000,000 | 4,600,000 | 5,400,000 |
| Office Furniture | 2,000,000 | 200,000 | 1,800,000 |
| Motor Vehicle | 14,000,000 | 3,920,000 | 10,080,000 |
| 26,000,000 | 8,720,000 | 17,280,000 | |
| Current Assets | |||
| Stock : WIP | 4,000,000 | ||
| Raw material | 4,500,000 | ||
| Finished Goods less PFUP | 3,750,000 | ||
| Indirect Materials | 2,000,000 | 14,250,000 | |
| Accounts Receivable less pbd | 7,387,500 | ||
| Cash at Bank | 28,000,000 | ||
| Cash in hand | 600,000 | ||
| Prepaid insurance | 200,000 | 50,437,500 | |
| Total Assets | 67,717,500 | ||
| Financed By: | |||
| Capital | 58,175,000 | ||
| Add Net Profit | 1,712,500 | 59,887,500 | |
| Current Liability | |||
| Accounts Payable | 3,500,000 | ||
| Accrued Stationery | 50,000 | 3,550,000 | |
| 63,437,500 | |||
| Off 4,280,000 |
|
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Managerial Accounting
Authors: Susan V. Crosson, Belverd E. Needles
11th Edition
0538742801, 978-0538742801
