Question 1

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

7

8

Notes:

The company adds 20% mark-up to its cost of production.

The provision for bad and doubtful debts is to be increased to 1.5% of debtors.

$200,000 of the insurance relates to 2012.

Rent payable is to be apportioned 75% factory; 25% office.

Depreciation is to be charged as follows: Machinery 10% Reducing balance; Motor vehicles 10% Straight line; Office furniture 10% on cost.

On December 31, 2011, $50,000 was outstanding for stationery.

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

1/5 of the amount paid for insurance is to be allocated to the office, while 60% of the electricity relates to the factory.

The motor vehicles are used equally between the factory and the office.

Required:

Prepare Manufacturing, Trading and Profit and Loss Account for the year ending December 31, 2011. (28 marks)

A Balance Sheet as at December 31, 2011. (12 marks)