QUESTION TWO (15 MARKS)

Ombese owns and manages a small manufacturing business.  The following balances have been extracted from her books of accounts at 31 December 2021.

	Dr.	Cr.
Purchase of Raw materials	280,000
Fuel and Light	21,000
Administration salaries	17,000
Factory wages	59,000
Carriage outwards	4,000
Rent and business rates	21,000
Sales		482,000
Return inwards	7,000
General office expenses	9,000
Repairs to plant and machinery	9,000
Inventory at 1 January 2021:
Raw materials	21,000
Work –in –Progress	14,000
Finished goods	23,000
Sundry accounts payable		37,000
Capital account		457,000
Freehold premises	410,000
Plant and Machinery	80,000
Accounts receivable	20,000
Accumulated provision for depreciation on Plant and Machinery		8,000
Cost in Hand	11,000
	984,000	984,000

Additional information:

1. Inventory in hand at 31 December 2021:

Raw materials Sh 25,000

Work –in – progress Sh 11,000

Finished goods Sh 26,000

 

2. Depreciation of 10% on Plant and Machinery using the Straight line method

3. 80% of fuel and light and 75% of rent and rates to be charged to manufacturing

4. Allowance for doubtful debts: 5% of sundry accounts receivable

5. Sh 4,000 outstanding for Fuel and Light

6. Rent and business rates paid in Advanced sh 5,000

7. Market value of finished goods sh 382,000

Required:

i. Manufacturing account and Statement of profit or loss for the year ending 31 December 2021 (14 marks)

ii. Statement of financial position as at 31 December 2021.