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TWO (20 marks) i. ii. Distinguish between prime costs and indirect costs in the context of manufacturing accounts (2 marks) Bull was the sole proprietor
TWO (20 marks) i. ii. Distinguish between prime costs and indirect costs in the context of manufacturing accounts (2 marks) Bull was the sole proprietor of a sweet manufacturing business, and the following trial balance was extracted from his books as on December 2020. Dr Cr Capital Account: Bull 20,400 Freehold land and building at cost 15,000 Plant and machinery at cost 14,500 Plant and machinery provision for depreciation 7,000 Travellers' cars at cost 4,000 Traveller's cars provision for depreciation 2,800 Loose tools and utensils at valuation on 1 January 2020 1,200 Inventory, 1 January 2020: Raw materials 3,300 Inventory, 1 January 2020: Finished goods 6,000 Purchases of raw Materials 18,500 Purchases of tools and utensils Sales Factory wages Administration wages Sales department wages 800 66,000 13,640 5,400 3,000 Rates and insurance 1,600 Repairs to buildings 1000 Administration expenses 2,810 Sales expenses including vehicle running costs 1,440 Electricity and power 6,000 Provision for doubtful debts 1,000 Sales Ledger balances Purchase Ledger balances Bank Cash in hand 6,100 3,580 3.610 100 104,390 104,390 Additional information 1) Closing stocks on 31 December 2020: Raw materials Finished goods Loose tools and utensils Shs. 2,800 Shs. 3,900 Shs. 1,600 and power Shs. 800; New Plant and Machinery costing Shs. 500. licences Shs. 40 2) Provision is to be made for the following amounts owing on December 2020: Electricity 3) Payments in advance on 31 December 2020, were as follows: Rates Shs. 300: Vehicle 4) Annual depreciation on plant and machinery and travellers' cars is to be provided at the rate of 15 per cent and 20 per cent respectively on cost. 5) Bad debts amounting to Shs. 500 are to be written off and the provision for doubtful debts reduced to Shs. 600. 6) Expenses are to be allotted as follows: Rates and insurance Repairs Electricity and power Office Factory 9/10 1/10 3/5 2/5 7/10 3/10 Adjustments for bad debts and the provision for doubtful debts are attributable to selling and delivery expenses. You are required to prepare: a. The Manufacturing, trading and profit and loss accounts for the year ended 31 December 2020. b. Statement of financial position as at that date. (10 marks) (8 marks)
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