Leaving Cert Accounting FINAL ACCOUNTS - Manufacturing: Company Final Accounts including

Question

Company Final Accounts including a Manufacturing Account

McGuigan Ltd has an authorised capital of €2,000,000 divided into 1,500,000 ordinary shares at €1 each and 500,000 4% preference shares at €1 each.

The following trial balance was extracted from the books on 31/12/2021:

| Account                             | Debit (€) | Credit (€) |
|------------------------------------|-----------|------------|
| Plant and machinery (cost €340,000)| 290,000   |            |
| Factory buildings (cost €890,000)  | 865,000   |            |
| Hire of special equipment            | 37,800    |            |
| General factory overheads (including suspense) | 126,700 |            |
| Stocks on hand 01/01/2021:         |           |            |
| - Raw materials                     | 27,300    |            |
| - Work in progress                  | 38,650    |            |
| - Finished goods                    | 38,400    |            |
| Direct factory wages                 | 148,000   |            |
| Purchase of raw materials           | 760,400   |            |
| Sale of scrap materials             |           | 18,950     |
| Selling expenses                    | 45,000    |            |
| Administration expenses              | 57,900    |            |
| Sales                               |           | 1,650,000  |
| Discount (net)                     | 5,530     |            |
| Rent                                | 15,700    |            |
| 4% Investments acquired on 01/04/2021 | 250,000  |            |
| Investment interest received         | 2,800     |            |
| Profit and loss balance 01/01/2021 | 69,500    |            |
| PAYE, PRSI & USC                   | 1,850     |            |
| 8% Debentures (including €50,000 issued on 01/04/2021) | 300,000 |            |
| Debenture interest payable          | 5,000     |            |
| Bad debt provision                  | 3,050     |            |
| Dividends paid                      | 27,500    |            |
| Bank                                |           | 85,000     |
| Debtors and creditors               | 76,350    | 61,400     |
| Issued share capital - ordinary shares |          | 460,000    |
| 4% preference shares                |           | 150,000    |
|                                    | 2,823,600 | 2,823,600  |

The following information and instructions are to be taken into account:

(i) Stocks on hand at 31/12/2021:  
- Raw materials €28,300  
- Work in progress €27,600  
- Finished goods €58,000

(ii) No entry has been made in the books for sale of goods to a debtor on 31/12/2021.  
An invoice has been sent for €10,800, which included a mark-up on cost of 20%. The goods were not dispatched until 02/01/2022 and were included in closing stock.  
Included in the figure for sale of scrap materials is €7,000 received from the sale of an old machine on 31/03/2021. This machine had cost €30,000 on 01/09/2016.  
Plant and Machinery is to be depreciated at a rate of 15% of cost from the date of purchase to the date of sale.

(iii) The suspense figure arises as a result of discount received €1,400 entered only in the discount account and credit purchases of raw materials €11,000 which were entered only in the creditors account.

(iv) Provide for a recent wage increase of 2% to be backdated to cover the three months from 01/10/2021.

(v) During 2021 a store was built by the firm's own employees. The cost of their labour €60,000 (before wage increase) had been treated as a business expense and the materials costing €12,000 were taken from the firm’s stocks. The building work commenced on 01/01/2021 and took 12 months to complete. No entry had been made in the books for this store.

(vi) The figure for bank in the trial balance has been taken from the firm’s own records. Moreover, a bank statement dated 31/12/2021 shows an overdraft of €2,600. A comparison of the bank account and the bank statement revealed the following discrepancies:

1. A cheque for €3,500 had been received on 31/12/2021 in respect of a debtor who has recently been declared bankrupt. This represents a first and final payment of 70c for every €1.
2. A cheque for €6,300 received from a debtor had been entered in the books (Cash book and ledger) as €5,700.
3. A cheques for €460 issued to a creditor had not been presented for payment by 31/12/2021.

(vii) Provision should be made for the following:
1. Investment income due and debenture interest.
2. Provision for bad debts to be adjusted to 4% of debtors.
3. Depreciation on buildings at a rate of 2% of cost per annum.

Required:  
(a) Prepare a manufacturing, trading and loss account for the year ended 31/12/2021.  
(b) Prepare a balance sheet as at 31/12/2021.

Company Final Accounts including a Manufacturing Account McGuigan Ltd has an authorised capital of €2,000,000 divided into 1,500,000 ordinary shares at €1 each and 500,000 4% preference shares at €1 each - Leaving Cert Accounting - Question 1(A) - 2022

Worked Solution & Example Answer:Company Final Accounts including a Manufacturing Account McGuigan Ltd has an authorised capital of €2,000,000 divided into 1,500,000 ordinary shares at €1 each and 500,000 4% preference shares at €1 each - Leaving Cert Accounting - Question 1(A) - 2022

Prepare a manufacturing account for the year ended 31/12/2021

Balance Sheet as at 31/12/2021

Assets

Financial Assets

Current Assets

Total Assets:

Liabilities

Equity

Total Liabilities and Equity:

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