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Final Accounts of a Manufacturing Company The following balances were extracted from the books of Brophy Ltd - Leaving Cert Accounting - Question 1 - 2005
Question 1
Final Accounts of a Manufacturing Company The following balances were extracted from the books of Brophy Ltd. on 31/12/2004. Share Capital Authorized - 600,000 Or... show full transcript
Worked Solution & Example Answer:Final Accounts of a Manufacturing Company The following balances were extracted from the books of Brophy Ltd - Leaving Cert Accounting - Question 1 - 2005
Step 1
Manufacturing account for the year ended 31/12/2004
Answer
To prepare the Manufacturing Account, we start by calculating the cost of raw materials consumed:
- Opening Stock of Raw Materials: €46,000
- Purchases of Raw Materials: €90,000
- Closing Stock of Raw Materials: €44,000
Using these, we calculate:
Cost of Raw Materials = Opening Stock + Purchases - Closing Stock
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Cost ext{ of Raw Materials} & = 46000 + 90000 - 44000
& = 91000
ext{ (considering 80% as direct costs)}
& = 72800
ext{ (total cost of Factory Wages given is €120,000, hence direct costs €96,000)}
ext{Total Prime Cost} = 72800 + 20000 (Direct Expenses) = 92800
- Factory Cost: We add factory overhead expenses (e.g. supervisor wages, insurance) to the prime cost.
- Factory Supervisor Wages: €24000
- Factory Light & Heat: €12900
- Depreciation for Plant & Machinery and Factory Building (10% and 4% calculated on their costs)
Total Factory Cost is derived by summing all expenses with contributions from the works in progress and other variable costs like light and heating.
Step 2
Trading, Profit and Loss Account for the year ended 31/12/2004
Answer
To prepare the Trading, Profit and Loss Account, we calculate:
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Sales: €860,000
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Less: Cost of Sales (beginning inventory + purchases - ending inventory + manufacturing cost): €732,000
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Gross Profit: Sales - Cost of Sales
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Less Expenses:
- Administration expenses, wages, and showroom expenses.
- Net Profit for the year is calculated by subtracting total expenses from gross profit. Lastly, add the profit from the prior balance (if applicable).
Step 3
Balance Sheet as at 31/12/2004
Answer
For the Balance Sheet:
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Assets: Categorized into Non-Current Assets (fixed assets like trucks and equipment) and Current Assets (like stocks, debtors).
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Liabilities: Current liabilities (debts due within one year) and Long-term liabilities (like debentures).
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Equity: Include the share capital authorized and issued, plus retained earnings or profits from the profit and loss account.
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Ensure that the equation Assets = Liabilities + Equity holds true.