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Final Accounts of a Manufacturing Company The following balances were extracted from the books of Casey Ltd - Leaving Cert Accounting - Question 1 - 2008
Question 1
Final Accounts of a Manufacturing Company The following balances were extracted from the books of Casey Ltd. on 31/12/2007. Share Capital Authorised - 800,000 Or... show full transcript
Worked Solution & Example Answer:Final Accounts of a Manufacturing Company The following balances were extracted from the books of Casey Ltd - Leaving Cert Accounting - Question 1 - 2008
Step 1
Manufacturing Account for the year ended 31/12/2007
Answer
To prepare the Manufacturing Account, we start with the opening stock of raw materials, add the purchases made during the year, and subtract the closing stock of raw materials to find the cost of raw materials consumed. Then, we calculate the total manufacturing costs by adding factory wages and other expenses. Finally, we arrive at the prime cost and gross profit by adjusting for the costs of finished goods.
- Opening Stock of Raw Materials: €49,000
- Add Purchases of Raw Materials: €384,000
- Total Raw Material Available: €433,000
- Less Closing Stock of Raw Materials: €49,000
- Cost of Raw Materials Consumed: €384,000 - €49,000 = €384,000
- Factory Wages: €134,000
- Add Direct Expenses: €3,600
- Total Manufacturing Cost: €384,000 + €134,000 + €3,600 = €521,600
- Cost of Finished Goods:
- Closing Stock of Finished Goods: €74,000
- Cost of Goods Manufactured: €521,600 - €74,000 = €447,600
Thus, Gross Manufacturing Cost = €447,600.
Step 2
Trading and Profit and Loss Account for the year ended 31/12/2007
Answer
Next, we will prepare the Trading and Profit and Loss Account. We begin with the total sales, subtract any returns, and then deduct the cost of goods sold to calculate the gross profit.
- Sales: €980,000
- Less Sales Returns: €3,400
- Net Sales: €980,000 - €3,400 = €976,600
- Less Cost of Goods Sold:
- Cost of Sales: €447,600
- Gross Profit: €976,600 - €447,600 = €528,900
- Less Expenses:
- Advertising: €7,000
- Factory Insurance: €13,500
- Factory Light and Heat: €8,700
- Total Expenses: €7,000 + €13,500 + €8,700 = €29,200
- Net Profit: €528,900 - €29,200 = €499,700.
Step 3
Balance Sheet as at 31/12/2007
Answer
Finally, the Balance Sheet includes the assets, liabilities, and equity of the company on the date specified. We will classify these into fixed and current assets and liabilities, also considering share capital and retained earnings.
- Intangible Assets: €29,500 (Patents)
- Fixed Assets:
- Plant & Machinery (Net) : €292,000
- Delivery Vans (Net): €60,000
- Factory Building (Net): €582,000
- Total Fixed Assets: €292,000 + €60,000 + €582,000 = €934,000
- Current Assets:
- Stocks:
- Raw Materials: €49,000
- Work in Progress: €23,000
- Finished Goods: €74,000
- Debtors: €41,600
- Cash at Bank: €7,600
- Total Current Assets: €49,000 + €23,000 + €74,000 + €41,600 + €7,600 = €195,200
- Stocks:
- Total Assets: Fixed + Current = €934,000 + €195,200 = €1,129,200
- Liabilities:
- Creditors: €29,500
- 10% Debentures: €200,000
- Total Liabilities: €29,500 + €200,000 + €200,000 = €210,500
- Equity:
- Share Capital: €600,000
- Profit & Loss Balance: €499,700
- Total Equity: €600,000 + €499,700 = €1,099,700
Final Balance Sheet: Total Assets = Total Liabilities + Equity, confirming the accounts are balanced.