Leaving Cert Accounting FINAL ACCOUNTS - Manufacturing: Final Accounts of a Manufacturin

Final Accounts of a Manufacturing Company The following balances were extracted from the books of Kelly Ltd as at 31/12/2016: Share capital Authorised - 800,000 ordinary shares at €1 each Issued - 600,000 ordinary shares at €1 each €600,000 Delivery vans (cost €72,000) €50,000 Factory buildings €705,000 Factory equipment (cost €350,000) €250,000 Patent €60,000 Stock 01/01/2016 Raw materials €45,000 Work in progress €13,500 Finished goods €63,500 Purchase of raw materials €360,500 Sales €857,000 Returns inwards (sales returns) €11,000 Creditors €85,000 Debtors €82,000 Sale of scrap materials €7,400 Factory wages €140,000 Direct expenses €15,000 Stationery €9,000 10% Debentures (issued 01/04/2016) €160,000 VAT €14,500 Provision for bad debts €3,500 Advertising €8,000 Factory insurance €19,000 Bank €55,200 Factory light and heat €14,200 Profit and loss balance 01/01/2016 €65,000 You are given the following additional information: (i) Stock at 31/12/2016: - raw materials: €35,000 - work in progress: €22,000 - finished goods: €60,000 (ii) Stock of stationery at 31/12/2016 was €700 - Leaving Cert Accounting - Question 1 - 2017

Question 1

Final Accounts of a Manufacturing Company The following balances were extracted from the books of Kelly Ltd as at 31/12/2016: Share capital Authorised - 800,000... show full transcript

Worked Solution & Example Answer:Final Accounts of a Manufacturing Company The following balances were extracted from the books of Kelly Ltd as at 31/12/2016: Share capital Authorised - 800,000 ordinary shares at €1 each Issued - 600,000 ordinary shares at €1 each €600,000 Delivery vans (cost €72,000) €50,000 Factory buildings €705,000 Factory equipment (cost €350,000) €250,000 Patent €60,000 Stock 01/01/2016 Raw materials €45,000 Work in progress €13,500 Finished goods €63,500 Purchase of raw materials €360,500 Sales €857,000 Returns inwards (sales returns) €11,000 Creditors €85,000 Debtors €82,000 Sale of scrap materials €7,400 Factory wages €140,000 Direct expenses €15,000 Stationery €9,000 10% Debentures (issued 01/04/2016) €160,000 VAT €14,500 Provision for bad debts €3,500 Advertising €8,000 Factory insurance €19,000 Bank €55,200 Factory light and heat €14,200 Profit and loss balance 01/01/2016 €65,000 You are given the following additional information: (i) Stock at 31/12/2016: - raw materials: €35,000 - work in progress: €22,000 - finished goods: €60,000 (ii) Stock of stationery at 31/12/2016 was €700 - Leaving Cert Accounting - Question 1 - 2017

Step 1

Prepare a manufacturing account for the year ended 31/12/2016.

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Answer

To prepare the manufacturing account, we will follow these steps:

Calculate the Cost of Raw Materials Consumed:
- Initial stock of raw materials (01/01/2016): €45,000
- Add: Purchase of raw materials: €360,500
- Less: Closing stock of raw materials (31/12/2016): €35,000
- Cost of raw materials consumed:
$ext{Cost of raw materials consumed} = 45,000 + 360,500 - 35,000 = 370,500$
Add Direct Expenses:
- Direct expenses: €15,000.
- Total cost of raw materials consumed and direct expenses:
$ext{Total cost} = 370,500 + 15,000 = 385,500$
Add Factory Wages:
- Factory wages: €140,000.
- Prime Cost:
$ext{Prime Cost} = 385,500 + 140,000 = 525,500$
Add Factory Overhead Expenses:
- Factory supervisor's wages (80% of direct wages):
  
  $140,000 imes 0.80 = 112,000$
- Factory insurance: €19,000.
- Factory light and heat: €14,200.
- Depreciation of factory equipment (15% of cost):
  
  $250,000 imes 0.15 = 37,500$
- Depreciation of factory buildings (4% of cost):
  
  $705,000 imes 0.04 = 28,200$
- Total Factory Overhead Expenses:
$ext{Total Overhead} = 112,000 + 19,000 + 14,200 + 37,500 + 28,200 = 210,900$
Total Expenses:
- Total expenses now become:
$ext{Total Expenses} = 525,500 + 210,900 = 736,400$
Adjust for Work in Progress and Closing Stock:
- Add Opening Work in Progress: €13,500
- Less Closing Work in Progress: €22,000
- Add Sale of Scrap Materials: €7,400
- **Final Factory Cost:
$ext{Cost of Manufacture} = 736,400 + 13,500 - 22,000 + 7,400 = 735,300$ **

**Final Manufacturing Account Completion:

Manufacturing Account

Description	Amount (€)
Cost of raw materials	370,500
Direct expenses	15,000
Factory wages	140,000
Supervisor’s wages	112,000
Factory insurance	19,000
Factory light and heat	14,200
Depreciation - equipment	37,500
Depreciation - buildings	28,200
Total Factory Cost	735,300

Step 2

Prepare a trading, profit and loss account for the year ended 31/12/2016.

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Answer

To complete the trading, profit and loss account:

Sales Calculation:
- Sales: €857,000
- Less: Sales returns: €11,000
- Net Sales:
$ext{Net Sales} = 857,000 - 11,000 = 846,000$
Cost of Sales Calculation:
- Opening stock: €60,000
- Cost of manufacture: €735,300
- Closing stock: €60,000
- Cost of Sales:
$ext{Cost of Sales} = 60,000 + 735,300 - 60,000 = 735,300$
Calculate Gross Profit:
- Gross Profit:
$ext{Gross Profit} = 846,000 - 735,300 = 110,700$
Less Expenses:
- Administration (Stationery): €8,300
- Advertising: €6,000
- Depreciation motor vehicles: €5,000
- Operating profit: €197,800
- Less: Interest on debentures: €12,000
- Taxation (corporation tax): €16,000
- Net Profit:
$ext{Net Profit} = ext{Gross Profit} - ext{Total Expenses}$
Final Trading, Profit and Loss Account:

Description Amount (€)
Net sales 846,000
Cost of sales 735,300
Gross Profit 110,700
Less: Administration expenses 8,300
Selling and Distribution expenses 19,300
Less: Taxation 16,000
Profit for the Year 234,800

Description	Amount (€)
Net sales	846,000
Cost of sales	735,300
Gross Profit	110,700
Less: Administration expenses	8,300
Selling and Distribution expenses	19,300
Less: Taxation	16,000
Profit for the Year	234,800

Step 3

Prepare a balance sheet as at 31/12/2016.

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Answer

To prepare the balance sheet:

List of Assets:

Intangible Assets: Patents, net value: €60,000
Fixed Assets:
- Factory buildings: €676,800
- Factory equipment: €177,500
- Delivery vans: €919,300
Current Assets:
- Raw materials: €35,000
- Work in progress: €22,000
- Finished goods: €60,000
Total Assets Calculation:

$ext{Total Assets} = 60,000 + 676,800 + 177,500 + 919,300 + 35,000 + 22,000 + 60,000$

List of Liabilities:

Creditors:
- Amounts falling due within 1 year: €85,000
- Corporation tax: €14,500
- VAT: €14,500
- Bank: €55,200
- Debenture interest due: €12,000
Long-term Liabilities (Debentures): €160,000
Total Liabilities Calculation:

$ext{Total Liabilities} = 85,000 + 14,500 + 14,500 + 55,200 + 12,000 + 160,000$

Balance Sheet Representation:
Description Amount (€)
Total Assets 979,300
Total Liabilities 994,800
Capital Employed 834,800
Share capital 600,000
Profit and loss 234,800

Description	Amount (€)
Total Assets	979,300
Total Liabilities	994,800
Capital Employed	834,800
Share capital	600,000
Profit and loss	234,800

Prepare a manufacturing account for the year ended 31/12/2016.

Prepare a trading, profit and loss account for the year ended 31/12/2016.

Prepare a balance sheet as at 31/12/2016.

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