Question

QUESTION THREE Carol and are in paineeship sharing peek and looses equally. They make bedbugs under the brand name 'CARY Capital: Carol Mary Sh.000 Sh.00 24,000 24,000 5,000 Drawings: Carol 4.800 Mary Land 15,200 Factory building a cost 20,400 Accumulated depreciation on factory building 15,370 Delivery vans at cost 8,100 Accumulated depreciation on delivery vans 1,912 laventory (1 January 2021): Kan maserials 2.300 Work in progres 2,210 Fleished goods (10,250 handbags at sh. 2,000 each) 20,500 Sales 63,200 Return inward 112 Purchase of raw materials 14,590 Tax 3,960 Factory wages 7,630 Office salaries 2,500 General expenses: Factory 7,730 :Office 9,470 Plant at cost Accumulated depreciation on plant 17,220 Provision for unrealized profit (1. Jan. 2021) 5,870 Allowance for doubtful debts 2,050 Hank overdraft Trade receivables and payables 770 10,680 2,640 4.670 Additional information: 148,442 148,442 1. During the year ended 31 December 22, 16,727 handbags were transferred to the warehouse at a price of sh. 2,400 each. of 2. As at 31. December 2021, inventory was valued as follows: . Raw materials sh. 1,900,000 Work in progress sh. 2,880,000 sh. 17,428,800 Finished goods 3. All handbags are sold at sh. 3,200 each s 4. The allowances for doubtful debts is to be maintained at 5% of the trade bes 5. Accrued general expenses as at 31 December 2021 were as follows Factory expense Sh. 1,748,000 Office Sh764,000 6. As at 31 December 2021, rent and rates were prepaid as follows: Factory rent Sh. 104,000 Office Sh. 80,000 7. Depecciation is to be provided on cost as follow 8. Carol is entitled to 25% of the manufactoring profit based on the transter price to the warehou while Mary is entitled to 10% of the trading gross profit 9. No interest is credited or charged on capital accounts or drawings Required: (a) Manufacturing account for the year ended 31 December 2021 (b) Income Statement of the year ended 31 December 2021 (c) Statement of financial position as at 31 December 2021 (20 Marks)​

Answer 1

(a) Manufacturing account for the year ended 31 December 2021:

| Manufacturing Account | |
|-----------------------|-------------------|
| | Shilling |
|Opening Inventory: | |
|Raw materials | 2,300 |
|Work in progress | 2,210 |
| | |
|Add: Purchases | 14,590 |
| | |
|Total: | 19,100 |
|Less: Closing Inventory| (1,900) |
| | |
|Direct Materials Used | 17,200 |
| | |
|Add: Direct Labor | 7,630 |
| | |
|Prime Cost | 24,830 |
| | |
|Factory Expenses | |
|Depreciation on Factory| (1,030) |
|Wages | (7,630) |
|General Expenses | (7,730) |
| | |
|Total Factory Expenses | (16,390) |
| | |
|Cost of Goods Manufactured | 8,440 |
| | |
|Transfer to Warehouse | |
|(16,727 handbags x Sh.2,400)| (40,252) |
| | |
|Manufacturing Profit | |
|(To be split) | 72,438 |
| | |

(b) Income Statement for the year ended 31 December 2021:

| Income Statement | |
|------------------|-------------------|
| | Shilling |
|Sales | 127,904 |
|Less: Cost of Goods Sold | (72,438) |
|Gross Profit | 55,466 |
|Less: Operating Expenses | |
|Factory Expenses | 16,390 |
|Office Salaries | (2,500) |
|General Expenses | (9,470) |
|Tax | (3,960) |
| | |
|Net Profit | 23,146 |

(c) Statement of Financial Position as at 31 December 2021:

| Statement of Financial Position | |
|---------------------------------|-------------------|
|Assets | |
|Current Assets: | |
|Inventory | 17,428 |
|Trade Receivables | 10,680 |
|Cash at Bank | 2,640 |
| | |
|Non-Current Assets: | |
|Factory Building | (20,400) |
|Accumulated Depreciation | 15,370 |
|Delivery Vans | (8,100) |
|Accumulated Depreciation | (1,912) |
|Plant | (17,220) |
|Accumulated Depreciation | |
| | |
|Total Assets | 18,946 |
| | |
|Liabilities and Equity | |
|Trade Payables | (770) |
|Bank Overdraft | (2,050) |
|Provision for Unrealized Profit | (5,870) |
|Allowance for Doubtful Debts | (2,050) |
|Capital: | |
|Carol's Capital | 24,000 |
|Mary's Capital | 24,000 |
| | |
|Total Liabilities and Equity | 18,946 |