- 20 Marks
FA – Nov 2020 – L1 – SB – Q1 – Financial Statements Preparation
Prepare the manufacturing account and the statement of profit or loss for a family business.
Question
Sweetberry Manufacturing Company is a family business that produces and sells pure water in Lagos. In the year ended October 31, 2019, the following balances were extracted from the company’s ledger accounts:
| Item | N’000 |
|---|---|
| Revenue | 900,000 |
| Raw materials purchased | 180,000 |
| Raw materials carriage expenses | 8,000 |
| Carriage outwards | 4,000 |
| Wages: Machine operators | 184,800 |
| Wages: Factory supervisors | 45,000 |
| Salary: Administrative staff | 124,000 |
| Salary: Sales and marketing staff | 104,000 |
| Distribution cost | 4,000 |
| Administration expenses | 15,500 |
| Rent and rates | 58,000 |
| Utility | 6,000 |
| Insurance | 9,500 |
| Sales promotion expenses | 20,000 |
| Discount received | 6,000 |
| Factory plant and machinery | 72,000 |
| Office equipment | 20,000 |
| Delivery van | 36,000 |
| Inventories as at Nov 01, 2018: | |
| – Raw materials | 34,000 |
| – Work-in-progress | 21,000 |
| – Finished goods | 40,000 |
| Inventories as at Oct 31, 2019: | |
| – Raw materials | 29,000 |
| – Work-in-progress | 32,000 |
| – Finished goods | 50,000 |
The following information is also relevant for the preparation of the financial statements:
(i) Straight line depreciation policy at the following rates:
- Factory plant and machinery: 10%
- Office equipment: 10%
- Delivery van: 20%
(ii) General expenses are to be apportioned as follows:
| Expense Item | Factory (%) | Administration (%) |
|---|---|---|
| Rent and rates | 80 | 20 |
| Insurance and utility | 75 | 25 |
(iii) Insurance prepaid amounted to N1.5 million
(iv) Accrued administration expenses amounted to N500,000
Required:
Using the vertical format, prepare the manufacturing account and the statement of profit or loss for the year ended October 31, 2019. (20 Marks)
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