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Purchase of raw materials 1837500 payroll for factory

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Purchase of raw materials1,837,500Payroll for factory wages1,250,000Factory expenses(overheads)2,170,000
Sales of finished goods8,650,000Required:A manufacturing account to show the following:i.Cost of direct material usedii.Prime costiii.Cost of goods manufactured.SolutionTENGENEZA CO. LTDThe manufacturing account for the year ended 31stDecember, 2004Shs.Shs.i) Direct Raw MaterialsStock at start225,000Add: Purchases1,837,500Available for use2,062,500Less:stock at end(310,000)Cost of direct material used1,752,500Direct LabourFactory wages1,250,000ii) Prime cost3,002,500Indirect manufacturing costsFactory expenses2,170,000Manufacturing cost5,172,500
Add: Work in Progress at start187,5005,360,000Less:Work in Progress at end(390,000)iii)Cost of Goods manufactured4,970,000The cost of goods manufactured will be transferred to the trading account to calculate the cost ofgoods sold.1.6 THE MANUFACTURER’S TRADING ACCOUNTThe trading account of the manufacturer consists of cost of goods manufactured. Stocks referto the manufacturers finished goods. The following is the format of a trading profit and lossaccount.MOLO MANUFACTURERS LTDShs.Shs.SalesLess cost of goods sold:xxxxStock of finished goods 1.1.2004XxxxAdd: Production cost of goods completedxxxxxxxxLess stock of finished goods 31.12.2004xxxxGross profit c/d(xxxx)xxxxContinuing with the facts of Tengeneza Co,Ltd. In Example 1, the trading account will appearas follows:TENGENEZA CO.LTDTrading , Profit and Loss Account for the year ended 31 December,2004
Shs.Shs.Sales8,650,000Less cost of goods sold:Stock of finished goods 1.1.2004250,000Add: Production cost of goods completed4,970,000Available for saleLess stock of finished goods 31.12.20045,220,000Gross profit c/d(470,000)4,750,0003,900,0001.7 THEMANUFACTURER’S PROFIT AND LOSS ACCOUNT.The gross profit on trading is transferred from the trading account to the profit and loss account.Net profit or loss is determined in the profit and loss account in the usual way. All none-manufacturing costs are debited to the profit and loss account as operating expenses.Shs.Shs.Gross profit b/dxxxxAdd IncomesxxxxLess: Operating Expenses:AdministrationxxxxSelling expensesxxxxFinancial expensesxxxxNet profit for the year(xxxx)xxxx1.8 THE BALANCE SHEETThe different category of stock on hand for the manufacturer is shown in the balance sheet.The stocks are for:a)Work in Progressb)Raw materialsc)Finished Goods.The following example illustrates the manufacturing, trading profit and loss accountsand balance sheet of a manufacturer.Example 2
The following trial balance was extracted from the books of Kungu manufacturers on 31December 2004Dr.Cr.Shs.Shs.Stock at 1 Jan,2004Raw Materials459,000Work in Progress578,000Finished goods516,800Plant and machinery1,500,000Office Furniture& Equipment470,000Sale of finished goods7,735,000Purchase of raw materials1,870,000Factory wages1,250,000Supervisory salaries170,000Factory insurance61,200Factory Electricity and Power51,000Plant repairs and maintenance136,000Advertising33,000Factory rates57,600Office salaries and wages680,000Office Electricity and water142,800Telephone,faxes and email28,500Postage & stationery25,800Debtors /Creditors444,000323,000Cash and bank balance

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Term
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Balance Sheet, Plant and Machinery

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