Problem
Buttercup Industries Limited is a manufacturing company whose annual financial performance is determined by preparing its final accounts at the end of the financial period which ends on December 31st each. The following Trial Balance was extracted from the company's books on December 31, 2020:
|
Details/Accounts
|
Dr $
|
Cr $
|
|
Cash at bank
|
20,000,000
|
|
|
Furniture and office equipment
|
4,000,000
|
|
|
Provision for depreciation furniture and fittings
|
|
800,000
|
|
Administrative salaries
|
12,000,000
|
|
|
Discounts
|
400,000
|
320,000
|
|
Production supervisors salaries
|
8,000,000
|
|
|
Net sales
|
|
105,000,000
|
|
Accounts payable
|
|
4,570,000
|
|
Direct raw materials inventory, January 1, 2020
|
4,500,000
|
|
|
Expenses for trucking direct raw materials
|
2,800,000
|
|
|
Electricity
|
3,000,000
|
|
|
Purchases of direct raw materials
|
25,200,000
|
|
|
Janitorial wages
|
800,000
|
|
|
Finished goods inventory, January 1, 2020
|
5,500,000
|
|
|
License fees paid to produce goods
|
2,000,000
|
|
|
Commission
|
3,600,000
|
|
|
Interest
|
|
2,500,000
|
|
Capital
|
|
30,800,000
|
|
Cash in hand
|
2,400,000
|
|
|
Rent
|
3,700,000
|
|
|
Direct raw materials sent back to suppliers
|
|
200,000
|
|
Accounts receivable
|
7,000,000
|
|
|
Insurance
|
1,900,000
|
|
|
Work-in-progress, January 1, 2020
|
3,800,000
|
|
|
Bad debts
|
250,000
|
|
|
Cash drawings
|
550,000
|
|
|
Motor vehicle repairs
|
2,200,000
|
|
|
Production workers salaries
|
18,000,000
|
|
|
Provision for bad and doubtful debts
|
175,000
|
210,000
|
|
Motor vehicles
|
10,000,000
|
|
|
Accumulated depreciation on motor vehicles
|
|
2,000,000
|
|
Provision for unrealized profits
|
|
500,000
|
|
Machinery
|
12,000,000
|
|
|
Provision for depreciation on machinery
|
|
1,200,000
|
|
Long term loan
|
-------------
|
5,500,000,
|
|
Total
|
153,600,000
|
153,600,000
|
Notes:
1) On December 31, 2020, $200,000 due for motor vehicle repairs was still unpaid; interest receivable for $300,000 was not booked to the account and $100,000 was owed for commission.
2) Inventory on December 31, 2020 were as follows: Direct raw materials $3,700,000; work-in-progress $4,500,000; finished goods $6,600,000.
3) The provision for bad and doubtful debts should be moved to 2.5% of debtors while the company has a policy in place that adds 10% mark up to its cost of production.
4) Rent is apportioned 3/5 to the factory while 75% of the electricity usage is for the factory; 40% of insurance charges are for the office while the motor vehicles are used equally between the office and the factory.
5) Depreciation is to be charged as follows: machinery 10% reducing balance; motor vehicles 20% reducing balance; furniture and office equipment 10% straight line.
Task
A. Prepare Manufacturing, Trading and Profit and Loss Accounts for the year ending December 31, 2020.
B. Prepare Balance Sheet as at December 31, 2020.