In the books of ABC Manufacturers

Manufacturing Income Statement for the year ended 31st December, 2021

Detail GHC GHC

Direct Material:
Opening inventory of raw materials 24390
Add Purchases of raw materials 427770
Carriage on raw materials 1013
Less returns on purchase of raw materials (2003)
Less drawings of raw materials (2000)
Cost of Raw Materials Available for Production 449170
Less closing inventory of raw materials (132000)
Cost of raw materials used/consumed 317170
Add direct labour cost:
Factory wages (95760+2000) 97760
Prime Cost 414930
Factory Overheads:
Factory power 8190
Factory lights and heat 3591
Factory salaries 18000
Rent and rates (60% x 2700) 1620
Insurance (20% x 10305) 2061
Depreciation of factory plant and equipment (5% x 2025
40500)
Total factory overheads 35487
Cost of production 450417
Adjustment for WIP:
Opening WIP 9000
Closing WIP (4417) 4,583
Cost of goods produced 455000
Manufacturing profit (20% x 455000) 91000
Market Value of goods transferred 546000

Sales 641565
Less sales returns (720)
Net Sales 640845
Less Cost of Sales:
Opening inventory of finished goods 13770
Add Market Value of goods transferred 546000
Less drawings of finished goods (10000)
Cost of goods available for sale 549770
Less closing inventory of finished goods (45000)
Cost of Sales (504770)
Gross Profit 136075
Add other income:
Manufacturing profit 91000
 Discount received 1350
Gross income 228425
Less operating expenses:
Office light and heat 2574
Printing and Stationery 2275
Postage and telephone 1836
Office Salaries 17820
Rent and rates (40% x 2700) 1080
Insurance (80% x 10305) 8244
Display expenses (12024-1200) 10824
Advertising 1530
Discount allowed 1260
Increase in provision for unrealized profit (7500-2025) 5475
Depreciation:
Office equipment 10% x (10800-1080) 972 (53890)
Net Profit 174535

Provision for unrealized profit:

Mark-up = 20% = 20/100
Margin = 20/(100+20) = 20/120
Provision for unrealized profit = Margin x closing inventory of finished goods
Provision for unrealized profit = 20/120 x 45000 = 7500
Provision for unrealized profit = Manufacturing profit/Market Value x finished goods
Provision for unrealized profit = 91000/546000 x 45000 = 7500

Old provision 2025

New provision 7500
An increase in provision for unrealized profit of 5475 (expense)

Q5. B.
In the books of Never Give Up Ltd

Ratio Formula 2022 2021

1. Gross profit =Gross profit/Sales x =33500/83500 x 100 =29500/79000 x 100
margin 100 =40.12% =37.34%
2. Net Profit =Profit after =16125/83500 x 100 =12000/79000 x 100
Margin tax/Sales x 100 =19.31% =15.19%
3. Current Ratio =Current =130000/68875 : 1 = 153000/102000 : 1
assets/current =1.89 : 1 =1.50 : 1
liabilities
4. Quick ratio =CA-Inv/CL =130000- =153000-
50000/68875 60000/102000
= 1.16 : 1 = 0.91 : 1
5. Trade = Trade = 45000/83500 x = 43000/79000 x
receivables receivables/Credit 360 360
collection sales x 360 days =194 days = 196 days
days
6. Inventory = Inventory/COS x = 50000/50000 x = 60000/49500 x
turnover 360 days 360 360
days =360 days = 436 days
7. Trade =Trade = 63875/50000 x = 92000/49500 x
payable days payables/Credit 360 360
purchases x 360 = 460 days = 669 days
days

a. Common Size or Vertical Analysis

Calculation %
st
Income Statement for the year ended 31 December 2022
Sales =83500/83500 x 100 100%
Cost of Sales =50000/83500 x 100 59.88%
Gross profit = 33500/83500 x 100 40.12%
Other income = 15000/83500 x 100
Administrative
expenses
Selling and
distribution
expenses
Profit before
interest and tax
Finance Cost
Profit before tax
Tax
Profit after tax

Statement of Financial Position as at 31st December 2022

 Calculation %
Non-Current Assets:
PPE =150000/305000 x 49.18%
100
Goodwill =25000/305000 x 8.20%
100
Total non-current = 175000/305000 x 57.38%
assets 100
Current Assets:
Inventory = 50000/305000 x
100

Total Assets = 305000/305000 x 100%

100

Common base or Horizontal Analysis

Income Statement
% Change
Sales 83500-79000/79000 x 100 5.70%
Cost of Sales 50000-49500/49500 x 100
Gross Profit 33500-29500/29500 x 100

Statement of Financial Position

Non-Current Assets:
PPE 150000-145000/145000 x 100
Goodwill 25000-24000/24000 x 100
Average inventory for 2022 = inventory 2022 + inventory 2021 / 2
Average inventory for 2021 = inventory 2021 + inventory 2020 / 2

Opening inventory + Purchases – Closing inventory = Cost of Sales

Purchases = Cost of Sales – Opening inventory + Closing inventory
Purchases for 2022 = 50000 – 60000 + 50000 = 40000
Purchases for 2021 = 49500 – x + 60000 =

Q3. In the books of Boys Boys Club

Statement of Affairs as at 1/1/2020
 GHC GHC
Assets:
Subscriptions in arrears 1200
Office equipment 28600
Bar inventory 4758
Bank balance 1224
35782
Liabilities:
Subscriptions paid in advance 573
Creditors for bar supplies 5406
Secretary expenses owing 3845 (9824)
Accumulated fund 25958

Creditors’ Control Account

Detail GHC Detail GHC

Bank/R&P 9975 Bal b/d 5406
Bal c/d 4150 Credit purchases 8719
14125 14125
Bal b/d 4150

Subscription Account

Detail GHC Detail GHC

Arrears b/d 1200 Prepaid b/d 573
Bank/ R&P 10705
Income & Exp. 9,838
Prepaid c/d 640 Arrear c/d 400
11678 11678
Arrears b/d 400 Prepaid b/d 640

Secretary Expense account

Detail GHC Detail GHC

Bank / R&P 4600 Owings b/d 3845
Owings c/d 2287 Income & Exp. 3042
6887 6887
Owings b/d 2287

Depreciation:
Office equipment 28600 + 7800 = 36400
Depreciation = 20/100 x 36400 = 7280

Bar Trading Account for the year ended 31/12/2020

Detail GHC GHC

Bar Sales 28159
Less Cost of Sales:
Opening inventory 4758
Add purchases (8719 + 6500) 15219
Less closing inventory (2306)
Cost of Sales (17671)
Gross profit 10488
Less bar expenses (1690)
Bar Profit 8798

Income and Expenditure for the year ended 31/12/2020

Detail GHC GHC

Income:
Subscription 9838
Bar profit 8798
Donation 5150
23786

Less Expenditure:
Secretary expense 3042
Depreciation of office equipment 7280
General Expenses 3150
Travelling and transport 2280
Repairs 1200 (16952)
Surplus 6834