ALMA Ltd. manufactures electric toys called PIRELI on small scale basis. On 1 January 1997,...
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Accounting
ALMA Ltd. manufactures electric toys called PIRELI on small scale basis. On 1 January 1997, 6000 units of PIRELI were in stock. During 1997, the company manufactured 200,000 units and sold 190,000 units at a price of Sh.6 each. The following balances were extracted from the books of account on 31 December 1997.
Sh
Stock of raw material 1.1.97 23,280
Stock of raw material 31.12.97 32,560
Purchase of raw material 269,000
Carriage on raw material 82,400
Direct wages 185,400
Factory expenses:
Rent and rates 76,800
Power 34,400
Insurance 31,280
Plant and Machinery (Net of depreciation on 1.1.97) 300,000
The following additional information was available: 1. Stocks of work-in-progress on 1 January and 31 December 1997 were of insignificant value and are to be ignored. 2. Plant and machinery are to be depreciated using reducing balance method at 10 %. 3. Finished units of PIRELI are valued at factory cost. 4. Factory cost per unit of PIRELI was the same in 1996 and 1997.
Required: The manufacturing account for the year ended 31 December 1997, showing clearly the prime cost and factory costs of producing PIRELI. (10 marks) The trading account for the year ended 31 December 1997. (6 marks)
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