Financial Accounting 1A: Assignment 2

Question 1          (30 Marks)

Partner Lea has a 2/3 share in a partnership. Her capital is N$420 000 and from the year profits she is entitled to an interest of 8% per annum on her capital, as well as bonus of 20% of profit before interest and other distributions to partners are considered.

Partner Diana with a capital of N$264 000 is entitled to 7.5% interest per annum on her capital as well as a salary of N$21 600 per annum. Diana’s salary was included in the general salaries account.

Lea and Diana withdrew cash of N$1 020 and N$600 respectively per month. Interest on drawings for the year amounted to N$1 800 and N$1 080 for Lea and Diana, respectively.

Debit balances on current at 30 June 2022 were:

1. Lea      N$4 800
2. Diana  N$1 200

These accounts are subject to interest at 12% per annum on opening balances.

• Interest on the N$36 000 loan from partner Lea is calculated at 9% per annum.
• The profits for the year ended 31 December 2022, before the above items were provided for, amounted to N$139 600.

REQUIRED:

1. Prepare the appropriation account for the year ended 31 December 2022. (Round off to the nearest Namibian Dollar N$).   (15 marks)
2. Prepare the current accounts, in columnar format, of the partnership as at 31 December 2022 properly balanced and closed off.           (15 marks)

Question 2          (20 Marks)

1. The depreciation on equipment for the year amounted to N$41 250.
2. There were no disposals of or additions to the land and buildings and equipment during the year.
3. On 01 July 2022 the members contributed additional funds as follows Arnold Katoima N$10 000 and Peter Haikera N$40 000. These funds were deposited into the business bank account.
4. The loan from Arnold Katoima is unsecured and the first instalment of N$15 000 must be paid on 28 February 2023. During the year, this loan was increased by an additional N$30 000 to improve the liquidity position of the business.
5. The actual normal income tax for the year amounted to N$50 570 and must still be recorded.
6. A further distribution of N$40 000 must be made to the members, this was entry had been omitted.
7. The long-term loan from Omega Bank was obtained on 01 March 2022 at 15% interest per annum and is secured by a first mortgage over land and buildings. The capital amount of the loan must be repaid on 28 February 2029.
8. The loan to Peter Haikera is payable on demand. On 01 August he managed to repay N$10 000.
9. An additional N$8 000 is to be transferred to asset replacement reserve.

REQUIRED:

1. Prepare the statement of changes in members’ interest and net investments of Wood-Venture Traders CC for the year ended 28 February 2022.             (15 marks)
2. Journalise transactions numbered: 4,5,6 and 9. Where applicable close any account, narrations are not necessary.  (5 marks)

Question 3          (25 Marks)

The following information appeared in the accounting records of GLASSWARE Ltd, a manufacturing entity, at 28 February 2022, the end of the financial year.

Extract from the trial balance as at 28 February 2022: N$

     Inventory on hand 1 March 2021

     Raw materials                  160 650

     Work-in-progress             229 500

     Finished products            469 200

     Raw material purchased (including N$52 326 indirect material)     511 326

     Raw materials issued to production                         ?

     Air freight paid on raw material purchased in Nigeria                     163 200

     Indirect materials additionally issued to production                            6 426

     Insurance expenses (including N$8 415 for office insurance)          30 294

     Depreciation (10:3 ratio)                                                                   39 780 

     Rent expenses (60% of the rent was paid for the factory premises)  84 150

     Wages and salaries paid                                                                  336 600

     Water and electricity (N$272 646 included for the factory water& electricity)  321 453

     Sales during the year                                                                    1 530 000

Additional information:

1. Inventory is valued on the FIFO (First-in-First-out) method.
2. Inventory on hand- 28 February 2022:   N$

        Raw materials                  387 090

        Work-in-progress             535 041

        Finished products            532 440

3. Products are transferred to the sales department at cost plus 15%.
4. 30% of salaries and wages represent indirect labour cost of which N$39 780 was paid to the factory supervisor. The rest of the salaries and wages relate to direct labourers.
5. All indirect materials issued were used in the production process. The raw material account in the general ledger contains both the receipt and issue of direct and indirect material.
6. At 1 March 2021, the allowance for the unrealised profit in finished products inventory amounted to N$61 200.
7. The remainder of the insurance expense relates to the insurance on the factory equipment.

REQUIRED:

Prepare the following accounts, properly balanced and closed off, in the general ledger of GLASSWARE Ltd for the year ending 28 February 2022:

1. Raw materials            (5 marks)
2. Factory overheads    (5 marks)
3. Work-in-progress     (5 marks)
4. Finished goods inventory      (5 marks)
5. Allowance for unrealised profit    (5 marks)

Question 4          (25 Marks)

“NEW ERA Ltd” manufacturers steel cabinets. They want to know what the cost was to produce one cabinet during the year 31 December 2022. The following information is available for the year ended 31 December 2022 (N$).

Additional information

1. 75% of insurance, telephone and rent was for the factory.
2. Number of units produced: 10 000 units.
3. Finished product are transferred to the sales department at cost plus 25%.

YOU ARE REQUIRED TO:

1. Compile a manufacturing cost statement for the year ended 31 December 2022. (20 marks)
2. Calculate the manufacturing cost per unit. (2 marks)
3. Calculate the unrealised profit in closing inventory as at 31 December 2022. (3 marks)