Reference no: EM1345438
At a management meeting you suggested that the production department should transfer goods produced at a value above cost, but there was no unanimity in the discussion of the issue. Outline arguments to convince the other members of the management team for the adoption of that mode of transfer pricing.
Q1 . The trial balance of AZ Traders failed to balance and the accountant went ahead to prepare the final account leaving suspense account with a debit balance of GH0315 on the statement of financial position.An examination of the books revealed the following errors.
a. A cheque for GH09,100.00 for the purchase of computers had been entered correctly in the cash book was posted to the account as G1-107,000.00
b. A credit note from S.T. Zooms, suppliers for 01102,100.00 entered correctly in the returns outwards book was posted to the account of S.T. Zooms as 01-102,213 .00.
c. Bank charges of G1-10735.00 appeared in the cash book but had not been posted to the ledger.
d. A debit balance of a debtors account at the end of the year G1-107,805.00 was carried down as G1-108,855.00 and included in the trial balance at the that figure.
e. An invoice for 01104,865.00 for goods sold to Malam Dogo on credit, correctly recorded in the sales journal, was posted to his account as G1-106,755.00.
You are required to:
i. make journal entries to correct the errors.
Write up the suspense account showing the necessary correction in it, and Prepare a statement showing the revised profit for year, which had been given as 01-10192,395.00.
Q2 The following balances were extracted from the books of Paab Trading Enterpeise as at 30th June, 2012.
GH0
linventairy of finished goods 117112 37,800
frivamitory of materials 1/7112 49,650
Purchase of materials 187,950
Sales 480,000
Carriage inwards on materials 6,300
Rates and insurance 11,250
Plants and machinery 72,000
Office furniture 21,750
Drawings 48,750
Bank overdraft 77,250
Discount allowed 6,450
Provision for doubtful debts 4,800
Debtors 78,600
Creditors 59,400
Factory wages 58,050
, factory power 15,900
' Salaries 44,850
Freehold factory 240,000
Delivery vans 45,000
Capital 1/7/03 322,500
General office expenses 20,850
Cash in hand 3,150
Discount received 4,350
From the balances above, prepare the manufacturing, Trading and Profit and Loss Accounts for thc year ended 30th June, 2012 and a statement of financial position as at that date, taking into consideration the following additional information.
a. Provide for depreciation thus: Plant and machinery GI-107,200.00 delivery van GH011,250.00; office furniture GI-103,750.00.
b. Inventories at 30/6/12 were: Materials GH032,700.00; Finished Goods GI1031,500.00.
c. Prepaid insurance at 30/6/12 GI-101,050.00.
d. Three-quarters of rates and insurance should be charged to the factory.
e. Transfer of finished goods from factory to ware house should be at cost plus 5%.
f. Inventory of finished goods at 30/6/12 was valued at factory transfer valuation. Make appropriate adjustment of stated closing inventory at cost in the statement of financial position.
Q3 Anyirawase Volley Ball Club had the following data for the year 2011/12.
01/05/11
GHO 30/04/12
GH0
Furniture 12,450 11,650
Balls and equipment 5,200 8,320
Club House 86,700 78,030
Creditors for equipment supply 3,500 1,670
Bar inventory 10,340 8,326
Bar debtors 675 1,050
Creditors for bar supplies 17,240 18,150
Grounds man's wages owing 4,800 3,600
RECEIPTS AND PAYMENTS ACCOUNT GH0 GII0
Balance b/d 10,300 Team travelling costs 7,400
Donations 51,000 Team training costs 13,600
Registration fees 720 Ball and equipment 42,500
Subscriptions 157,800 Grounds man's wages 15,600
Games gate proceeds 89,270 Bar purchases 165,400
Bar sales 267,500 Bar man's wages 60,000
Grounds maintenance 3,490
General administration 12,470
Trophies and awards 100,000
Balance c/d 156,130
576,590 576,590
Balance b/d 156,130
You are required to prepare:
a) Statement of affairs of the club as at 1St May 2011;
b) Income and Expenditure Account for the year; and
c) Statement of Financial Position as at 30th April 2012