5.5. Manufacturing accounts
A subsection of Accounting, 7707, through 5. Preparation of financial statements
Listing 10 of 33 questions
Chippo owns a manufacturing business which produces product S. She provided the following information for the year ended 30 April 2020. $ Revenue 254 000 Purchases of raw materials 46 500 Purchases of finished goods 59 000 Wages of factory operatives 38 250 Royalties paid to the inventor of product S 7 690 Factory general expenses 4 500 Factory fuel and power 5 325 Rent and insurance 28 000 Factory machinery at cost 60 000 Provision for depreciation of factory machinery 21 600 Inventory at 1 May 2019: raw materials 3 120 work in progress 5 400 finished goods 8 220 Additional information Factory machinery is depreciated at 20% per annum using the reducing balance method. Rent and insurance is to be split equally between the factory and the office. The annual salary of the factory supervisor is $28 500. Closing inventory at 30 April 2020 was: $ Raw materials Work in progress Finished goods REQUIRED Prepare Chippo’s manufacturing account for the year ended 30 April 2020. Chippo Manufacturing Account for the year ended 30 April 2020 ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… Prepare Chippo’s income statement (trading account section) for the year ended 30 April 2020. Chippo Income Statement (Trading Account section) for the year ended 30 April 2020 ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… ………………………………………………………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… Complete the table by placing a tick (ü) in the correct column, to indicate whether each of the following actions would increase or decrease Chippo’s gross margin. Action Increase gross margin Decrease gross margin Increase wages of factory supervisor Reduce trade discount allowed to customers Chippo is considering converting her sole trader business into a limited company because she thinks that this will make it easier for her to obtain finance for future expansion. REQUIRED Advise Chippo whether or not she should convert her business to a limited company, in order to obtain finance. Justify your answer by providing advantages and disadvantages.
7707_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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Questions Discovered
33