Batumi Ltd. is in the motor vehicle assembling industry. A trial balance extract from the books on 30 September 2020 was as follows:

Sh.	Sh.
Authorized and issued share capital:
140,000 ordinary shares of sh.10 each	1,4000,000
Share premium	350,000
General reserve	840,000
Retained profits	730,835
Interim dividend paid	112,000
Cash at bank and in hand	234,990
Accounts receivable and payable	924,315	407,645
Land and buildings, at cost (land sh. 525,000)	875,000
Plant, at cost	910,000
Plant- accumulated depreciation	434,000
Motor vehicle, at cost	371,000
Motor vehicle- accumulated depreciation	213,500
Fixtures and fittings, at cost	277,935
Fixtures and fittings- Accumulated Depreciation	82,530
Inventories, 1 October 2019:
Raw materials	238,385
Work in progress	403,315
Finished goods	758,415
Provision for doubtful debts	48,335
Bad debts	34,265
Rates and insurance	64,505
Direct wages	758,590
Factory power	157,920
Electricity and water	113,960
Plant maintenance	76,790
Salaries	630,000
Return inwards and outwards	9,415	22,190
Advertising	60,060
Transport expenses	161,315
Bank charges	20,415
General expenses	204,415
Purchases and Sales	6,421,660	8,572,375
15% debentures	700,000
Discount received	17,255
13,818,665	13,818,665

Additional information:

1. Provision for bad and doubtful debts is to be adjusted to a figure equal to 10% of accounts receivable.
2. Depreciation is to be provided for the year using the reducing balance method and applying rates of 15% on plants, 25% on motor vehicles, and 10% on fixtures and fittings.
3. The building is to be depreciated at the rate of 4% using the straight-line method.
4. Electricity and water, rates and insurance, and general expenses are to be apportioned in the ratio of 4:1 between factory and administrative overheads.
5. At 30 September 2020:

	Sh.
Electricity and water accrued	5,390
Insurance prepaid	1,680
Rates prepaid	5,250
Inventories:
Raw materials	974,785
Work in progress	577,150
Finished goods	861,945

6. Debenture interest has not yet been paid.
7. A final dividend has been declared to be paid on 30 November 2020 which will bring the dividend for the year up to sh. 2 per share.
8. Provide corporation tax at 30%.

Required:

i) Prepare the manufacturing account and income statement for the year ended 30 September 2020.

ii) Statement of changes in equity for the year ended 30 September 2020.

iii) Statement of Financial Position as of 30 September 2020.

Answer rating: 100% (QA)

i Manufacturing Account Particulars Amount Cost of Goods Sold 6421660 Gross Profit 2150715 Direct Labor 758590 Factory Overheads 157920 Administrative Overheads 204415 Depreciation 348750 Interest on ... View the full answer