- 20 Marks
IA – JULY 2020 – L1 – Q1 – Transaction Analysis and Manufacturing Account
Analyze the effects of given transactions on the accounting elements of a mining company using a table format and prepare the manufacturing section of the accounts from extracted balances.
Question
a. On March 1, 2020, KOFI CHINA opened a small-scale mining business in the Atswea Forest. Kofi China was the sole owner of the Company, which he named GALAMSEY LIMITED. During the first month of its operations in March 2020, GALAMSEY LIMITED engaged in the following transactions:
- GALAMSEY LIMITED received cash of GHS 4,000,000 from Kofi China as initial capital.
- The Company paid GHS 200,000 cash to the Traditional Council for the mining concession leased to it.
- The business paid GHS 2,000,000 cash to acquire excavators and other mining trucks.
- The business purchased supplies of various mining materials costing GHS 680,000 on credit.
- The business produced and sold its first gold and received GHS 300,000 cash.
- The business sold another batch of gold for GHS 400,000. The client agreed to pay in April 2020.
- The business paid GHS 80,000 cash toward the supplies of various materials purchased in Transaction 4.
- The business paid employee salaries of GHS 100,000 in cash.
- Kofi China withdrew GHS 150,000 cash for his personal use.
- The business collected GHS 260,000 from the client in Transaction 6.
- Kofi China collected GHS 10,000 cash from the business for his personal groceries.
You are required to: Analyze the above transactions in terms of their effects on the accounting of GALAMSEY LIMITED.
Note: Use the following table. (T represents Transaction; Bal. represents Balance)
| Assets | Liabilities | Owner’s Equity | |||||
|---|---|---|---|---|---|---|---|
| Cash | Debtors | Stocks | Leasehold | Vehicles | Creditors | Capital | |
| T 1 | +4,000 | +4,000 | |||||
| Bal. | 4,000 | 4,000 | |||||
| T 2 | |||||||
| Bal. | |||||||
| T 3 | |||||||
| Bal. | |||||||
| … |
(In GHS’000)
(10 marks)
b. The following balances were extracted from the books of CONSOLIDATED LIMITED for the year ended September 30, 2019.
| GHS | GHS | ||
|---|---|---|---|
| Stock (October 1, 2018): | Depreciation: | ||
| Raw Materials | 105,500 | Plant & Machinery | 10,000 |
| Finished Goods | 347,000 | Motor Van | 8,000 |
| Work-in-Progress | 76,000 | Sales | 1,800,000 |
| Purchases – Raw Materials | 227,000 | Wages | 254,500 |
| Motor Vehicle Expenses | 11,000 | Rent & Rates | 35,000 |
| Factory Expenses | 50,000 | Salaries | 65,000 |
| Selling Expenses | 6,800 | Administrative Expenses | 700,000 |
| Market Value of Goods Produced | 0 |
Additional Information:
- 25% of Rent and Rates is for the office.
- 30% of Salaries is for the Foreman’s Salaries in the factory.
- Stocks as at September 30, 2019:
a. Raw materials GHS 87,700
b. Finished goods GHS 320,000
c. Work-in-Progress GHS 65,000.
You are required to: Prepare CONSOLIDATED LIMITED Manufacturing section only of the Manufacturing, Trading, and Profit and Loss Accounts for the year ended September 30, 2019.
(10 marks)
Total Marks – 20
Find Related Questions by Tags, levels, etc.
