Manufacturing Accounts Alıştırma Soruları — JAMB UTME — Sayfa 4

Soru 61Soru →

A manufacturing enterprise transfers finished goods to its retail department at a price that includes a mark-up of $25\%$ on manufacturing cost. At the end of the trading period on 31 December 2025, the opening inventory of finished goods at transfer price was $\text{₦}18,000$ (with an existing provision for unrealized profit of $\text{₦}3,600$ ), while the closing inventory of finished goods at transfer price was $\text{₦}25,000$ . What is the amount to be charged to the Profit and Loss Account as an adjustment for unrealized profit?

\text{₦}1,400

\text{₦}2,650

\text{₦}5,000

\text{₦}1,750

Cevabı ve açıklamayı göster

Cevap: $\text{₦}1,400$

Cevap

The amount to be charged to the Profit and Loss Account as an adjustment for unrealized profit is

\text{₦}1,400

.

To find the adjustment to the Profit and Loss Account, first convert the

25\%

mark-up on cost to a margin on transfer price:

\frac{25}{100 + 25} = \frac{1}{5}

. Next, compute the required closing provision on unrealized profit:

\frac{1}{5} \times \text{₦}25,000 = \text{₦}5,000

. Finally, calculate the net increase in provision by subtracting the existing opening provision from the required closing provision:

\text{₦}5,000 - \text{₦}3,600 = \text{₦}1,400

.

Adım Adım Çözüm

1

Convert the percentage mark-up on cost into a margin on transfer price.

Margin fraction =

\frac{\text{Mark-up}}{100 + \text{Mark-up}} = \frac{25}{125} = \frac{1}{5}

(or

20\%

).

Unrealized profit contained in inventory stated at transfer price must be calculated using margin rather than mark-up.

2

Calculate the required closing provision for unrealized profit on closing finished goods inventory.

Closing Provision =

\frac{1}{5} \times \text{₦}25,000 = \text{₦}5,000

.

This isolates the profit element embedded in the closing inventory valued at transfer price.

3

Determine the net adjustment (increase) to be charged to the Profit and Loss Account.

Increase in Provision = Required Closing Provision (

\text{₦}5,000

) - Opening Provision (

\text{₦}3,600

) =

\text{₦}1,400

.

Only the net change in provision between the beginning and end of the accounting period is recognized in the Profit and Loss Account.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Tahmini Süre:2m 0s

Soru 62Soru →

Match each component of the Manufacturing Account on the left with its correct accounting valuation formula or descriptive definition on the right.

Soldaki öğeye tıklayın, sonra eşleşen sağdaki öğeye tıklayın

Cevabı ve açıklamayı göster

Cevap

Cost of Raw Materials Consumed matches Opening Stock of Raw Materials + Purchases + Carriage Inwards - Closing Stock of Raw Materials; Prime Cost matches Cost of Raw Materials Consumed + Direct Wages + Direct Factory Expenses; Factory Overheads matches Indirect Factory Wages + Factory Rent + Factory Machinery Depreciation + Indirect Materials; Cost of Production matches Prime Cost + Factory Overheads + Opening Work-in-Progress - Closing Work-in-Progress.

Each manufacturing accounting term is correctly paired with its defining formula. Raw materials consumed aggregates direct raw material movements. Prime cost sums all direct inputs. Factory overheads accumulate indirect factory costs. Cost of production incorporates prime cost, factory overheads, and work-in-progress adjustments.

Adım Adım Çözüm

1

Identify the formula for Direct Materials Consumed

Opening stock of raw materials plus purchases plus carriage inwards minus closing stock of raw materials.

Carriage inwards adds to the cost of raw material acquisition, while closing inventory is subtracted to determine net raw material used in production.

2

Determine Prime Cost composition

Sum of all direct costs (Direct Raw Materials + Direct Wages + Direct Expenses).

Prime Cost includes only direct costs traceable directly to units produced.

3

Identify Factory Overheads

Aggregation of indirect manufacturing costs such as indirect labor, factory building rent, factory power, and plant depreciation.

Overheads represent operational costs essential for factory operations but not directly assignable to specific finished goods.

4

Formulate the total Cost of Production

Prime Cost + Factory Overheads + Opening Work-in-Progress - Closing Work-in-Progress.

Cost of production measures the total cost transferred to the trading account for completed goods during the period.

Anahtar Kavram

Preparation of Manufacturing Account and Cost of Production

Tahmini Süre:1m 30s

Soru 63Soru →

The following balances were extracted from the accounting records of Kene Manufacturing Enterprise for the year ended 31st December 2025:

Financial Item	Amount (₦)
Sales of finished goods	500,000
Opening inventory of finished goods	40,000
Cost of goods produced	280,000
Closing inventory of finished goods	50,000

What is the gross profit of the enterprise for the year?

₦230,000

₦220,000

₦210,000

₦130,000

Cevabı ve açıklamayı göster

Cevap: ₦230,000

Cevap

The gross profit of Kene Manufacturing Enterprise for the year is ₦230,000.

The gross profit is calculated by subtracting the Cost of Goods Sold from Sales. The Cost of Goods Sold is ₦40,000 + ₦280,000 - ₦50,000 = ₦270,000. Subtracting this from Sales of ₦500,000 gives ₦230,000.

Adım Adım Çözüm

1

Calculate the Cost of Goods Sold (COGS)

COGS = ₦40,000 (Opening Inventory of Finished Goods) + ₦280,000 (Cost of Goods Produced) - ₦50,000 (Closing Inventory of Finished Goods) = ₦270,000

In the Trading Account of a manufacturing entity, Cost of Goods Sold is calculated by adding the production cost transferred from the Manufacturing Account to opening finished goods inventory and deducting closing finished goods inventory.

2

Calculate the Gross Profit

Gross Profit = ₦500,000 (Sales) - ₦270,000 (COGS) = ₦230,000

Gross Profit is obtained by subtracting the Cost of Goods Sold from total sales revenue.

Anahtar Kavram

Calculation of Gross Profit in the Trading Account of a Manufacturing Entity

Tahmini Süre:1m 0s

Soru 64Soru →

Kovaro Manufacturing Enterprise transfers finished goods from its factory to its trading department at a price that includes a mark-up of $33\frac{1}{3}\%$ on manufacturing cost.

Extracts from the enterprise's books for the year ended 31st December 2025 show the following balances:

Item	Value
Opening inventory of finished goods (at transfer price)	$\text{₦}48,000$
Closing inventory of finished goods (at transfer price)	$\text{₦}72,000$

What amount should be charged to the Profit and Loss Account as an adjustment for the provision for unrealized profit for the year ended 31st December 2025?

\text{₦}6,000

\text{₦}8,000

\text{��}18,000

\text{₦}24,000

Cevabı ve açıklamayı göster

Cevap: $\text{₦}6,000$

Cevap

The amount to be charged to the Profit and Loss Account as an adjustment for provision for unrealized profit is

\text{₦}6,000

.

Transfer price includes a mark-up of

33\frac{1}{3}\%

(or

\frac{1}{3}

) on manufacturing cost. To extract the profit element from the transfer price, convert mark-up to margin:

\text{Margin} = \frac{1/3}{1 + 1/3} = 25\%

. The opening provision is

25\% \times \text{₦}48,000 = \text{₦}12,000

and the required closing provision is

25\% \times \text{₦}72,000 = \text{₦}18,000

. The increase in provision charged to the Profit and Loss Account is

\text{₦}18,000 - \text{₦}12,000 = \text{₦}6,000

.

Adım Adım Çözüm

1

Convert the mark-up on cost to margin on transfer price

Mark-up =

33\frac{1}{3}\% = \frac{1}{3}

. Margin on transfer price =

\frac{1/3}{1 + 1/3} = \frac{1}{4} = 25\%

.

Inventories are stated at transfer price, so the profit element contained within the transfer price is calculated using the profit margin.

2

Calculate the opening provision for unrealized profit contained in opening inventory

Opening Provision =

25\% \times \text{₦}48,000 = \text{₦}12,000

.

To determine the existing provision brought forward from the previous accounting period.

3

Calculate the closing provision for unrealized profit required for closing inventory

Closing Provision Required =

25\% \times \text{₦}72,000 = \text{₦}18,000

.

To determine the total provision needed at the end of the current accounting period.

4

Determine the net adjustment (increase) to be charged to the Profit and Loss Account

Adjustment = Closing Provision - Opening Provision =

\text{₦}18,000 - \text{₦}12,000 = \text{₦}6,000

.

Only the increase in provision during the year is charged as an expense to the Profit and Loss Account.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Tahmini Süre:2m 0s

Soru 65Soru →

Zenith Manufacturing Enterprise extracted the following closing inventory figures and adjustment details at the end of its financial year:

- Raw materials inventory: ₦45,000
- Work-in-progress inventory: ₦28,000
- Finished goods inventory (at market transfer value): ₦75,000
- Provision for unrealized profit on closing finished goods: ₦15,000

What is the total value of manufacturing inventories (in Naira) to be presented under current assets in the Statement of Financial Position?

Cevabı ve açıklamayı göster

Cevap: 133000

Cevap

The total value of manufacturing inventories to be presented under current assets in the Statement of Financial Position is ₦133,000.

In the Statement of Financial Position of a manufacturing business, inventories are disclosed under current assets. Raw materials (₦45,000), work-in-progress (₦28,000), and finished goods are summed together. Finished goods transferred at market value must be stated at original prime/production cost by subtracting the provision for unrealized profit (₦75,000 - ₦15,000 = ₦60,000). Thus, total manufacturing inventories equal ₦45,000 + ₦28,000 + ₦60,000 = ₦133,000.

Adım Adım Çözüm

1

Deduct the provision for unrealized profit from finished goods inventory at transfer value.

Net finished goods inventory = ₦75,000 - ₦15,000 = ₦60,000.

Finished goods transferred at a market value above cost include an internal profit element, which must be eliminated via a provision for unrealized profit so that inventory is reported at original cost in the financial statements.

2

Sum all three categories of manufacturing inventory (Raw Materials, Work-in-Progress, and Net Finished Goods).

Total manufacturing inventories = ₦45,000 + ₦28,000 + ₦60,000 = ₦133,000.

All three forms of inventory are current assets and must be aggregated for total inventory presentation under current assets in the Statement of Financial Position.

Anahtar Kavram

Balance Sheet Presentation of Manufacturing Inventories and Provision for Unrealized Profit

Soru 66Soru →

Kano Processing Company transfers all finished items from the factory to its sales unit at a price that includes a $20\%$ mark-up on factory cost. On 31st December 2025, the trading section held finished inventory valued at a transfer price of $\text{₦}48,000$ . What is the amount of provision for unrealized profit required for this closing inventory in Naira?

Cevabı ve açıklamayı göster

Cevap: 8000

Cevap

The provision for unrealized profit on the closing inventory is ₦8,000.

Converting the 20% mark-up on cost to a profit margin yields 1/6 of the transfer price. Applying 1/6 to the ₦48,000 closing inventory at transfer price gives ₦8,000.

Adım Adım Çözüm

1

Determine the profit fraction relative to the transfer price

Mark-up of 20% on cost equals a margin of 1/6 on transfer price

Since the closing inventory is recorded at transfer price, the profit element must be calculated as a proportion of the transfer price: Profit Margin = Markup / (1 + Markup) = 0.20 / 1.20 = 1/6.

2

Calculate the unrealized profit provision amount

₦8,000

Multiply the finished goods closing inventory at transfer price by the profit margin fraction: 1/6 * ₦48,000 = ₦8,000.

Anahtar Kavram

Calculation of Provision for Unrealized Profit on Closing Inventory using Mark-up to Margin conversion

Soru 67Soru →

Bisi Manufacturing Company provided the following balances extracted from its accounting records at the end of the year:

Financial Item	Amount (\text{N})
Opening inventory of finished goods	15,000
Cost of production	80,000
Closing inventory of finished goods	20,000
Carriage outwards	5,000

What is the cost of goods sold for the period?

\text{N}75,000

\text{N}80,000

\text{N}115,000

\text{N}85,000

Cevabı ve açıklamayı göster

Cevap: \text{N}75,000

Cevap

\text{N}75,000

In the Trading Account of a manufacturing entity, Cost of Goods Sold is obtained by adding the cost of production to the opening inventory of finished goods and subtracting the closing inventory of finished goods: \text{N}15,000 + \text{N}80,000 - \text{N}20,000 = \text{N}75,000. Carriage outwards is a distribution expense placed in the Profit and Loss Account.

Adım Adım Çözüm

1

Identify the components of Cost of Goods Sold in a manufacturing Trading Account

\text{Cost of Goods Sold} = \text{Opening Inventory of Finished Goods} + \text{Cost of Production} - \text{Closing Inventory of Finished Goods}

Cost of production is transferred from the Manufacturing Account to act as the primary cost of goods available for sale.

2

Calculate the Cost of Goods Sold using given figures

\text{N}15,000 + \text{N}80,000 - \text{N}20,000 = \text{N}75,000

Carriage outwards is ignored in this section because it is an administrative/selling expense reported in the Profit and Loss Account.

Anahtar Kavram

Calculation of Cost of Goods Sold for Manufacturing Entities

Tahmini Süre:45s

Soru 68Soru →

Kibo Manufacturing Company transfers finished goods from the factory to the trading account at cost plus a $20\%$ mark-up. At the end of the financial year, the following inventory balances were extracted from the books:

- Raw Materials Inventory: $₦62,000$
- Work-in-Progress Inventory: $₦38,000$
- Finished Goods Inventory (at transfer value): $₦120,000$

What is the total net carrying amount (in $₦$ ) of manufacturing inventories to be presented under Current Assets in the Statement of Financial Position?

Cevabı ve açıklamayı göster

Cevap: 200000

Cevap

The total net carrying amount of manufacturing inventories in the Statement of Financial Position is

₦200,000

.

In the Statement of Financial Position of a manufacturing entity, inventories under current assets must be shown at cost. Raw materials (

₦62,000

) and work-in-progress (

₦38,000

) are brought in at cost. Finished goods transferred at cost plus

20\%

(

₦120,000

) must be adjusted by deducting the provision for unrealized profit (

\frac{20}{120} \times ₦120,000 = ₦20,000

), bringing finished goods to its net cost of

₦100,000

. Summing all three yields

₦62,000 + ₦38,000 + ₦100,000 = ₦200,000

.

Adım Adım Çözüm

1

Compute the provision for unrealized profit on closing finished goods

Unrealized profit =

₦20,000

Finished goods are recorded at transfer value (cost +

20\%

markup), so profit component is

\frac{20}{120}

of transfer value.

2

Deduct provision for unrealized profit from finished goods transfer value

Net Finished Goods Inventory =

₦100,000

Inventories must be presented in the Statement of Financial Position at lower of cost and net realizable value, removing unrealized internal profit.

3

Aggregate all inventory components for Statement of Financial Position presentation

Total Current Asset Inventories =

₦200,000

Total inventories comprise Raw Materials (

₦62,000

) + Work-in-Progress (

₦38,000

) + Net Finished Goods at cost (

₦100,000

).

Anahtar Kavram

Valuation and presentation of raw materials, work-in-progress, and net finished goods (after deducting provision for unrealized profit) under current assets in manufacturing accounts.

Tahmini Süre:2m 0s

Soru 69Soru →

Apex Manufacturing Enterprise recorded the following closing inventory balances at the end of its trading period:
- Raw materials inventory: $\text{₦}15{}000$
- Work-in-progress inventory: $\text{₦}10{}000$
- Finished goods inventory: $\text{₦}25{}000$

A provision for unrealized profit of $\text{₦}2{}500$ was created on the finished goods inventory.

What is the total value of manufacturing inventories (in $\text{₦}$ ) to be presented under current assets in the statement of financial position?

Cevabı ve açıklamayı göster

Cevap: 47500

Cevap

The total value of manufacturing inventories presented under current assets in the statement of financial position is ₦47,500.

Manufacturing inventories listed under current assets in the statement of financial position consist of raw materials, work-in-progress, and finished goods reduced by any provision for unrealized profit. Deducting the ₦2,500 provision from ₦25,000 finished goods gives ₦22,500. Adding raw materials (₦15,000) and work-in-progress (₦10,000) results in a total inventory valuation of ₦47,500.

Adım Adım Çözüm

1

Deduct the provision for unrealized profit from the finished goods inventory

Net Finished Goods Inventory = ₦25,000 - ₦2,500 = ₦22,500

The provision for unrealized profit must be deducted from finished goods to ensure inventory is presented at original cost to the entity.

2

Sum all three manufacturing inventory categories

Total Inventory = ₦15,000 (Raw Materials) + ₦10,000 (WIP) + ₦22,500 (Net Finished Goods) = ₦47,500

Manufacturing inventories presented under current assets comprise raw materials, work-in-progress, and net finished goods.

Anahtar Kavram

Balance Sheet Presentation of Manufacturing Inventories and Provision for Unrealized Profit

Tahmini Süre:1m 0s

Soru 70Soru →

Danbatta Manufacturing Company transfers finished goods from its factory to its retail shop at a transfer price that includes a mark-up of $25\%$ on manufacturing cost. At the end of the accounting year on 31 December 2025, the entity's records show:

- Finished goods inventory (1 January 2025 at transfer price): $\text{₦}60,000$
- Finished goods inventory (31 December 2025 at transfer price): $\text{₦}100,000$

What is the net adjustment (increase in provision for unrealized profit) to be debited to the Profit and Loss Account for the year ended 31 December 2025?

Cevabı ve açıklamayı göster

Cevap: 8000

Cevap

The net increase in provision for unrealized profit to be debited to the Profit and Loss Account is ₦8,000.

The profit element contained in finished goods inventory transferred at cost plus

25\%

mark-up is

\frac{25}{125} = 20\%

of the transfer value. The unrealized profit in opening inventory is

20\% \times \text{₦}60,000 = \text{₦}12,000

and in closing inventory is

20\% \times \text{₦}100,000 = \text{₦}20,000

. The net adjustment (increase) to be charged to the Profit and Loss Account is

\text{₦}20,000 - \text{₦}12,000 = \text{₦}8,000

.

Adım Adım Çözüm

1

Convert mark-up on cost to profit margin on transfer value.

Margin =

\frac{25}{100 + 25} = \frac{25}{125} = \frac{1}{5} = 20\%

.

Because inventory is valued at transfer price (cost plus mark-up), the profit component embedded in the transfer price must be calculated using the margin fraction.

2

Compute the provision for unrealized profit in the opening inventory of finished goods.

Opening Provision =

\frac{1}{5} \times \text{₦}60,000 = \text{₦}12,000

.

To determine the profit element carried forward from the previous year.

3

Compute the required provision for unrealized profit in the closing inventory of finished goods.

Closing Provision =

\frac{1}{5} \times \text{₦}100,000 = \text{₦}20,000

.

To eliminate the internal profit on unsold manufactured goods remaining at the end of the current period.

4

Calculate the net change in provision required for the current period.

Net Increase =

\text{₦}20,000 - \text{₦}12,000 = \text{₦}8,000

.

Only the change (increase or decrease) between the required closing provision and existing opening provision is adjusted in the Profit and Loss Account.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Tahmini Süre:2m 0s

Soru 71Soru →

During a financial year, Zenith Manufacturing Company recorded a total cost of production of $\text{N}480,000$ . The company transfers finished goods to the trading account at market value, which reflects a mark-up of $25\%$ on the cost of production. What is the amount of manufacturing profit in Naira to be credited to the Profit and Loss Account for the year?

Cevabı ve açıklamayı göster

Cevap: 120000

Cevap

The manufacturing profit credited to the Profit and Loss Account is N120,000.

Manufacturing profit is calculated by applying the profit mark-up percentage to the cost of production: 25% of N480,000 = N120,000.

Adım Adım Çözüm

1

Identify the total cost of production

Cost of production = N480,000

This serves as the baseline cost before applying the manufacturing profit mark-up.

2

Apply the 25% mark-up rate to calculate manufacturing profit

Manufacturing Profit = 25% × N480,000 = N120,000

Finished goods are transferred at market value, and the mark-up added to the cost of production represents the manufacturing profit.

Anahtar Kavram

Manufacturing profit is the mark-up added to the cost of production when transferring finished goods to the trading account at market value.

Soru 72Soru →

The following summary of financial information was extracted from the accounting records of Highgrade Manufacturing Company for the year ended 31st December 2025:

Financial Item	Amount (₦)
Sales Revenue	520,000
Opening Stock of Finished Goods	60,000
Cost of Finished Goods Produced	310,000
Closing Stock of Finished Goods	50,000
Carriage Outwards	15,000
Administrative Expenses (including ₦5,000 prepaid)	35,000
Selling Expenses (excluding ₦8,000 accrued)	22,000

Based on the information above, complete the missing financial figures for the Trading and Profit & Loss Account.

Aşağıdaki boşlukları doldurun

The Gross Profit reported in the Trading Account is ₦, while the Net Profit reported in the Profit & Loss Account is ₦.

Cevabı ve açıklamayı göster

Cevap

The Gross Profit is ₦200,000 and the Net Profit is ₦125,000.

To calculate the Gross Profit, opening stock of finished goods (₦60,000) is added to the cost of finished goods produced (₦310,000) minus closing stock of finished goods (₦50,000) to arrive at a Cost of Goods Sold of ₦320,000. Subtracting this from Sales Revenue (₦520,000) gives a Gross Profit of ₦200,000. For Net Profit, operating expenses are adjusted for prepayments and accruals: Administrative Expenses (₦35,000 - ₦5,000 = ₦30,000), Selling Expenses (₦22,000 + ₦8,000 = ₦30,000), and Carriage Outwards (₦15,000). Total operating expenses of ₦75,000 subtracted from ₦200,000 Gross Profit yields a Net Profit of ₦125,000.

Adım Adım Çözüm

1

Calculate Cost of Goods Sold (COGS)

COGS = ₦60,000 + ₦310,000 - ��50,000 = ₦320,000

Cost of goods sold in a manufacturing firm is calculated by adding the opening stock of finished goods to the cost of production (finished goods produced) and subtracting the closing stock of finished goods.

2

Calculate Gross Profit

Gross Profit = ₦520,000 - ₦320,000 = ₦200,000

Gross profit is determined by deducting the cost of goods sold from sales revenue.

3

Calculate Adjusted Total Operating Expenses

Carriage Outwards = ₦15,000; Adjusted Administrative Expenses = ₦35,000 - ₦5,000 = ₦30,000; Adjusted Selling Expenses = ₦22,000 + ₦8,000 = ₦30,000. Total Operating Expenses = ₦15,000 + ₦30,000 + ₦30,000 = ₦75,000

Prepaid expenses must be subtracted from paid administrative expenses, while accrued expenses must be added to selling expenses. Carriage outwards is a selling/distribution expense charged directly to the Profit and Loss Account.

4

Calculate Net Profit

Net Profit = ₦200,000 - ₦75,000 = ₦125,000

Net profit is calculated by deducting total operating expenses from gross profit.

Anahtar Kavram

Preparation of Trading and Profit & Loss Account for Manufacturing Entities

Tahmini Süre:2m 0s

Soru 73Soru →

Zaria Industrial Ltd transfers finished goods from its factory to its trading section at cost plus a $20\%$ mark-up. At the beginning of the financial year, the stock of finished goods held at transfer price was $\text{₦}30,000$ . At the end of the financial year, the stock of finished goods at transfer price was $\text{₦}45,000$ . What is the net adjustment required in the Profit and Loss Account for the provision for unrealized profit?

An increase of

\text{₦}2,500

debited to the Profit and Loss Account

An increase of

\text{₦}3,000

debited to the Profit and Loss Account

An increase of

\text{₦}7,500

debited to the Profit and Loss Account

A decrease of

\text{₦}2,500

credited to the Profit and Loss Account

Cevabı ve açıklamayı göster

Cevap: An increase of $\text{₦}2,500$ debited to the Profit and Loss Account

Cevap

An increase of

\text{₦}2,500

debited to the Profit and Loss Account

When finished goods are transferred at a profit, unrealized profit contained in closing inventory must be eliminated using a provision account. With a

20\%

mark-up on cost (

\frac{1}{5}

), the margin on transfer price is

\frac{1}{6}

. The opening provision is

\frac{1}{6} \times \text{₦}30,000 = \text{₦}5,000

, and the required closing provision is

\frac{1}{6} \times \text{₦}45,000 = \text{₦}7,500

. The net increase of

\text{₦}2,500

is debited to the Profit and Loss Account.

Adım Adım Çözüm

1

Convert the mark-up percentage to a margin fraction

Mark-up of

20\% = \frac{1}{5}

. Profit margin on transfer price

= \frac{1/5}{1 + 1/5} = \frac{1}{6}

.

Because finished inventory values are given at transfer price (cost + profit), margin must be applied to extract the unrealized profit element.

2

Calculate the opening provision for unrealized profit

Opening provision

= \frac{1}{6} \times \text{₦}30,000 = \text{₦}5,000

.

Determines the existing balance in the Provision for Unrealized Profit account.

3

Calculate the closing provision for unrealized profit

Closing provision

= \frac{1}{6} \times \text{₦}45,000 = \text{₦}7,500

.

Determines the required closing balance for unrealized profit in ending inventory.

4

Determine the net adjustment for the Profit and Loss Account

Increase in provision

= \text{₦}7,500 - \text{₦}5,000 = \text{₦}2,500

(debit to Profit and Loss Account).

An increase in provision represents an additional expense charged against profits.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Tahmini Süre:1m 30s

Soru 74Soru →

Meridian Manufacturing Ltd extracted the following inventory figures at the end of its financial year:
- Raw materials inventory: $\text{₦}120,000$
- Work-in-progress inventory: $\text{₦}85,000$
- Finished goods inventory (at market transfer value): $\text{₦}250,000$

Finished goods were transferred from the factory to the trading account at cost plus a $25\%$ mark-up. What is the total carrying amount of manufacturing inventories to be presented under current assets in the Statement of Financial Position?

₦320,000

₦405,000

₦455,000

₦505,000

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Cevap: ₦405,000

Cevap

The total carrying amount of manufacturing inventories to be presented under current assets is ₦405,000.

The correct valuation of finished goods requires removing the unrealized profit component (₦250,000 × 25/125 = ₦50,000) to arrive at the actual cost of ₦200,000. Adding raw materials (₦120,000), work-in-progress (₦85,000), and net finished goods (₦200,000) gives total current asset inventory of ₦405,000.

Adım Adım Çözüm

1

Calculate the profit element (unrealized profit) included in closing finished goods.

Unrealized Profit = ₦250,000 × (25 / 125) = ₦50,000.

Since finished goods are recorded at cost plus a 25% mark-up, the transfer value represents 125% of cost, so profit is 25/125 (or 20%) of the transfer value.

2

Determine the net carrying value of finished goods for balance sheet presentation.

Net Finished Goods = ₦250,000 - ₦50,000 = ₦200,000.

Inventories must be valued at the lower of cost and net realizable value; unrealized profit must be deducted from finished goods to show them at cost.

3

Sum all manufacturing inventory components (Raw Materials + Work-in-Progress + Net Finished Goods).

Total Inventories = ₦120,000 + ₦85,000 + ₦200,000 = ₦405,000.

All three inventory types are combined to determine the aggregate inventory figure reported under current assets.

Anahtar Kavram

Balance Sheet Presentation of Manufacturing Inventories and Deduction of Provision for Unrealized Profit

Soru 75Soru →

Sovereign Manufacturing Enterprise extracted the following closing inventory figures and provision balances at the end of its accounting year:

Inventory / Provision Item	Amount ( $\text{₦}$ )
Raw materials inventory	$85,000$
Work-in-progress inventory	$42,000$
Finished goods inventory (at transfer price)	$160,000$
Provision for unrealized profit	$16,000$

What is the net total value of manufacturing inventories to be presented under Current Assets in the Statement of Financial Position (Balance Sheet)?

\text{₦}303,000

\text{₦}287,000

\text{₦}271,000

\text{₦}229,000

Cevabı ve açıklamayı göster

Cevap: $\text{₦}271,000$

Cevap

The net total value of manufacturing inventories presented under Current Assets is

\text{₦}271,000

.

In a manufacturing entity's Statement of Financial Position, all three types of inventory (raw materials, work-in-progress, and finished goods) are reported under Current Assets. Finished goods transferred at a markup must be shown net of the provision for unrealized profit (

\text{₦}160,000 - \text{₦}16,000 = \text{₦}144,000

). Adding raw materials (

\text{₦}85,000

) and work-in-progress (

\text{₦}42,000

) gives

\text{₦}271,000

.

Adım Adım Çözüm

1

Calculate the net valuation of finished goods inventory at cost price

Net Finished Goods = Gross Finished Goods - Provision for Unrealized Profit =

\text{₦}160,000 - \text{₦}16,000 = \text{₦}144,000

Finished goods transferred at a markup must be reduced by the provision for unrealized profit so they appear at actual cost in the Statement of Financial Position.

2

Sum all manufacturing inventory components under Current Assets

Total Inventories = Raw Materials + Work-in-Progress + Net Finished Goods =

\text{₦}85,000 + \text{₦}42,000 + \text{₦}144,000 = \text{₦}271,000

All three forms of inventory (raw materials, WIP, finished goods at cost) are combined to show total closing inventory under current assets.

Anahtar Kavram

Valuation and presentation of manufacturing inventories and provision for unrealized profit in the balance sheet

Soru 76Soru →

Benue Manufacturing Enterprise transfers finished goods from its factory to its retail outlet at a transfer price that includes a mark-up of $25\%$ on cost. On 1 January 2025, the provision for unrealized profit was $\text{₦}2,000$ . On 31 December 2025, the stock of finished goods valued at transfer price was $\text{₦}25,000$ . What is the amount of closing provision for unrealized profit (in $\text{₦}$ ) to be deducted from finished goods inventory in the Statement of Financial Position?

Cevabı ve açıklamayı göster

Cevap: 5000

Cevap

The closing provision for unrealized profit on finished goods inventory is \text{₦}5,000.

The closing inventory of finished goods is held at transfer price (cost + profit). To find the unrealized profit provision, the

25\%

mark-up on cost is converted to a

20\%

margin on transfer price (

\frac{25}{125} = \frac{1}{5}

). Applying

20\%

to the closing inventory value of

\text{₦}25,000

gives a closing provision of

\text{₦}5,000

.

Adım Adım Çözüm

1

Convert mark-up on cost to margin on transfer price

Margin on transfer price = 20%

Since closing inventory is valued at transfer price, the profit element must be calculated using the margin on transfer price, where Margin = Mark-up / (1 + Mark-up) = 0.25 / 1.25 = 0.20.

2

Calculate closing provision for unrealized profit

Closing Provision = ₦5,000

Multiply the transfer price of closing inventory (₦25,000) by the profit margin rate (20%) to find the profit fraction contained in unsold inventory.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Soru 77Soru →

Vanguard Manufacturing Company extracted the following closing inventory balances at the end of its accounting period:

Inventory Category	Amount (₦)
Raw materials	65,000
Work-in-progress	35,000
Finished goods (at transfer value)	100,000

Finished goods are transferred from the factory to the trading account at cost plus a $25\%$ mark-up. What is the total carrying value of inventories (in ₦) to be presented under current assets in the statement of financial position?

Cevabı ve açıklamayı göster

Cevap: 180000

Cevap

The total carrying value of inventories to be presented under current assets in the statement of financial position is ₦180,000.

The total carrying amount of inventories presented under current assets is ₦180,000. This is calculated by eliminating the ₦20,000 unrealized profit provision (25/125 × ₦100,000) from finished goods to reduce it to its cost of ₦80,000, then adding raw materials (₦65,000) and work-in-progress (₦35,000).

Adım Adım Çözüm

1

Calculate the provision for unrealized profit included in the closing finished goods inventory.

Provision for unrealized profit = ₦20,000.

Since finished goods are transferred at cost plus a 25% mark-up, the unrealized profit margin contained in the transfer price is 25/125 (or 20%).

2

Deduct the provision for unrealized profit from the finished goods inventory at transfer value.

Net carrying value of finished goods = ₦80,000.

Inventories must be stated at original prime/factory cost on the balance sheet by removing the internal unrealized manufacturing profit.

3

Sum all inventory components (raw materials, work-in-progress, and net finished goods).

Total inventory carrying amount = ₦180,000.

All three inventory elements are aggregated and presented as a single total or sub-itemized under current assets.

Anahtar Kavram

Balance sheet presentation of manufacturing inventories requires deducting the provision for unrealized profit from closing finished goods to ensure all inventories are valued at actual cost under current assets.

Soru 78Soru →

Zenith Manufacturing Enterprise extracted the following financial details at the end of its accounting year on 31st December 2025:

Financial Item	Amount (\text{N})
Finished goods inventory (1st January 2025)	45,000
Finished goods inventory (31st December 2025)	55,000
Cost of finished goods transferred from factory	350,000
Sales revenue	520,000
Carriage outwards	12,000

What is the gross profit of the enterprise for the year ended 31st December 2025?

\text{N}180,000

\text{N}168,000

\text{N}160,000

\text{N}70,000

Cevabı ve açıklamayı göster

Cevap: \text{N}180,000

Cevap

The gross profit of Zenith Manufacturing Enterprise for the year ended 31st December 2025 is

\text{N}180,000

.

The gross profit is calculated by deducting cost of goods sold from sales revenue. Cost of goods sold is opening finished goods (\text{N}45,000) plus transfer cost (\text{N}350,000) minus closing finished goods (\text{N}55,000), giving \text{N}340,000. Subtracting \text{N}340,000 from sales (\text{N}520,000) yields \text{N}180,000.

Adım Adım Çözüm

1

Calculate the Cost of Goods Sold (COGS) for finished goods

\text{Cost of Goods Sold} = \text{Opening Finished Goods Inventory} + \text{Cost of Goods Transferred} - \text{Closing Finished Goods Inventory} = 45,000 + 350,000 - 55,000 = \text{N}340,000

Cost of goods sold in a manufacturing entity comprises opening finished goods inventory plus factory production transfers minus closing finished goods inventory.

2

Calculate Gross Profit

\text{Gross Profit} = \text{Sales Revenue} - \text{Cost of Goods Sold} = 520,000 - 340,000 = \text{N}180,000

Gross profit is determined in the trading account by subtracting cost of goods sold from sales revenue. Carriage outwards is a selling expense charged to the profit and loss account, not the trading account.

Anahtar Kavram

Trading Account Gross Profit Determination for Manufacturing Entities

Manufacturing Accounts

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