3. The following information was extracted from the books of Garioch Manufacturing plc
for the year ended 31 December Year 8.

£000
Inventory (Stocks) – 1 January Year 8:
Raw Materials 20
Work in Progress 35
Finished Goods 15
Purchases:
Raw Materials 160
Finished Goods 70
Purchase Returns – Raw Materials 15
Carriage in on Finished Goods 2
Wages:
Production 95
Warehouse 30
Factory Repairs 10
Factory Rates 12
Royalties 52
Advertising 8
Salaries 44
General Expenses 24
Lighting and Heating 20
Insurance 17
Factory Machinery (at cost) 120
Vehicles (at cost) 50
Provision for Depreciation at 1 January Year 8:
Factory Machinery 20
Vehicles 10
Trade Receivables (Debtors) 22
Bad Debts 5
Sales Revenue (Sales) of Finished Goods 640
Sales Revenue Returns (Sales Returns) of Finished Goods 20
Selling Expenses 4

NOTES AT 31 DECEMBER YEAR 8:
1 Inventory (Stocks):
Raw Materials £22,000
Work in Progress £26,000
Finished Goods £19,000
2 Production wages payable (due) £5,000.
3 Lighting and Heating and Insurance are to be apportioned between the Factory
and the Office in the ratio of 3:2 after taking into account receivable (prepaid)
insurance of £2,000.
4 The salaries are to be apportioned between the Factory and the Office in the
ratio of 3:1.
5 The Factory is to be charged with 75% of the General Expenses with the
remainder being charged to the Office.
6 Depreciation per annum is to be provided for as follows:
• Factory Machinery – 20% of the reduced balance.
• Vehicles – 10% on cost – vehicles are used 80% for delivery of finished
goods and 20% for the factory.
7 Production of finished goods for the year amounted to 100,000 units. These are
to be transferred to the warehouse at their market value of £4·60 per unit.
(a) Prepare the Manufacturing Account for the year ended 31 December Year 8
using the relevant information.
(b) Prepare the trading section of the Income Statement (Trading Account) for the
year ended 31 December Year 8.
(c) Explain how the Manufacturing Profit is treated in the Financial Statements.

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