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Swift Company Income Statement For the Month Ended August 31 $ 450,000 Sales... Less operating expenses: Direct labor cost....... Raw materials purchased Manufacturing overhead Selling and administrative expenses $ 70,000 165,000 85,000 142,000 462,000 Net operating loss.... $ (12,000) After seeing the $12,000 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets-if we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. Inventory balances at the beginning and end of August were: August 1 August 31 Raw materials. Work in process. Finished goods $8.000 $16,000 $13,000 $21,000 $40,000 $ 60,000 The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. 2. As a second step, prepare a new income statement for August. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the com- pany look for a buyer?

Swift Company Income Statement For the Month Ended August 31 $ 450,000 Sales... Less operating expenses: Direct labor cost....... Raw materials purchased Manufacturing overhead Selling and administrative expenses $ 70,000 165,000 85,000 142,000 462,000 Net operating loss.... $ (12,000) After seeing the $12,000 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets-if we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. Inventory balances at the beginning and end of August were: August 1 August 31 Raw materials. Work in process. Finished goods $8.000 $16,000 $13,000 $21,000 $40,000 $ 60,000 The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. 2. As a second step, prepare a new income statement for August. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the com- pany look for a buyer?

Financial & Managerial Accounting
Financial & Managerial Accounting
13th Edition
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter6: Inventories
Section: Chapter Questions
Problem 6.3CP: Costing inventory Golden Eagle Company begun operations in 2016 by selling a single product. Data on...
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PROBLEM 2-16 Schedule of Cost of Goods Manufactured; Income Statement [LO2, LO3, LO4, LO5] Swift Company was organized on March 1 of the current year. After five months of start-up losses, management had expected to earn a profit during August. Management was disappointed, however, when the income statement for August also showed a loss. August's income statement follows: eXcel Swift Company Income Statement For the Month Ended August 31 Sales... Less operating expenses: Direct labor cost. Raw materials purchased Manufacturing overhead Selling and administrative expenses $450,000 $ 70,000 165,000 85,000 142,000 462,000 Net operating loss $ (12,000) After seeing the S12,000 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets-if we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. Inventory balances at the beginning and end of August were: August 1 August 31 Raw materials Work in process. Finished goods $8,000 $13,000 $16,000 $21,000 $60,000 $40,000 The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. 2. As a second step, prepare a new income statement for August. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the com- pany look for a buyer?
Transcribed Image Text:PROBLEM 2-16 Schedule of Cost of Goods Manufactured; Income Statement [LO2, LO3, LO4, LO5] Swift Company was organized on March 1 of the current year. After five months of start-up losses, management had expected to earn a profit during August. Management was disappointed, however, when the income statement for August also showed a loss. August's income statement follows: eXcel Swift Company Income Statement For the Month Ended August 31 Sales... Less operating expenses: Direct labor cost. Raw materials purchased Manufacturing overhead Selling and administrative expenses $450,000 $ 70,000 165,000 85,000 142,000 462,000 Net operating loss $ (12,000) After seeing the S12,000 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets-if we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. Inventory balances at the beginning and end of August were: August 1 August 31 Raw materials Work in process. Finished goods $8,000 $13,000 $16,000 $21,000 $60,000 $40,000 The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. 2. As a second step, prepare a new income statement for August. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the com- pany look for a buyer?
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