Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:
Instructions
- 1. For both companies, determine the amounts of the missing items (a) through (f), identifying them by letter.
- 2. Prepare Yakima Company’s statement of cost of goods manufactured for December.
- 3. Prepare Yakima Company’s income statement for December.
1.
Calculate the amounts of the missing items (a) through (f).
Explanation of Solution
Cost of goods manufactured:
Cost of goods manufactured refers to the costs incurred for manufacturing the goods during the period. A statement of cost of goods manufactured is prepared in order to determine the cost of goods manufactured, which in turn is used to determine the cost of goods sold, and prepare the income statement.
Income statement:
The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.
Calculate the amounts of the missing items (a) through (f) as follows:
Particulars | Company On | Company Off |
Materials inventory, December 1 | $ 65,800 | $ 195,300 |
Materials inventory, December 31 |
(a) 30,800 | 91,140 |
Materials purchased | 282,800 |
(a) 581,560 |
Cost of direct materials used in production | 317,800 |
(b) 685,720 |
Direct labor | 387,800 | 577,220 |
Factory overhead | 148,400 | 256,060 |
Total manufacturing costs incurred during December |
(b) 854,000 | 1,519,000 |
Total manufacturing costs | 973,000 | 1,727,320 |
Work in process inventory, December 1 | 119,000 | 208,320 |
Work in process inventory, December 31 | 172,200 |
(c) 195,300 |
Cost of goods manufactured |
(c) 800,800 | 1,532,020 |
Finished goods inventory, December 1 | 224,000 | 269,080 |
Finished goods inventory, December 31 | 197,400 |
(d) 256,060 |
Sales | 1,127,000 | 1,944,320 |
Cost of goods sold |
(d) 827,400 | 1,545,040 |
Gross profit |
(e) 299,600 |
(e) 399,280 |
Operating expenses | 117,600 |
(f) 234,360 |
Net income |
(f) 182,000 | 164,920 |
Table (1)
Working note (a):
Determine the amount of material inventory for Company On.
Determine the amount of materials purchased for Company Off.
Working note (b):
Determine the amount of total manufacturing cost incurred in December for Company On.
Determine the cost of direct materials used in production for Company Off.
Working note (c):
Determine the amount of work in process at the end of the December for Company Off.
Determine the cost of goods manufactured for Company On.
Working note (d):
Determine the amount of finished goods inventory for December 31 for Company Off.
Determine the cost of goods sold for Company On.
Working note (e):
Determine the amount of gross profit for Company On.
Determine the amount of gross profit for Company Off.
Working note (f):
Determine the amount of operating expense for Company Off.
Determine the amount of net income for Company On.
2.
Prepare Company On’s statement of cost of goods manufactured for December.
Explanation of Solution
Prepare Company On’s statement of cost of goods manufactured for December.
Company On | |||
Statement of Cost of Goods Manufactured | |||
For the month ended December 31 | |||
Particulars | $ | $ | $ |
Work in process inventory, December 1 (A) | $ 119,000 | ||
Direct materials: | |||
Materials inventory, December 1 | $ 65,800 | ||
Purchases | 282,800 | ||
Cost of materials available for use | $348,600 | ||
Less: Materials inventory, December 31 | 30,800 | ||
Cost of direct materials used | $317,800 | ||
Direct labor | 387,800 | ||
Factory overhead | 148,400 | ||
Total manufacturing costs incurred (B) | 854,000 | ||
Total manufacturing costs | $973,000 | ||
Less: Work in process inventory, December 31 | 172,200 | ||
Cost of goods manufactured | $800,800 |
Table (2)
Therefore, the cost of goods manufactured of Company On for December is $800,800.
3.
Prepare Company On’s income statement for December.
Explanation of Solution
Prepare Company On’s income statement for December.
Company On | ||
Income Statement | ||
For the month ended December 31 | ||
Sales | $1,127,000 | |
Cost of goods sold: | ||
Finished goods inventory, December 1 | $224,000 | |
Cost of goods manufactured | 800,800 | |
Cost of finished goods available for sale | $1,024,800 | |
Less: Finished goods inventory, December 31 | 197,400 | |
Cost of goods sold | 827,400 | |
Gross Profit | $299,600 | |
Less: Operating expenses | 117,600 | |
Net Income | $182,000 |
Table (3)
Hence, the net income of Company On for the month of December is $182,000.
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