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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Manufacturing income statement, statement of cost of goods manufactured

Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December.

 

On

Company

Off

Company

Materials inventory. December 1 $ 65,800 $ 195,300
Materials inventory. December 31 (a) 91,140
Materials purchased 282,800 (a)
Cost of direct materials used in production 317,800 (b)
Direct labor 387,800 577,220
Factory overhead 148,400 256,060
Total manufacturing costs incurred in December (b) 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)
Cost of goods manufactured (c) 1,532,020
Finished goods inventory, December 1 $ 224,000 $ 269,080
Finished goods inventory. December 31 197,400 (d)
Sales 1,127,000 1,944,320
Cost of goods sold (d) 1,545,040
Gross profit (e) (e)
Operating expenses 117,600 (f)
Net income (f) 164,920

Instructions

1. Determine the amounts of the missing items, identifying them by letter.

2. Prepare On Company’s statement of cost of goods manufactured for December.

3. Prepare On Company’s income statement for December.

1.

To determine

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.

To determine: The amounts of the missing items, by identifying them by letter.

Explanation

Determine the amounts of the missing items.

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 notes:

  1. 1. Determine the amount (a) in Company On.

Materials inventory, December 31[Materials inventory, December 1+Materials purchasedCost of directmaterials used in production ]=$282,800+$65,800$317,800=$30,800 (a)

  1. 2. Determine the amount (a) in Company Off.

(Cost of direct materialsused in production)(Materials inventory, December 1+Materials purchasedMaterials inventory, December 31)=$685,720+$91,140$195,300=$581,560 (a)

  1. 3. Determine the amount (b) in Company On.

(Total manufacturing costsincurred during December)(Cost of direct materials used in production+Direct labor+Factory overhead)=($317,800+$387,800+$148,400)=$854,000 (b)

  1. 4. Determine the amount (b) in Company Off.

(Cost of directmaterials used in production)(Total manufacturing costs in DecemberDirect laborFactory overhead)=($1,519,000+$577,220+$256,060)=$685,720 (b)

  1. 5. Determine the amount (c) in Company Off.

Work in progress, December 31[Total manufacturing costsCost of goods manufactured]=$1,727,320$1,532,020=$195,300 (c)

  1. 6

2.

To determine

To prepare: Company On’s statement of cost of goods manufactured for December.

3.

To determine

To prepare: Company On’s income statement for December.

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