Question No.1 The following information has been taken from the accounting records of Klear-Seal Company for the year 2012 Selling expenses………………………………………………………. $140,000 Raw materials inventory, January 1…………………………………. 90,000 Raw materials inventory, December 31…………………………….. 60,000 Utilities, factory………………………………………………………… 36,000 Direct labor cost……………………………………………………….. 150,000 Depreciation, factory………………………………………………….. 162,000 Purchases of raw materials…………………………………………… 750,000 Sales……………………………………………………………………. 2,500,000 Insurance, factory……………………………………………………… 40,000 Supplies, factory………………………………………………………. 15,000 Administrative Expenses ………………………………………………… 270,000 Indirect labor…………………………………………………………… 300,000 Maintenance, factory………………………………………………….. 87,000 Work in process inventory, January 1………………………………. 180,000 Work in process inventory, December 31………………………….. 100,000 Finished goods inventory, January 1………………………………… 260,000 Finished goods inventory, December 31……………………………. 210,000 Management wants these data organized in a better format so that financial statements can be prepared for the year. Required: 1. Prepare a schedule of cost of goods manufactured. 2. Compute the cost of goods sold. 3. Using data as needed from (1) and (2) above, prepare an income statement.
1
Klear-Seal Company
Schedule of Cost of Goods Manufactured
For the year ended December 31
Direct materials:
$
$
Raw material inventory, Jan 1
190,000
Add: purchases of raw material
75,000
Raw material available for use
840,000
Less: raw material inventory, Dec 31
-600,000
Raw material used
780,000
Direct labor
150,000
Manufacturing overhead:
Indirect labor
300,000
Supplies, factory
15,000
Utilities, factory
36,000
Insurance, factory
40,000
Depreciation, factory
162,000
Maintenance, factory
87,000
Total manufacturing overhead
640,000
Total manufacturing costs
1,570,000
Add: work in process inventory, Jan 1
180,000
Less: work in process inventory, Dec 31
-100,000
Cost of Goods Manufactured
1,650,000
2
Klear-Seal Company
Schedule of Cost of Goods Sold
For the year ended December 31
Finished goods inventory, Jan 1
260,000
Add: cost of goods manufactured
1,650,000
Goods available for use
1,910,000
Less: finished goods inventory, Dec 31
-210,000
Cost of Goods Sold
1,700,000
3
Klear-Seal Company
Income statement
For the year ended December 31
Sales
2,500,000
Less: cost of goods sold
-1,700,000
Gross margin
800,000
Less: selling& admin costs
Selling exp.
140,000
Admin exp.
270,000
Total selling& admin costs
-410,000
Net operating income
390,000
