Question

Consider the following information for Huntersville Inc. for the fiscal year ended December 31. Depreciation expense—administrative office $ 33,050 Depreciation expense—plant and equipment 87,500 Direct labor—wages 499,200 Materials Inventory, Dec. 31 28,250 Materials Inventory, Jan. 1 20,500 Direct materials purchases 162,500 Finished goods inventory, Dec. 31 24,400 Finished goods inventory, Jan. 1 15,300 Heat, light, and power—plant 44,900 Indirect labor 25,600 Property taxes—plant 34,750 Sales representatives’ salaries 146,500 Sales revenue 1,516,000 Factory supervisor’s salary 66,450 Supplies—administrative office 16,600 Supplies—plant 29,300 Work-in-process inventory, Dec. 31 9,600 Work-in-process inventory, Jan. 1 23,750 Required: Prepare a statement of cost of goods manufactured and an income statement for Huntersville for the year ended December 31.

Answer 1

Answer:

Statement of cost of goods manufactured

Depreciation expense—plant and equipment     87,500

Direct labor—wages                                            499,200

Materials (20,500+162,500-28,250)                   157,750

Heat, light, and power—plant                               44,900

Indirect labor                                                          25,600

Property taxes—plant                                            34,750

Factory supervisor’s salary                                   66,450

Supplies—plant                                                      29,300

Total Cost of Goods Manufactured                    945,450

Add Opening Work-in-process inventory            23,750

Less Closing Work-in-process inventory              (9,600)

Cost of Goods Manufactured                             959,600

Income statement for Huntersville for the year ended December 31

Sales revenue                                                                      1,516,000

Less Cost of Goods Sold :

Opening Finished goods inventory                 24,400

Add Cost of Goods Manufactured                959,600

Less  Closing Finished goods inventory        (15,300)      (968,700)

Gross Profit                                                                           547,300

Less Expenses ;

Depreciation expense—administrative office                     (33,050)

Sales representatives’ salaries                                           (146,500)

Supplies—administrative office                                            (16,600)

Net Income/(loss)                                                                    351,150

Explanation:

Be careful to consider only manufacturing (Plant related costs) in the computation of cost of goods manufactured.

Cost of Goods manufactured is transferred to Income Statement. Account for non-manufacturing costs in the Income Statement.