Question

The following data from the just completed year are taken from the accounting records of Mason Company: Sales $ 524,000 Direct labor cost $ 70,000 Raw material purchases $ 118,000 Selling expenses $ 140,000 Administrative expenses $ 63,000 Manufacturing overhead applied to work in process $ 90,000 Actual manufacturing overhead costs $ 80,000 Inventories Beginning Ending Raw materials $ 7,000 $ 15,000 Work in process $ 10,000 $ 5,000 Finished goods $ 20,000 $ 35,000 Required: 1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials. 2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. 3. Prepare an income statement.

Answer 1

Answer:

Cost of Goods Available Sold $ 265,000

Adjusted Cost of Goods Sold  $ 255,000

Net Income             $ 66,000    

Explanation:

Mason Company:

Cost Of Goods Schedule

Inventories Beginning Raw materials $ 7,000

Raw material purchases $ 118,000

Inventories  Ending Raw materials  $ 15,000

Direct Materials Used $ 110,000

Direct labor cost $ 70,000

Manufacturing overhead applied to work in process $ 90,000

Total Manufacturing Costs $ 270,000

Add Work in process  Inventories Beginning  $ 10,000

Cost of Goods Available For Manufacture  $ 280,000

Less Work in process Inventories Ending $ 5,000

Cost of Goods  Manufactured $ 275,000

Add Finished goods  Inventories Beginning $ 20,000

Cost of Goods Available For Sale $ 295,000

Less Finished goods  Inventories Ending  $ 35,000

Cost of Goods Available Sold $ 265,000

Mason Company:

Cost Of Goods Schedule Adjusted

Inventories Beginning Raw materials $ 7,000

Raw material purchases $ 118,000

Inventories  Ending Raw materials  $ 15,000

Direct Materials Used $ 110,000

Direct labor cost $ 70,000

Manufacturing overhead applied to work in process $ 90,000

Total Manufacturing Costs $ 270,000

Add Work in process  Inventories Beginning  $ 10,000

Cost of Goods Available For Manufacture  $ 280,000

Less Work in process Inventories Ending $ 5,000

Cost of Goods  Manufactured $ 275,000

Add Finished goods  Inventories Beginning $ 20,000

Cost of Goods Available For Sale $ 295,000

Less Finished goods  Inventories Ending  $ 35,000

Cost of Goods Available Sold $ 265,000

Less Over Applied Overhead  $ 10,000

Adjusted Cost of Goods Sold  $ 255,000

Over applied overhead is deducted to get the actual Cost of Goods Sold.

Mason Company:

Income Statement

Sales $ 524,000

Less

Adjusted Cost of Goods Sold  $ 255,000

Gross Profit        $ 269,000

Less Selling expenses $ 140,000

Administrative expenses $ 63,000

Net Income             $ 66,000