Question

Information for Jersey Metalworks as of December 31 follows. Prepare (a) the company's schedule of cost of goods manufactured for the year ended December 31; (b) prepare the company's income statement that reports separate categories for selling and general and administrative expenses. Administrative salaries expense $ 135,000 Depreciation expense–Factory equipment 52,400 Depreciation expense–Delivery vehicles 36,200 Depreciation expense–Office equipment 24,800 Advertising expense 22,350 Direct labor 268,000 Factory supplies used 12,000 Income taxes expense 91,500 Indirect labor 35,000 Indirect material 24,000 Factory insurance 15,500 Factory utilities 14,000 Factory maintenance 7,500 Inventories Raw materials inventory, January 1 32,000 Raw materials inventory, December 31 28,000 Work in Process inventory, January 1 33,780 Work in Process inventory, December 31 37,460 Finished goods inventory, January 1 56,970 Finished goods inventory, December 31 62,000 Raw materials purchases 325,000 Rent expense–Factory 50,000 Rent expense–Office space 24,000 Rent expense–Selling Space 24,000 Sales salaries expense 97,500 Sales 1,452,000 Sales discounts 29,000

Answer 1

Answer and Explanation:

a. The Preparation of cost of goods manufactured for the year ended December 31 is prepared below:-

                            Jersey Metalworks

                    Cost of goods manufactured

                   for the year ended December 31

Particulars                                                     Amount

Direct materials

Raw materials, January 1                $32,000

Add:

Raw materials purchases               $325,000

Raw materials available                  $357,000

Less raw materials, December 31  $28,000

Direct materials used                                        $329,000

Direct labor                                                        $268,000

Factory overhead costs:

Depreciation expense-

Factory equipment                      $52,400

Factory supplies used                $12,000

Indirect labor                               $35,000

Indirect material                          $24,000

Factory insurance                       $15,500

Factory utilities                           $14,000

Factory maintenance                  $7,500

Rent expense—Factory              $50,000

Total factory overhead costs                        $210,400

Total manufacturing costs                             $807,400

Add:

Work in Process inventory, January 1           $33,780

Total cost of work in Process                        $841,180

Less work in Process inventory,

December 31                                                   $37,460

Cost of goods manufactured                     $803,720

b.The Preparation of income statement is prepared below:-

                            Jersey Metalworks

                    Cost of goods manufactured

                   for the year ended December 31

Particulars                                                     Amount

Sales                                                          $1,452,000

Less: sales discounts                                 $29,000

Net sales                                                     $1,423,000

Cost of Goods Sold

Finished goods inventory,

January 1                                  $56,970

Cost of goods manufactured  $803,720

Goods available for sale          $860,690

Less finished goods inventory,

December 31                             $62,000

Cost of Goods Sold                                         $798,690

Gross Profit                                                      $624,310

Operating expenses

Selling expenses

Sales salaries expense              $97,500

Depreciation expense - Delivery

vehicles                                      $36,200

Advertising expense                  $22,350

Rent expense-Selling space      $24,000

Total selling expenses                                     $180,050

General and administrative expenses    

Administrative salaries expense  $135,000

Depreciation expense- Office

equipment                                     $24,800

Rent expense-Office space         $24,000

Total general and administrative

expenses                                                           $183,800

Total operating expenses                                 $363,850

Income before taxes                                          $260,460

Income taxes expense                                       $91,500

Net Income                                                         $168,960

We simply applied the above format to prepare the cost of goods manufactured and the income tax