Problem 3 (Textbook Reference: P2-3)-Prepare statement of costs of goods manufac

Question

Problem 3 (Textbook Reference: P2-3)-Prepare statement of costs of goods manufactured and an income statement Good Vibrations, Inc., produces recordings of musical performances. A newly hired executive of the company has asked you to sort through the records and prepare a statement of the company's cost of goods manufactured. You find the following data from records prepared by Good Vibrations, Inc., for the year ended December 31, 2013 Inventories Beginning Diect Materials Inventory, January 1, 2013 S 6,000 Ending Direct Materials Inventory, December, 31, 2013 S10,500 Beginning Work in Process Inventory, January 1, 2013 S10,000 Ending Work in Process Inventory, December 1, 2013 S 9,500 Materials Purchases Direct Labor Indirect Labor Factory Utilities Expense Factory Supplies Expense Depreciation Expense - Factory Buildng Depreciaton Expense-Factory Equpment Other Manufacturing Overhead Applied Manufacturing Overhead $50,000 $40,000 $15,000 S 7,000 5,000 $14,000 $10,500 $25,000 $76,500 You also learn that Beginning Finished Goods Inventory on January 1, 2013, was $20,000 and Ending Finished Goods Inventory on December 31, 2013, was S5,000. Sales for the year were 5400,000. Selling expenses were 550,000 and ative expenses were $75,000 Required Prepare a statement of cost of goods manufactured for Good Vibrations, Inc., for the year ended December 31, 2013 (Hint: Use the space below to recreate the T-Account Template we made together in class) Prepare an income statement for Good Vibrations, Inc., for the year ended December 31, 2013 a. b. ***Templates for (a) and (b) have been provided on the next page***

Explanation / Answer

Solution:-

(a).statement of cost of goods manufactured for goods vibrations for the year ended december 31, 2013:-

=6,000 + 50,000

= $56,000

=56,000 - 10,500

= $45,500

= 45,500 + 40,000 + 76,500

= $1,62,000

= 1,62,000 - 10,000 + 9,500

= $1,62,500

(b).Income statement for goods vibrations for the year ended december 31 ,2013:-

= 20,000 + 1,62,500

= $1,82,500

= 1,82,500 - 5,000

= $1,77,500

= 4,00,000 - 1,77,500

= $2,22,500

= 50,000 + 75,000

=125,000

= 2,22,500 - 1,25,000

= $97,500

Direct material: Material inventory,january 1,2013 $6,000 Materials purchases $50,000 Materials available for sale for use = material inventory + material Purchases

=6,000 + 50,000

= $56,000

Material inventory in december 31 $10,500 Direct material = (materials available for sale for use - material inventory in december )

=56,000 - 10,500

= $45,500

Direct labor $40,000 Manufacturing overhead: Indirect labor $15,000 Factory utilities expenses $7,000 factory supplies expenses $5,000 Depreciation expense - factory building $14,000 Depreciation expense - factory equipment $10,500 Other manufacturing overhead   $25,000 Total applied manufacturing overhead $76,500 Cost to manufacturing = (direct material + direct labor + total applied manufacturing overhead )

= 45,500 + 40,000 + 76,500

= $1,62,000

Work in process inventory in january 1 $10,000 Work in process inventory in december 31 $9,500 Cost of goods manufactured = (Cost of manufacturing - work in process inventory in january 1 + work in process inventory december 31)

= 1,62,000 - 10,000 + 9,500

= $1,62,500

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