E14-14 The following information is available for Aikman Company Prepare a cost

Question

E14-14 The following information is available for Aikman Company Prepare a cost of goods manufactured schedule and a partial income statement. (LO 3), AP January 1, 2017 2017 December 31, 2017 Raw materials inventory Work in process inventory Finished goods inventory Materials purchased Direct labor Manufacturing overhead Sales revenue $21,000 13,500 27,000 $30,000 17,200 21,000 $150,000 220,000 180,000 910,000 Instructions (a) Compute cost of goods manufactured. (b) Prepare an income statement through gross profit. (c) Show the presentation of the ending inventories on the December 31, 2017, balance sheet. (d) How would the income statement and balance sheet of a merchandising company be different from Aikman's financial statements?

Explanation / Answer

An income statement reflects your small-business earnings and shows all the expenses incurred in generating that income. If your small business is a manufacturing company, you will show different categories of expenses than you would for a merchandising company. The merchandiserrefers to expenses as “cost of goods sold.” Manufacturers often refer to expenses and “cost of goods manufactured.” The income statements for each of these types of companies may reflect this terminology

Aikman Company cost of goods manufactured Schedule work in process inventory,January 2017 13,500 Raw materials used Raw materials inventory ,Jan 1,2017 21,000 materials purchased 150,000 cost of raw materials avaialble 171,000 less : Raw materials inventory,dec 31 2017 30,000 Raw materials used 141,000 direct labor 220,000 manufacturing overhead 180,000 total manufacturing cost 541,000 total manufacturing cost & work in process 554,500 less: work in process ,december 31 ,2017 17,200 cost of goods manufactured 537,300 Income statement (partial) Sales 910,000 cost of goods sold finished goods,Jan 1 27,000 cost of goods manufactured 537,300 cost of goods avaialble for sales 564,300 less:finished goods ,dec 31 21,000 cost of goods sold 543,300 Gross profit 366,700 Balance sheet (partial) Current Assets inventories Finished goods 21,000 work in process inventory 17,200 Raw materials inventory 30,000 68,200

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