The following calendar year-end information is taken from the December 31, 2015,

Question

The following calendar year-end information is taken from the December 31, 2015, adjusted trial balance and other records of Leone Company.

Prepare the company’s 2015 schedule of cost of goods manufactured.

Prepare the company’s 2015 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.

  Advertising expense $ 34,900   Direct labor $ 683,600   Depreciation expense—Office equipment 9,900   Income taxes expense 293,700   Depreciation expense—Selling equipment 10,600   Indirect labor 58,300   Depreciation expense—Factory equipment 39,900   Miscellaneous production costs 11,400   Factory supervision 119,500   Office salaries expense 74,000   Factory supplies used 8,400   Raw materials purchases 960,000   Factory utilities 33,000   Rent expense—Office space 26,000   Inventories   Rent expense—Selling space 27,200      Raw materials, December 31, 2014 151,100   Rent expense—Factory building 82,900      Raw materials, December 31, 2015 195,000   Maintenance expense—Factory equipment 36,200      Work in process, December 31, 2014 17,600   Sales 4,456,700      Work in process, December 31, 2015 21,300 Sales salaries expense 393,300      Finished goods, December 31, 2014 161,400         Finished goods, December 31, 2015 142,200

Explanation / Answer

Solution:

1) Schedule of cost of goods manufactured for the year 2015

Particulars

Amount ($)

Raw Material Consumed During the year (Note 1)

$916,100

Direct Labor Cost

$683,600

Manufacturing Overheads (Note 2)

$389,600

Gross Production Cost of Cost of Goods Manufactured

$1,989,300

Add: Beginning Work In Process Jan 1, 2015

$17,600

Less: Ending Inventory Work In Process Dec 31, 2015

($21,300)

Cost of Goods Manufactured

$1,985,600

Note 1: Raw Material Consumed During the year 2015

Particulars

Amount ($)

Beginning Inventory of Raw Material, Jan 1, 2015

$151,100

Add: Raw Material Purchases during the year

$960,000

Less: Ending Inventory of Raw Material, Dec 31, 2015

($195,000)

Raw Material Consumed During the year

$916,100

Note 2: Manufacturing Overheads Incurred during the year 2015

Particulars

Amount ($)

Indirect Labor

$58,300

Factory Supervision

$119,500

Factory supplies used

$8,400

Factory utilities

$33,000

Depreciation expense—Factory equipment

$39,900

Miscellaneous production costs

$11,400

Rent expense—Factory building

$82,900

Maintenance expense—Factory equipment

$36,200

$389,600

2) Income Statement of the Company for the year 2015

Particulars

US$

US$

Sales

$4,456,700

Cost of Goods Manufactured

$916,100

Add: Beginning Inventory of Finished Goods Jan 1, 2015

$161,400

Cost of Goods Available for Sale

$1,077,500

Less: Ending Inventory of Finished Goods Dec 31, 2015

($142,200)

Cost of Goods Sold

$935,300

General and Administrative expenses (Note 3)

$109,900

Selling Expenses (Note 4)

$466,000

Cost of Sales

$1,511,200

$1,511,200

Operating Profit before tax (Sales - Cost of Sales)

$2,945,500

Less: Income taxes expense

($293,700)

Profit After Tax

$2,651,800

Note 3: General and Administrative expenses for the year 2015

Particulars

Amount ($)

Depreciation expense—Office equipment

$9,900

Office salaries expense

$74,000

Rent expense—Office space

$26,000

Total Expenses

$109,900

Note 4: Selling Expenses the year 2015

Particulars

Amount ($)

Advertising expense

$34,900

Depreciation expense—Selling equipment

$10,600

Rent expense—Selling space

$27,200

Sales salaries expense

$393,300

Total Selling Expenses

$466,000

Particulars

Amount ($)

Raw Material Consumed During the year (Note 1)

$916,100

Direct Labor Cost

$683,600

Manufacturing Overheads (Note 2)

$389,600

Gross Production Cost of Cost of Goods Manufactured

$1,989,300

Add: Beginning Work In Process Jan 1, 2015

$17,600

Less: Ending Inventory Work In Process Dec 31, 2015

($21,300)

Cost of Goods Manufactured

$1,985,600

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