Question

PR 18.4A Manufacturing income statement, statement of cost of goods manufactured Several items are omitted from each of the following income statement and cost of goods manufactured statement data for the month of December 2012: Tom Company $ 187,200 Jerry Company $ 118,000 120,000 228,000 (b) 120,000 690,000 985,000 295,000 Materials inventory, December 1 Materials inventory, December 31 Materials purchased Cost of direct materials used in production Direct labor Factory overhead Total manufacturing costs incurred during December Total manufacturing costs Work in process inventory, December 1 Work in process inventory, December 31 Cost of goods manufactured Finished goods inventory, December 1 Finished goods inventory, December 31 Sales Cost of goods sold Gross profit Operating expenses Net income 475,200 501,600 705,600 218,400 (b) 1,785,600 360,000 302,400 (c) 316,800 331,200 2,760,000 (d) (e) 360,000 683,000 136,000 (d) 1,117,000 701,000 (e) (f) 256,000 Instructions 1. Determine the amounts of the missing items, identifying them by letter. 2. Prepare a statement of cost of goods manufactured for Jerry Company 3. Prepare an income statement for Jerry Company,

Answer 1

1.

Tom Company :

a) Material inventory, December 31 = material purchased + Material Inventory ,December 1 -Cost of  material used in production = $475200+$187200-$501600 = $160800

b) Total manufacturing cost incurred in December = Cost of direct materials+Direct Labor+Factory Overhead = $501600+$705600+$218400 = $14256000

c) Cost of goods manufactured = Total manufacturing costs +Opening work in progress - Closing work in progress =$14256000+$360000-$302400 = $14313600

d) Cost of goods sold = Opening finished goods + cost of goods manufactured - closing finished goods = $316800+$14313600-$331200 = $1417200.

e) Gross Profit = Sales - cost of goods sold = $2760000 - $1417200 = $1342800

f) Net Income = Gross Profit - Operating expenses = $1342800- $ 360000 = $982800.

Jerry Company :

a) Cost of direct materials used in Production : Opening materials inventory +materials purchased - Closing Inventory = $118000+$228000-$120000 = $226000

b) Direct Labor : total manufacturing cost - cost of direct materials -factory overheads = $690000-$226000-$120000 = $344000

c) Work in progress inventory ,December 31 : Manufacturing costs+ Work in progress - Cost of goods manufactured = $985000+$295000-$683000 = $597000

d) Finished goods inventory , December 31: Cost of goods manufactured + Finished goods, December 1 - cost of goods sold = $683000+$136000-$701000 =$118000

e) Gross Profit : Sales - Cost of goods sold = $1117000-$701000 = $416000

f) Operating Income: Gross profit - Net Income = $416000-$256000 = $160000

2.

STATEMENT OF COST OF GOODS MANUFACTURED FOR THE MONTH ENDED DECEMBER 31, 2012
		$
work in process inventory		295000
Direct material:
material inventory, December 1,2012	118000
purchases	228000
cost of materials	346000
less: material inventory , December 31 , 2012	(120000)
Cost of materials in production	226000
Direct labor	344000
Factory OH	120000
Total manufacturing cost in December		690000
Total Manufacturing Cost		985000
less: Work in process December 31,2012		(597000)
Cost of goods manufactured		388000

3.

		$
sales		1117000
cost of goods sold
FG Dec,1,2012	136000
Cost of goods manufactured	683000
cost of finished goods	819000
less: FG Dec31,2012	(118000)
cost of goods sold		701000
Gross profit		416000
operating expenses		160000
Net income		256000