Question

Alexandria Aluminum Company, a manufacturer of recyclable soda cans, had the following inventory balances at the beginning and end of 20x1. Inventory Classification January 1, 20x1 December 31, 20x1 Raw material $ 60,000 $ 70,000 Work in process 120,000 115,000 Finished goods 140,000 165,000 During 20x1, the company purchased $240,000 of raw material and spent $400,000 on direct labor. Manufacturing overhead costs were as follows: Indirect material $ 10,000 Indirect labor 24,000 Depreciation on plant and equipment 100,000 Utilities 25,000 Other 30,000 Sales revenue was $1,113,000 for the year. Selling and administrative expenses for the year amounted to $110,000. The firm’s tax rate is 40 percent. 3. Prepare an income statement.

Answer 1

Alexandria Aluminum Company Schedule of Cost of Goods Manufactured For the Year Ended 12/31/X1 Direct Materials: Raw Materials, 1/1 Add: Materials Purchases 60,000 240,000 Materials Available for Use 300,000 Deduct: Raw Materials, 12/31 Direct Labor Manufacturing Overhead: Indirect Materials Indirect Labor Depreciation, Plant and Equipment 70,000 $ 230,000 400,000 10,000 24,000 100,000 Utilities 25,000 30,000 $ Other 189,000 Total Manufacturing Costs Add: Work in Process, 1/1 Deduct: Work in Process, 12/31 Cost of Goods Manufactured 819,000 120,000 $ 115,000 824,000 Alexandria Aluminum Company Schedule of Cost of Goods Sold For the Year Ended 12/31/X1 Finished Goods Inventory, 1/1 Add: Cost of Goods Manufactured Goods Available for Sale Deduct: Finished Goods Inventory, 12/31 140,000 824,000 964,000 165,000 Cost of Goods Sold 799,000

Alexandria Aluminum Company Income Statement For the Year Ended 12/31/X1 $ 1,113,000 Sales Revenue Less: Cost of Goods Sold 799,000 Gross Margin |Selling and Administrative Expenses Income before Income Tax Less: Income Tax Expense Net Income 314,000 110,000 204,000 81,600 122400