Question

Consider the following information for Fair Wind Yachts Inc.. a manufacturer of sailboat rigging, blocks, and cordage. Advertising expenses Depreciation expense-administrative office Depreciation expense-plant and equipment Depreciation expense-delivery trucks Materials inventory, beginning Materials inventory, ending Direct materials purchases 155,5e0 77,288 325, 500 48,850 21,500 26,25e 437,508 534, eee 280,eee 56,10e 45, 200 35, 300 24,200 38,750 99,650 133,10e 79,650 33,750 41,200 327,75e 2,999, eee Direct labor Indirect labor Finished goods inventory, beginning Finished goods inventory, ending Insurance on plant Heat and light for plant Repairs on plant building Supervisor's salary-plant Supplies-plant Supplies-administrative office Work-in-process inventory, beginning Work-in-process inventory, ending Sales representatives' salaries Sales revenue Required: Prepare a statement of cost of goods manufactured and an income statement for Fair Wind Yachts for the year ended December 31

Answer 1

Ans. 1	Fair Wind Yachts
	Schedule of Cost of Goods Manufactured
	For the Year Ended December 31
	Particulars	Amount	Amount
	Direct materials
	Beginning raw materials inventory	$21,500
	Add: Purchase of direct materials	$437,500
	Raw materials available	$459,000
	Less: Ending raw materials inventory	-$26,250
	Direct materials used (A)		$432,750
	Direct labor (B)		$534,000
	Manufacturing overhead applied:
	Indirect labor	$280,000
	Depreciation expense - plant and equipment	$325,500
	Insurance on plant	$35,300
	Heat and light for plant	$24,200
	Repairs on plant building	$38,750
	Supervisor's salary - plant	$99,650
	Supplies - plant	$133,100
	Total manufacturing overhead ©		$936,500
	Total manufacturing costs (A+B+C)		$1,903,250
	Add: Beginning Work in process inventory		$33,750
	Less: Ending Work in process inventory		-$41,200
	Cost of goods manufactured		$1,895,800
	*All manufacturing costs are listed under cost of goods manufactured statement.
Ans. 2	Fair Wind Yachts
	Income Statement
	For Year Ended December 31
	Particulars	Amount	Amount
	Sales revenue		$2,999,000
	Less: Cost of goods sold:
	Cost of Goods Manufactured	$1,895,800
	Add: Beginning finished goods inventory	$56,100
	Cost of goods available for sale	$1,951,900
	Less: Ending finished goods inventory	-$45,200
	Cost of goods sold		$1,906,700
	Gross margin		$1,092,300
	Less: Selling and Administrative expenses:
	Advertising expenses	$155,500
	Depreciation expense - administrative office	$77,200
	Depreciation expense - delivery trucks	$48,850
	Supplies - administrative office	$79,650
	Sales representatives' salaries	$327,750
	Total Selling and Administrative expenses		$688,950
	Operating Income		$403,350
	*Selling, administrative, office and general expenses are operating expenses so
	these are listed in income statement.