Question

Exercise 14.9 Preparing financial statements for a manufacturer LO C4, P2

Required:

1. Prepare income statements for both Garcon Company and Pepper Company.

2. Prepare the current assets section of the balance sheet for each company.

Answer 1

Answer:

	Details as given
	Description	Garcon Company	Pepper Company
	Beginning finished goods inventory	$12,100	$17,350
	Beginning work in process inventory	$15,200	$20,250
	Beginning raw materials inventory	$11,000	$13,050
	Rental cost on factory equipment	$34,250	$26,500
	Direct labor	$20,800	$36,600
	Ending finished goods inventory	$20,150	$14,100
	Ending work in process inventory	$26,500	$18,800
	Ending raw materials inventory	$6,200	$9,400
	Factory utilities	$10,800	$12,500
	Factory supplies used	$9,100	$4,800
	General and administrative expenses	$23,000	$49,500
	Indirect labor	$2,150	$7,900
	Repairs-Factory equipment	$7,580	$2,450
	Raw materials purchases	$38,000	$57,500
	Selling expenses	$59,600	$55,300
	Sales	$2,19,030	$3,47,510
	Cash	$23,000	$18,200
	Factory equipment, net	$2,37,500	$1,57,825
	Accounts receivable, net	$16,600	$24,200
Calculation of Cost of Goods Sold
Sl. No.	Description	Garcon Company	Pepper Company
	Direct Materials
1	Beginning raw materials inventory	$11,000	$13,050
2	Add:Raw materials purchases	$38,000	$57,500
3	Less:Ending raw materials inventory	$6,200	$9,400
4	Direct Materials (1+2-3)	$42,800	$61,150
5	Direct labor	$20,800	$36,600
6	Factory Overhead
7	Rental cost on factory equipment	$34,250	$26,500
8	Factory utilities	$10,800	$12,500
9	Factory supplies used	$9,100	$4,800
10	Indirect labor	$2,150	$7,900
11	Repairs-Factory equipment	$7,580	$2,450
12	Total Factory Overhead (7 to 11)	$63,880	$54,150
13	Total Manufacturing Cost (4+5+12)	$1,27,480	$1,51,900
14	Add:Beginning work in process inventory	$15,200	$20,250
15	Total Cost of work in process (13+14)	$1,42,680	$1,72,150
16	Less:Ending work in process inventory	$26,500	$18,800
17	Cost of goods manufactured (15-16)	$1,16,180	$1,53,350
18	Beginning finished goods inventory	$12,100	$17,350
19	Cost of goods available for sale (17+18)	$1,28,280	$1,70,700
20	Less:Ending finished goods inventory	$20,150	$14,100
21	Cost of goods sold	$1,08,130	$1,56,600
	1. Prepare income statements for both Garcon Company and Pepper Company.
	Answer:
	Garcon Company
	Income Statement
	For Year Ended December 31, 2019
	Sales	$2,19,030
	less:Cost of goods sold	$1,08,130
	Gross Profit		$1,10,900
	Less: Operating expense:
	General & administrative expense	$23,000
	Selling expense	$59,600	$82,600
	Income before tax		$28,300
	Pepper Company
	Income Statement
	For Year Ended December 31, 2019
	Sales	$3,47,510
	less:Cost of goods sold	$1,56,600
	Gross Profit		$1,90,910
	Less: Operating expense:
	General & administrative expense	$49,500
	Selling expense	$55,300	$1,04,800
	Income before tax		$86,110
	2. Prepare the current assets section of the balance sheet for each company.
	Answer:
	Garcon Company
	Partial Balance Sheet
	As of December 31, 2019
	Cash		$23,000
	Accounts receivable,net		$16,600
	Inventories
	Ending raw materials inventory	$6,200
	Ending work in process inventory	$26,500
	Ending finished goods inventory	$20,150	$52,850
	Total current assets		$92,450
	Pepper Company
	Partial Balance Sheet
	As of December 31, 2019
	Cash		$18,200
	Accounts receivable,net		$24,200
	Inventories
	Ending raw materials inventory	$9,400
	Ending work in process inventory	$18,800
	Ending finished goods inventory	$14,100	$42,300
	Total current assets		$84,700