Question

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The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Leone Company.
   

Advertising expense	$	30,600		Direct labor	$	677,100
Depreciation expense—Office equipment		9,800		Income taxes expense		259,700
Depreciation expense—Selling equipment		9,900		Indirect labor		59,800
Depreciation expense—Factory equipment		36,500		Miscellaneous production costs		11,400
Factory supervision		105,700		Office salaries expense		63,000
Factory supplies used		9,100		Raw materials purchases		943,000
Factory utilities		44,000		Rent expense—Office space		22,000
Inventories				Rent expense—Selling space		28,300
Raw materials, December 31, 2016		151,100		Rent expense—Factory building		76,700
Raw materials, December 31, 2017		188,000		Maintenance expense—Factory equipment		35,300
Work in process, December 31, 2016		17,500		Sales		4,546,900
Work in process, December 31, 2017		19,400		Sales salaries expense		394,400
Finished goods, December 31, 2016		167,300
Finished goods, December 31, 2017		136,100

2. Prepare the company’s 2017 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.
  

LEONE COMPANY Income Statement For Year Ended December 31, 2017 Cost of goods sold Goods available for sale Cost of goods sold Operating expenses Selling expenses Total selling expenses General and administrative expenses Total general and administrative expenses Total operating expenses Income before taxes Net income

Answer 1

First, we have to calculate cost of goods manufactured.

Schedule of cost of goods manufactured
for year ended December 31, 2017
Direct Meterial
Beginning raw meterial inventory		151,100
Add: Purchase of raw meterial		943,000
Raw meterials available for production		1,094,100
Less: Ending raw meterial inventory		188,000
Raw meterials transferred to production		906,100
Direct Labour		67,100
Factory overhead
Depreciation expenses - Factory equipment	36,500
Factory supervision	105,700
Factory supplies used	9,100
Factory utilities	44,000
Indirect Labour	59,800
Misc. production cost	11,400
Rent expense - factory building	76,700
Maintenance expense - factory equipment	35,300
		378,500
Total Manufactoring Cost		1,351,700
Add:Beginning work in progress inventory		17,500
Less: Ending work in progress inventory		19,400
Cost of goods manufactured		1,349,800

Now we can go for income statement

Leone Company
Income statement
for year ended December 31, 2017
Sales		$ 4,546,900
Less: Cost of goods sold
Beginning finished goods inventory	$     167,300
Add: Cost of goods manufactured	$ 1,349,800
Less: Ending finished goods inventory	$     136,100
		$ 1,381,000
Gross Profit		$ 3,165,900
Operating expense
Selling expenses
Advertising expense	$        30,600
Depreciation expense - selling equipment	$          9,900
Rent expense - selling space	$        28,300
Sales salaries expense	$     394,400
Total selling expenses	$     463,200
General and administrative expenses
Depreciation expense - Office equipment	$          9,800
Office salaries expenses	$        63,000
Rent expense - office space	$        22,000
Total General and administrative expenses	$        94,800
Total operating expenses		$     558,000
Income before income tax		$ 2,607,900
Income tax expenses		$     259,700
Net Income		$ 2,348,200

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