Question

Problem 2-44A

Tombert Company is a manufacturer of computers. Its controller resigned in October 2016. An inexperienced assistant accountant has prepared the following income statement for the month of October 2016.

TOMBERT COMPANY Income Statement For the Month Ended October 31, 2016
Sales (net)				$ 782,700
Less: Operating expenses
Raw materials purchases		$264,550
Direct labour cost		190,800
Advertising expense		89,900
Selling and administrative salaries		74,950
Rent on factory facilities		60,600
Depreciation on sales equipment		44,850
Depreciation on factory equipment		31,700
Indirect labour cost		28,450
Utilities expense		12,800
Insurance expense		8,750		807,350
Net Loss				$(24,650)

Prior to October 2016, the company had been profitable every month. The company’s president is concerned about the accuracy of the income statement. As his friend, he has asked you to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired the following additional information.

1. Inventory balances at the beginning and end of October were as follows:

		October 1		October 31
Raw materials		$15,800		$29,650
Work in process		16,350		14,800
Finished goods		30,500		45,950

2. Only 73% of the utilities expense and 53% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.

Calculate the following:

Question follows: Please fill in the blanks

Prepare a schedule of the cost of goods manufactured for October 2016. (Round answers to 0 decimal places, e.g. 125.) TOMBERT COMPANY Cost of Goods Manufactured Schedule For the Month Ended October 31, 2016

Prepare a correct income statement for October 2016. (Round answers to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

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Answer 1

16350 250,700 190,800 Tombart Company COST OF GOODS MANUFACTURED SCHEDULE For The Month October 31,2016 Work in process, October 1 Direct material: Raw-material inventory, October 1 15,800 Add: Purchases of raw material 264,550 Raw material available for use 280,350 less: Raw-material inventory, October 31 29,650 Direct material used Direct labor Manufacturing overheads Rent on Factory Utility 60,600 Depreciation on factory equipment 31,700 Indirect Labor 28,450 Utilities expense 9,344 Insurance expense 4,638 Total Manufacturing Overheads Total manufacturing costs Total Cost of Work in Process Less; Work-in-process, October 31 Cost of Goods Manufactured 134,732 576,232 592,582 14,800 577,782 84

86 Tombart Company Income Statement For The Month October 31, 2016 Sales 782,700 Cost of Goods Sold finished goods inventory, October 1 30,500 Cost of goods manufactured 577,782 Cost of goods available for sale 608,282 Less finished goods inventory, October 31 45,950 Cost of goods sold 562,332 Gross Profit 220,369 Operating Expenses Advertising Expense 89,900 Selling and administrative salaries 74,950 Depreciation on sales equipment 31,700 Utilities expense 3,456 Insurance expense 4,113 Total Operating Expenes 204,119 Net Income 16,250 100 103 104 105