Question

Exercise 3-6 Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement [LO3-3] The following data from the just completed year are taken from the accounting records of Mason Company: Sales Direct labor cost Raw material purchases Selling expenses Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead costs $524,000 $ 70,000 $118,000 $140,000 $ 63,000 $ 90,000 $ 80,000 Inventories Raw materials Work in process Finished goods Beginning $ 7,000 $ 10,000 $ 20,000 Ending $ 15,000 $ 5,000 $ 35,000 Required: 1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials. 2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. 3. Prepare an income statement.

Answer 1

1.Schedule of Cost of goods manufactured

Particulars	Amount($)	Amount($)
Opening Stock of Raw materials	7,000
Add: Raw material purchased	1,18,000
Less: Closing Stock of Raw materials	(15,000)
Direct materials used		1,10,000
Direct Labor		70,000
Manufacturing Overheads		90,000
Total Manufacturing costs		2,70,000
Add: Opening balance of WIP		10,000
Less: Closing balance of WIP		(5,000)
Cost of goods manufactured		2,75,000

2. Cost of Goods Sold Schedule

Particulars	Amount($)
Opening balance of Finished goods	20,000
Add: Cost of goods manufactured	2,75,000
Less: Closing balance of finished goods	(35,000)
COGS(not adjusted)	2,60,000
Less: Over applied manufacturing Overheads	(10,000)
COGS(Adjusted)	2,50,000

3. Income statement

Sales	5,24,000
Less:COGS	(2,50,000)
Gross Profit	2,74,000
Less:Selling expenses	(1,40,000)
Less:Administrative expenses	(63,000)
Net Income	$71,000