Question

Exercise 18-9 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

	Garcon	Pepper
Beginning raw material inventory	$9,300	$11,550
Add: Raw material purchases	43,500	62,500
Ending raw material inventory	(6,800)	(7,400)
Direct material	46,000	66,650
Direct labor	21,600	43,000
Factory overhead:
Rental cost on factory equipment	32,500	24,700
Factory utilities	9,900	16,000
Factory supplies used	13,600	4,900
Indirect labor	2,400	8,860
Repairs-Factory equipment	6,860	2,850
Total manufacturing costs	132,860	166,960
Beginning work in process inventory	15,100	20,400
Ending work in process inventory	(23,200)	(17,600)
Cost of goods manufactured	124,760	169,760
Beginning finished goods inventory	12,400	17,050
Ending finished goods inventory	(18,800)	(14,600)
Cost of goods sold	$118,360	$172,210

1.

GARCON COMPANY Income Statement For Year Ende December 31, 2019
Sales	$238,530
Cost of goods sold	118,360
Gross margin	120,170
Operating expenses:
General and administrative expenses	23,500
Selling expenses	52,000
Total operating expenses	75,500
Income (loss) before tax	$44,670

PEPPER COMPANY Income Statement For Year Ende December 31, 2019
Sales	$315,010
Cost of goods sold	172,210
Gross margin	142,800
Operating expenses:
General and administrative expenses	50,500
Selling expenses	55,300
Total operating expenses	105,800
Income (loss) before tax	$37,000

2.

GARCON COMPANY Partial Balance Sheet As of December 31, 2019
Cash		$24,000
Accounts receivable, net		17,000
Inventories:
Raw material inventory	$6,800
Work in process inventory	23,200
Finished goods inventory	18,800
Total inventories		48,800
Total current assets		$89,800

PEPPER COMPANY Partial Balance Sheet As of December 31, 2019
Cash		$23,200
Accounts receivable, net		20,450
Inventories:
Raw material inventory	$7,400
Work in process inventory	17,600
Finished goods inventory	14,600
Total inventories		39,600
Total current assets		$83,250