Question

$ 85 112 1,630 Information on January 1 (Beginning): Direct materials inventory Work-in-process inventory Finished goods inventory Information for the year: Administrative costs Direct labor Direct materials purchases Factory and machine depreciation Factory supervision Factory utilities Indirect factory labor Indirect materials and supplies Marketing costs Property taxes on factory Sales revenue Information on December 31 (Ending): Direct materials inventory Work-in-process inventory Finished goods inventory $ 3,660 12,950 8, 250 11,500 750 953 2,890 676 1,510 272 45,800 99 142 1,430 Required: 1. Prepare a cost of goods sold statement 2. Prepare an income statement. Complete this question by entering your answers in the tabs below.

Answer 1

Cost of goods sold is the cost of manufacturing the product sold by a company during a particular period. It includes the production costs like, direct materials, direct labor and manufacturing overhead.
Cost of goods sold is calculated by adding the cost of goods manufactured to the value of beginning finished goods inventory and by reducing the ending finished goods inventory.

An income statement is prepared to ascertain the net income or loss earned by the business by differentiating revenues with expenses.

1. & 2.

Statement of cost of goods sold for the year ended December, 31. Beginning Finished Goods Add: Cost of goods manufactured Cost of goods available for sale Less: Ending Finished Goods Adjusted Cost of goods sold $1,630 38,197 $39,827 -1,430 $38,397 Income Statement for the year ended December, 31 $45,800 -38,397 $7,403 Sales Revenue Less: Cost of goods sold Gross Margin Less: Administrative costs Marketing costs Total marketing and administrative costs Operating profit $3,660 1,510 $5,170 $2,233

Working note:

SCHEDULE OF COST OF GOODS MANUFACTURED FOR YEAR ENDED DECEMBER 31 Direct materials: Beginning Raw Materials Inventory $85 Add: Raw materials purchases 8,250 Raw materials available for use 8,335 Less: Ending raw materials inventory -99 Direct materials used $8,236 Direct labor 12,950 Factory overhead: Factory and machine depreciation 11,500 Factory supervision 750 Factory Utilities 953 Indirect factory labor 2,890 Indirect materials and supplies 676 Property taxes on factory 272 Total factory overhead costs 17,041 Total manufacturing costs $38,227 Add: Beginning Work in process inventory 112 Total cost of work in process $38,339 Less: Ending Work in process inventory -142 Cost of goods manufactured $38,197