Question

An accountant for Lisbon Company, prepared the following amounts to include on the financial statements for the period ending September 30, 2021. Include calculation/formula. Sales Purchases of materials Manufacturing labor Advertising Administrative travel Manufacturing utilities Facility rental Depreciation Sales commissions Insurance Office utilities Management salaries 1,200,000 250,000 270,000 37,000 27,000 49,000 90,000 60,000 31,000 40,000 25,000 380,000 • The purchase of materials included 20% indirect materials. 40% of the manufacturing labor was for indirect manufacturing labor The facility was used partly for the sales and administrative team (20%) 30% of the depreciation expense was related to delivery trucks 60% of the insurance relates to manufacturing activities 40% of the management salaries relate to manufacturing activities Furthermore, the accountant compiled the following information with respect to inventories for the period (note that the company does not maintain inventories of indirect materials). Direct materials Work-in-progress Finished goods Beginning 6,000 9,000 11,000 Ending 8,000 10,000 7,000 Required: 1. Prepare a cost of goods manufactured statement for the period. 2. Prepare an income statement for the period

Answer 1

1.Cost of Goods Manufactured:

Particulars	Amount	Amount
Direct Material:
Beginning Inventory	$       6,000.00
Add: Purchases (250000*80%)	$ 2,00,000.00
Less: Ending Inventory	$       8,000.00	$ 1,98,000.00
Direct Labor (270000*60%)		$ 1,62,000.00
Manufacturing/Factory Overhead:
Indirect Material (250000*20%)	$     50,000.00
Indirect Labor (270000*40%)	$ 1,08,000.00
Facility Rental (90000*80%)	$     72,000.00
Depreciation (60000*70%)	$     42,000.00
Insurance (40000*60%)	$     24,000.00
Management Salaries (380000*40%)	$ 1,52,000.00
Manufacturing Utilities	$     49,000.00	$ 4,97,000.00
Total Manufacturing Costs		$ 8,57,000.00
Add: Opening WIP	$       9,000.00
Less: Closing WIP	$     10,000.00	$     -1,000.00
Cost of Goods Manufactured		$ 8,56,000.00
Add: Opening Finished Goods	$     11,000.00
Less: Closing Finished Goods	$       7,000.00	$       4,000.00
Cost of Goods Sold		$ 8,60,000.00

2. Income Statement:

Particulars	Amount	Amount
Sales		$ 12,00,000.00
Cost of Goods Sold		$    8,60,000.00
Gross Profit		$    3,40,000.00
Expenses:
Advertising	$     37,000.00
Administrative Travel	$     27,000.00
Facility Rental (90000*20%)	$     18,000.00
Depreciation (60000*30%)	$     18,000.00
Sales Commissions	$     31,000.00
Insurance (40000*40%)	$     16,000.00
Office Utilities	$     25,000.00
Management Salaries (380000*60%)	$ 2,28,000.00	$    4,00,000.00
Net Profit		$      -60,000.00