Question

PROBLEMS Problem 6-1 (IAA) Masay Company provided the following information for 2019: Sales 7,500,000 Inventories - January 1: Raw materials 200,000 Goods in process 240,000 Finished goods 360,000 Inventories - December 31: Raw materials 280,000 Goods in process 170,000 Finished goods 300,000 Purchases 3,000,000 Direct labor 950,000 Indirect labor 250,000 Superintendence 210,000 Light, heat and power 320,000 Rent - factory building 120,000 Repair and maintenance - machinery 50,000 Factory supplies used 110,000 Sales salaries 400,000 Advertising 160,000 Depreciation - store equipment 70,000 Office salaries 150,000 Depreciation office equipment 40,000 Depreciation - machinery 60,000 Sales returns and allowances 50,000 Interest income 10,000 Gain on sale of equipment 100,000 Delivery expenses 200,000 Accounting and legal fees 150,000 Office expenses 250,000 Earthquake loss 300,000 Gain from expropriation of asset 100,000 Income tax expense 320,000 Required: a. Prepare a statement of cost of goods manufactured b. Prepare an income statement using the "cost of goods sold" method with supporting notes c. Prepare an income statement using the "nature of expense" method with supporting notes

Answer 1

1. Cost of goods manufactured includes all direct material and direct labour and manufacturing costs.
2. Under cost of goods sold method adjusting the opening d closing finished goods with cost of good manufactured we can get cost of goods sold
3. Under nature of expense method expenses are disclosed according to their categories they are spent on raw materials, labour, electricity, rents and repairs etc.
4. 
   cort of goods manufactured SA aliment of Particolau - Opening inventory - Sanrol Raw matiale Purclares - closing Inventory. Dec-31 Raw mature als + 200,000 30,00,000 (280,000) COST OF RAW MATERIAL USED 29,20,000 Direct Labour 990,000 COST 38,40,000 60,000 1 20,000 PRIME Manufacturing costs Applied - Depreciates on manf. equipment → Rent for factory building Repairs & maistenence Electricity Indirect labour Lactly supplies superintendence 50,000 3,20,000 2,00,000 1,10,000 2,10,ODD 11, 20,000 MANUFACTURING coss 419,90,000 240,000 wip opening invently wip closing invertly (190,000 COST OF GOODS MANUFACTURED 59, 60,000
   
   of consmethod Got Xchans 59, 60,000 4 kỳ, 4 xy o Income etalement Cost of goods manufactured opening finished goods e closing finished goods + + 3.60,000 gin Con (3oo, an) Profit Cost of Goods SOLD 5', 05,000 Con- sor -Income Parthe stalement asing nature of expense method Maray company Income staliment for the year end gola depre Particolau 900 Sales ( sale suton Expenses :- Con-2) 900,000 30,00,000 Ca 50,000 IT 1 1a0,000 120,000 19,60,000 opening lower they Puschale Closing coventoly Depre Galico Cont) Rent Expenses C salaries and sales expenses Repairs & maintenance Cun-2) Electicity Suppúe expenses Adverténg expenses & Other expenes (oon-3 fee 3,20,000 Corral 1,10, OVO 160, oro A500V 100,oo Accounting & tegal 320,00 [ Income tax expewes 6860, and Con prost befole che Bling lean & the income 599,00
   
   MRC bak seluas Edith quake loves sono (S്യമായ) 1000 Interest Income sale of equipment Crain from expropriation of Ques Profit 10,000 00, OVO 1 00,00 40,00 Atelind Con- & Depreciation Particolau depreciation for oppia equipment stolo equipment - machinery couro And 70, cuo 6o,cro 500 000 (50, ovo low,ovo (Wn-2) salaia & sales Expenses. Aut particolau s Direct labour Indirect labour supa intes deose lalu salaves office salaires 900,000 50,00 2,10,00 4,00,000 250,00 19,60,00 Con 3) Other Expenser Ance Particlay 200,00 Delivery expenses office expenses 239,010 450,000