Question

ADM2341 Managerial Accounting Fall 2009

Chapter 2 Capstone Problem

The managerial accountants at Haldimand Manufacturing Company were in the process of preparing the statement of cost of goods sold manufactured and sold for the year ended December 31, 2008, when a fire in the accounting office destroyed all of the information relating to the credits associated with the inventory accounts. Fortunately, the debit information was available and is listed below:

Purchases of direct materials	$140,000
Total manufacturing costs incurred	550,000
Cost of goods manufactured	600,000
Cost of Goods Sold	650,000

Direct materials inventory	$35,000
Work in progress inventory	75,000
Finished goods inventory	175,000

While the debit information is useful, Leslie, one of the older and wiser managerial accountants, reminded everyone that this was insufficient to prepare a statement of cost of goods sold. Nicky, a recently hired managerial accountant finally realized that he was sitting on important data, last year's annual report for 2007. He realized that the inventory values would be on the balance sheet. Nicky opened the report and read the balance sheet information relating to inventories. The inventory values for December 31, 2007, are listed below:

Direct materials inventory	$35,000
Work in progress inventory	75,000
Finished goods inventory	175,000

Leslie, the old and wise managerial accountant, again reminded the staff that this was insufficient data to prepare a statement of cost of goods sold. Nicky, the recently hired managerial accountant, had been working on the manufacturing costs for 2008 and remembered that direct labour amounted to 36 percent of the total manufacturing costs incurred and was 80 percent of the manufacturing overhead costs. Leslie smiled and said ''This might be sufficient information to prepare the statement of cost of goods sold''. Nicky said ''What about the ending inventory values?''. Leslie responded ''You can calculate those!''

REQUIRED:

1. Calculating the ending inventory values for HALDIMAND Manufacturing Company.

2. Prepare a Statement of Cost of Goods Manufactured and Sold for the year ending December 31, 2008.

Answer 1