Question

The following calendar year-end information istaken from the December 31, 2017, adjusted trial balance and other records of Leone Company Advertising expense Depreciation expense-Office equipment Depreciation expense-Selling equipment Depreciation expense-Factory equipment Factory supervision Factory supplies used Factory utilities Direct labor Indirect labor Miscellaneous production costs Office salaries expense Raw materials purchases* Rent exp Rent expense-Selling space Rent expense-Factory building Maintenance expense-Factory equipment Sales Sales salaries expense $30,250 9,500 9,900 37,550 108,360 8,850 37,500 693,000 74,200 8,875 65,200 935,000 29,800 30,900 76,800 38,100 4,712,500 402,160 ense Office space Assume that the raw materials inventory account is used only for direct materials. Indirect materials are recorded in a factory supplies account Required Classify each of the costs as either a product or period cost. Then, classify each of the product costs as either direct materials, direct labor, or factory overhead and each of the period costs as either selling or general and administrative expenses. (Leave no cell blank.) Product Cost or Period Cost Costs Type of Product Cost Type of Period Cost 1. Advertising expense 2. Depreciation expense-Office equipment 3. Depreciation expense-Selling equipment 4. Depreciation expense-Factory equipment 6. Factory supervision b. Factory supplies used 7. Factory utilities 8. Direct labor 9. Indirect labor 10 Miscellaneous production costs 11. Office salaries expense 12. Raw materials purchases 13. Rent expense-Office space 14. Rent expense-Selling space 15. Rent expense-Factory building 16. Maintenance expense-Factory equipment 17. Sales 18. Sales salaries expense The following calendar year-end information istaken from the December 31, 2017, adjusted trial balance and other records of Leone Company Advertising expense Depreciation expense-Office equipment Depreciation expense-Selling equipment Depreciation expense-Factory equipment Factory supervision Factory supplies used Factory utilities Inventories $27,700 Direct labor $680,50 8,100 Income taxes expense 236,100 57,50 10,100 70,000 978,000 23,00 29,000 77,900 37,900 9,500 Indirect labor 33,200 Miscellaneous production costs 122,900 Office salaries expense 8,100 Raw materials purchases 32,000 Rent expense-Office space Rent expense-Selling space Raw materials, December 31, 2016 Raw materials, December 31, 2017 Work in process, December 31, 2016 Work in process, December 31, 2017 Finished goods, December 31, 2016 Finished goods, December 31, 2017 159,300 Rent expense-Factory building 189,000 Maintenance expense-Factory equipment 15,100 Sales 23,700 Sales salaries expense 4,485,40 394,200 161,700e 138,400 LEONE COMPANY Schedule of Cost of Goods Manufactured For Year Ended December 31, 2017 Direct materials Raw materials available for use Direct materials used Factory overhead Total factory overhead costs Total manufacturing costs Total cost of work in process Cost of goods manufactured The following calendar year-end information istaken from the December 31, 2017, adjusted trial balance and other records of Leone Company. Advertising expense Depreciation expense-Office equipment Depreciation expense-Selling equipment Depreciation expense-Factory equipment Factory supervision Factory supplies used Factory utilities Inventories $27,700 Direct labor $680,50 8,100 Income taxes expense 236,100 57,500 10,100 70,000 978,000 23,000 29,000 77,900 37,900 9,500 Indirect labor 33,200 Miscellaneous production costs 122,900 Office salaries expense 8,100 Raw materials purchases 32,000 Rent expense-Office space Rent expense-Selling space Raw materials, December 31, 2016 Raw materials, December 31, 2017 Work in process, December 31, 2016 Work in process, December 31, 2017 Finished goods, December 31, 2016 Finished goods, December 31, 2017 159,300 Rent expense-Factory building 189,000 Maintenance expense-Factory equipment 15,100 Sales 23,700 Sales salaries expense 4,485,40 394,200 161,700 138,400 LEONE COMPANY Income Statement For Year Ended December 31, 2017 Cost of goods sold Goods available for sale Cost of goods sold Operating expenses Selling expenses Total selling expenses General and administrative expenses Total general and administrative expenses Total operating expenses Income before taxes Net income

Answer 1

Part 1

	costs	Product cost or period cost	Type of product cost	Type of period cost
1	Advertising expense	Period cost	NA - Not a product cost	Selling expenses
2	Depreciation expense—Office equipment	Period cost	NA - Not a product cost	General and Administrative expenses
3	Depreciation expense—Selling equipment	Period cost	NA - Not a product cost	Selling expenses
4	Depreciation expense—Factory equipment	Product cost	Factory Overhead	NA - Not a period cost
5	Factory supervision	Product cost	Factory Overhead	NA - Not a period cost
6	Factory supplies used	Product cost	Factory Overhead	NA - Not a period cost
7	Factory utilities	Product cost	Factory Overhead	NA - Not a period cost
8	Direct labor	Product cost	Direct labor	NA - Not a period cost
9	Indirect labor	Product cost	Factory Overhead	NA - Not a period cost
10	Miscellaneous production costs	Product cost	Factory Overhead	NA - Not a period cost
11	Office salaries expense	Period cost	NA - Not a product cost	General and Administrative expenses
12	Raw materials purchases	Product cost	Direct materials	NA - Not a period cost
13	Rent expense—Office space	Period cost	NA - Not a product cost	General and Administrative expenses
14	Rent expense—Selling space	Period cost	NA - Not a product cost	Selling expenses
15	Rent expense—Factory building	Product cost	Factory Overhead	NA - Not a period cost
16	Maintenance expense—Factory equipment	Product cost	Factory Overhead	NA - Not a period cost
17	Sales	Neither	NA - Not a product cost	NA - Not a period cost
18	Sales salaries expense	Period cost	NA - Not a product cost	Selling expenses

Part 2

LEONE COMPANY

Schedule of cost of goods manufactured

For the year ended December 31, 2017

Direct materials
Raw materials inventory, December 31, 2016	159300
Raw materials purchases	978000
Raw materials available for use	1137300
Less: raw materials inventory, December 31, 2017	189000
Direct materials used		948300
Direct labor		680500
Factory overhead
Indirect labor	57500
Factory supplies used	8100
Factory utilities	32000
Factory supervision	122900
Maintenance expense – factory equipment	37900
Depreciation expense – factory equipment	33200
Miscellaneous production costs	10100
Rent expense-factory building	77900
Total factory overhead costs		379600
Total manufacturing costs		2008400
Add: work in process inventory, December 31, 2016		15100
Total cost work in process		2023500
Less: work in process inventory, December 31, 2017		23700
Cost of goods manufactured		1999800

LEONE COMPANY

Income statement

For the year ended December 31, 2017

Sales		4485400
Cost of goods sold
Cost of goods manufactured	1999800
Finished goods inventory, december 31, 2016	161700
Goods available for sale	2161500
Less: Finished goods inventory, december 31, 2017	138400
Cost of goods sold		2023100
Gross profit from sales		2462300
Operating expenses
Selling expenses
Depreciation expense – selling equipment	9500
Rent expense – selling expense	29000
Sales salaries expense	394200
Advertising expense	27700
Total selling expense	460400
General and administrative expense
Depreciation expense – office equipment	8100
Office salaries expense	70000
Rent expense – office space	23000
Total general and administrative expenses	101100
Total operating expenses		561500
Income before taxes		1900800
Income taxes expense		236100
Net income		1664700