The following calendar year-end information is taken from the December 31, 2011, adjusted trial balance and other records of Firethorn Furniture.
Advertising expense | $ 22,250 | Director labor | $ 564,500 |
Depreciation expense–Office equipment | 10,440 | Income taxes expense | 138,700 |
Depreciation expense–Selling equipment | 12,125 | Indirect labor | 61,000 |
Depreciation expense–Factory equipment | 37,400 | Miscellaneous production costs | 10,440 |
Factory supervision | 123,500 | Office salaries expense | 72,875 |
Factory supplies used | 8,060 | Raw materials purchases | 896,375 |
Factory utilities | 39,500 | Rent expense–Office space | 25,625 |
Inventories |
| Rent expense—Selling space | 29,000 |
Raw materials, December 31,2010 | 42,375 | Rent expense–Factory building | 95,500 |
Raw materials, December 31,2011 | 72,430 | Maintenance expense–Factory equipment | 32,375 |
Goods in process, December 31,2010 | 14,500 | Sales | 5,002,000 |
Goods in process, December 31,2011 | 16,100 | Sales discounts | 59,375 |
Finished goods, December 31,2010 | 179,200 | Sales salaries expense | 297,300 |
Finished goods, December 31, 2011 | 143,750 |
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Required
1. Prepare the company’s 2011 manufacturing statement.
2. Prepare the company’s 2011 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.
Analysis Component
3. Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days’ sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory. (To compute turnover and days’ sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for differences between these ratios for the two types of inventories. Round answers to one decimal place.
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