Income Statement and Supporting Schedules. The following financial information i
ID: 2417473 • Letter: I
Question
Income Statement and Supporting Schedules. The following financial information is for Industrial Company. (Note that the most current financial information is presented in the first column.)
December 31, 2011
December 31, 2010
Raw materials inventory
$ 24,000
$ 30,000
Work-in-process inventory
1,800,000
1,650,000
Finished goods inventory
1,050,000
1,230,000
Of the total raw materials placed in production for the year, $36,000 was for indirect materials. Industrial had $3,795,000 in sales for the year ended December 31, 2011. The company also had the following costs for the year:
Selling
$ 270,000
General and administrative
$ 720,000
Raw materials purchases
$ 300,000
Direct labor used in production
$ 375,000
Manufacturing overhead
$1,890,000
Required:
a. Prepare a schedule of raw materials placed in production for the year ended December 31, 2011.
b Prepare a schedule of cost of goods manufactured for the year ended December 31, 2011.
c.Prepare a schedule of cost of goods sold for the year ended December 31, 2011.
d. Prepare an income statement for the year ended December 31, 2011.
e Describe the three types of costs included in cost of goods sold on the income statement. (Dollar amounts are not necessary in your descriptions.)
please show all calculations and explanations
Please properly mark the solution number
December 31, 2011
December 31, 2010
Raw materials inventory
$ 24,000
$ 30,000
Work-in-process inventory
1,800,000
1,650,000
Finished goods inventory
1,050,000
1,230,000
Explanation / Answer
All amounts in $ a. Schedule of Raw Materials Placed in Production for the year ended December 31, 2011 Opening Balance of Raw Materials Inventory as on January 1, 2011 30000 Raw Materials Purchased during the year 300000 330000 Closing Balance of Raw Materials Inventory as on December 31, 2011 24000 Raw Materials Placed in Production 306000 Less : Indirect Materials as given 36000 Direct Raw Materials Placed in Production 270000 b. Schedule of Cost of Goods Manufactured for the year ended December 31, 2011 Opening Balance of WIP Inventory as on January 1, 2011 1650000 Add : Used in Production Direct Materials (from a above) 270000 Direct Labor 375000 Manufacturing Overhead 1890000 2535000 4185000 Closing Balance of WIP Inventory as on December 31, 2011 1800000 Cost of Goods Manufactured 2385000 c. Schedule of Cost of Goods Sold for the year ended December 31, 2011 Opening Balance of FG Inventory as on January 1, 2011 1230000 Cost of Goods Manufactured 2385000 Selling Expenses 270000 Indirect Material Cost 36000 2691000 3921000 Closing Balance of FG Inventory as on December 31, 2011 1050000 Cost of Goods Sold 2871000 d. Income Statement Sales 3795000 Cost of Goods Sold 2871000 Gross Margin 924000 Less : General and Administrative Expenses 720000 Net Margin 204000 e. The three costs included while calculating the Cost of Goods Sold include : Cost of Goods Manufactured - Costs incurred for getting the goods in a saleable condition. Indirect Materials Cost - Cost of Materials not directly involved in production ; however, necessary to get the goods ready for sale. Selling Expenses - Marketing expenses incurred in order to promote the sale of the goods, forming a part of the cost of sales.