Question

Below is the financial data of FIT Corp. at the end of January 31, 2020. Prepare a traditional income statement. Show your calculations of the numbers that are not directly given.

1. Direct Materials used      $70k
2. Direct labor hour recorded:    1600
3. Average DL hourly pay:   $35
4. Applied Overhead   $50k
5. Work In Process (WIP), Jan.1, 2020        $20k
6. WIP, Jan.31, 2020                    $10k
7. Finished Goods Inventory, Jan. 1, 2020 $40k
8. Finished Goods Inv., Jan. 31, 2020 $30k
9. Other expenses paid for during January are:
10. Salesmen, executives, and other corporate employees salary and bonuses $100k
11. New vehicle bought on credit and put in use on 1/1/2020. $24k, 10 years life
12. Rent and utilities paid for the first quarter    $33k
13. Shipped products $800k
14. Collected payment $600k
15. No interest payment made. Tax rate is 21%

Please show the calculations please, thank you!

Answer 1

Given data:

Direct Materials used      $70k

Direct labor hour recorded:    1600

Average DL hourly pay:   $35

Applied Overhead   $50k

Work In Process (WIP), Jan.1, 2020        $20k

WIP, Jan.31, 2020                    $10k

Finished Goods Inventory, Jan. 1, 2020 $40k

Finished Goods Inv., Jan. 31, 2020 $30k

Other expenses paid for during January are:

Salesmen, executives, and other corporate employees salary and bonuses $100k

New vehicle bought on credit and put in use on 1/1/2020. $24k, 10 years life

Rent and utilities paid for the first quarter    $33k

Shipped products $800k

Collected payment $600k

No interest payment made. Tax rate is 21%

.

Traditional income statement

at the end of January 31, 2020

Sales revenue	$800 K
Less: Cost of goods sold	$196 k
Gross profit	$604 k
Less: operating expenses	$333 k
Operating profit	$271 k
Tax expenses	$56.91 k
Net income	$214.09 K

.

Working note:-

Sales revenue = Shipped products $800k

Cost of goods sold calculation:

Direct Materials used	$70 k
Direct labor cost ( 1600 * 35 )	56 k
Applied Overhead	50 k
Total manufacturing cost	$176
Add: Beginning work in process	20 K
Less: ending work in process	10 k
Cost of goods manufactured	$186 k
Add: Beginning Finished Goods Inventory	40 k
Less: Ending Finished Goods Inventory	30 k
Cost of goods sold	$196 k

.

Operating expenses

Salesmen, executives, and other corporate employees salary and bonuses $100k

.

New vehicle bought on credit and put in use on 1/1/2020. $24k, 10 years life

Depreciation expenses = 24000 / 10 = 2400 for one year, so, for 1 month = 2400 / 12 = 200 k

.

Rent and utilities paid for the first quarter    $33k

For 1^st month , Jan = 33 / 3 = 11 k

.

Operating expenses = 100 + 200 + 33 = $333 k

.

Tax expenses = 21% of operating profit = 271 k * 21% = 56.91 k

.

Net income = operating profit - Tax expenses = 271 k - 56.91 k = $214.09