Question

Presented below is selected information from the Larry Company’s current period accounting records:

Sales		$12,000
Raw Materials Used		2,500
Direct labor		3,000
Allocated overhead Selling and Administrative		4,500 2,500
Beginning Raw Material Inventory		300
Ending Raw Material Inventory		1,000
Beginning Work-in-Process Inventory		800
Ending Work-in-Process Inventory		300
Beginning Finished Goods Inventory		700
Ending Finished Goods Inventory		400

Required:

1. Prepare statement of cost of goods manufactured in good form.
2. Prepare income statement in good form (ignore income tax expense).

Answer 1

.

Larry Company
Schedule of Cost of Goods Manufactured
Direct Materials:
Beginning raw materials inventory	$300
Add: Purchases of raw materials              [Refer above working note]	$3,200
Total raw materials inventory available for consumption	$3,500
Less: Ending raw materials inventory	$1,000
Raw Materials used in Production		$2,500
Direct labor		$3,000
Manufacturing Overhead / Allocated overhead		$4,500
Total manufacturing costs		$10,000
Add: Beginning Work in Process inventory		$800
Total Cost of work in Process		$10,800
Less: Ending Work in process inventory		$300
Cost of Goods Manufactured		$10,500

.

.

Larry Company
Income Statement
Sales		$12,000
Cost of Goods Sold
Beginning Finished goods inventory	$700
Add: Cost of Goods Manufactured            (Calculated above)	$10,500
Total Cost of Goods available for sale	$11,200
Less: Ending Finished goods inventory	$400
Cost of Goods Sold		$10,800
Gross Margin         [Sales - Cost of Goods Sold]		$1,200
Selling and Administrative Expenses		$2,500
Operating loss / Net loss		($1,300)