Question

1. Calvin’s Clothing, a retailer, had the following account balances for the month of September. Prepare an Income statement for Calvin. Ignore income taxes.

Sales Revenue $400,000

Cost of Goods Sold 240,000

Salaries Expense 10,000

Utilities Expense 1,000

Sales Commissions 4,000

Inventory Purchases 27,000

Rent Revenue 12,000

Interest Expense 2,000

2. Hank’s Home Improvement, provides home improvement services, had the following account balances for the month of July. Prepare an Income Statement for Hank. Ignore income taxes.

Service Revenue $200,000

Office Supplies Expense 500

Salaries Expense 7,000

Utilities Expense 650

Advertising Expense 300

Office Supplies Purchased 800

3. Complete the table below by placing an “X” under each heading that classifies the cost (Items may be under more than one classification).

	Direct Material	Indirect Material	Direct Labor	Indirect Labor	Overhead	Selling Cost	Gen & Adm Cost	Product Cost	Period Cost
Salary Paid to Maintenance Supervisor in Plant
Advertising Cost to Promote Product
Factory Machine Operator Salary
Yarn Used in Knitted Sweaters
Beads Used to Embellish Cuffs of a Blouse

4. The following information relates to the 2011 operations of Adler Company, a manufacturer.

Finished goods inventory, beginning $ 90,000

Finished goods inventory, ending $ 83,000

Cost of goods available for sale $230,000

Required:

a. What is Adler’s cost of goods manufactured for the period?

b. What was Adler’s cost of goods sold for the period?

Answer 1

1]	INCOME STATEMENT
	Service revenue		$         400,000
	Cost of goods sold		$ 240,000
	Gross profit		$ 160,000
	Less: Operating expenses:
	Salaries expense	$            10,000
	Utilities expense	$              1,000
	Sales commissions	$              4,000
	Total operating expenses		$ 15,000
	Net operating income		$ 145,000
	Other income/(expense):
	Rent revenue	$            12,000
	Interest expense	$            (2,000)	$           10,000
	Net income		$ 155,000
2]	INCOME STATEMENT
	Service revenue		$         200,000
	Less: Operating expenses:
	Office supplies expense	$                  500
	Salaries expense	$ 7,000
	Utilities expense	$                  650
	Advertising expense	$                  300
	Total operating expenses		$             8,450
	Net income		$ 191,550
3]		Direct Material	Indirect Material	Direct Labor	Indirect Labor	Overhead	Selling Cost	Gen & Adm Cost	Product Cost	Period Cost
	Salary Paid to Maintenance Supervisor in Plant				x	x			x
	Advertising Cost to Promote Product						x			x
	Factory Machine Operator Salary				x	x			x
	Yarn Used in Knitted Sweaters	x							x
	Beads Used to Embellish Cuffs of a Blouse	x							x
4]
a]	Cost of goods manufactured = Cost of goods available for sale-Finished goods inventory, beginning = 230000-90000 =	$          140,000
b]	Cost of goods sold = Cost of goods available for sale-Finished goods inventory, ending = 230000-83000 =	$          147,000