Question

Superior Company has the following cost and expense data for the year ending December 31, 2017.

Raw materials, 1/1/17 $ 30,000 Insurance, factory $   14,000 Raw materials, 12/31/17 20,000 Property taxes, factory building 6,000 Raw materials purchases 205,000 Sales revenue 1,500,000 Indirect materials 15,000 Delivery expenses 100,000 Work in process, 1/1/17 80,000 Sales commissions 150,000 Work in process, 12/31/17 50,000 Indirect labor 90,000 Finished goods, 1/1/17 110,000 Factory machinery rent 40,000 Finished goods, 12/31/17 120,000 Factory utilities 65,000 Direct labor 350,000 Depreciation, factory building 24,000 Factory manager's salary 35,000 Administrative expenses 300,000

Instructions

(a)	Prepare a cost of goods manufactured schedule for Superior Company for 2017.
(b)	Prepare an income statement for Superior Company for 2017.

(c)

Assume that Superior Company's accounting records show the balances of the following current asset accounts: Cash $17,000, Accounts Receivable (net) $120,000, Prepaid Expenses $13,000, and Short-Term Investments $26,000. Prepare the current assets section of the balance sheet for Superior Company as of December 31, 2017. Action Plan •   Start with beginning work in process as the first item in the cost of goods manufactured schedule. •   Sum direct materials used, direct labor, and total manufacturing overhead to determine total manufacturing costs. •   Sum beginning work in process and total manufacturing costs to determine total cost of work in process. •   Cost of goods manufactured is the total cost of work in process less ending work in process. •   In the cost of goods sold section of the income statement, show beginning and ending finished goods inventory and cost of goods manufactured. •   In the balance sheet, list manufacturing inventories in the order of their expected realization in cash, with finished goods first.

Answer 1

(a) Prepare the cost of goods manufactured schedule as follows:

S Company
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2017
Work in process, 1/1/17		80000
Direct Materials:
Raw materials, 1/1/17	30000
Add: Raw materials purchases	205000
Total raw materials available	235000
Less: Raw materials, 12/31/17	20000
Less: Indirect materials	15000
Direct materials used		200000
Direct labor		350000
Manufacturing Overhead:
Indirect materials	15000
Factory manager's salary	35000
Insurance, factory	14000
Property taxes, factory building	6,000
Indirect labor	90000
Factory machinery rent	40000
Factory utilities	65000
Depreciation, factory building	24000
Total manufacturing overhead		289000
Total manufacturing costs		839000
Less: Work in process, 12/31/17		50000
Cost of goods manufactured		789000

(b) Prepare the income statement as follows:

S Company
Income Statement
For the Year Ended December 31, 2017
Sales revenue		1500000
Cost of goods sold:
Finished goods, 1/1/17	110000
Add: Cost of goods manufactured	789000
Total goods available for sale	899000
Less: Finished goods, 12/31/17	120000
Cost of goods sold		779000
Gross profit		721000
Selling and administrative expenses:
Delivery expenses	100000
Sales commissions	150000
Administrative expenses	300000
Total selling and administrative expenses		550000
Net income		171000

(c) Prepare the balance sheet as follows:

S Company
Balance Sheet (Partial)
December 31, 2017
ASSETS
Current Assets:
Cash		17000
Accounts Receivable, net		120000
Short-term investments		26000
Inventory:
Finished goods, 12/31/17	120000
Work in process, 12/31/17	50000
Raw materials, 12/31/17	20000
Total inventory		190000
Prepaid expenses		13000
Total current assets		366000