Question

In: Accounting

(TCO A) The following data (in thousands of dollars) have been taken from the accounting records...

(TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year. Sales 1,300 Raw materials inventory, beginning 25 Raw materials inventory, ending 30 Purchases of raw materials 250 Direct labor 350 Manufacturing overhead 500 Administrative expenses 300 Selling expenses 250 Work in process inventory, beginning 150 Work in process inventory, ending 100 Finished goods inventory, beginning 80 Finished goods inventory, ending 110 Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, what is the impact on the financial statements if the ending finished goods inventory is overstated or understated?

Solutions

Expert Solution

1
Direct materials:
Raw materials inventory, beginning 25
Add: Purchases of raw materials 250
Raw materials available for use 275
Less: Raw materials inventory, ending 30
Raw materials used in production 245
Direct labor 350
Manufacturing overhead cost applied to work in process 500
Total manufacturing costs 1095
Add: Work in process inventory, beginning 150
1245
Less: Work in process inventory, ending 100
Cost of goods manufactured 1145
2
Finished goods inventory, beginning 80
Add: Cost of goods manufactured 1145
Cost of goods available for sale 1225
Less: Finished goods inventory, ending 110
Cost of Goods Sold 1115
3
If the ending finished goods inventory is overstated, cost of goods sold will be understated and net income will be overstated
If the ending finished goods inventory is understated, cost of goods sold will be overstated and net income will be understated

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