Question

Empire Company is a manufacturer of smart phones. Its controller resigned in October 2017. An inexperienced assistant accountant has prepared the following income statement for the month of October 2017.

EMPIRE COMPANY Income Statement For the Month Ended October 31, 2017
Sales revenue					$ 793,800
Less:	Operating expenses
	Raw materials purchases		$ 263,200
	Direct labor cost		188,900
	Advertising expense		91,000
	Selling and administrative salaries		77,000
	Rent on factory facilities		61,500
	Depreciation on sales equipment		45,200
	Depreciation on factory equipment		32,500
	Indirect labor cost		28,800
	Utilities expense		11,700
	Insurance expense		8,700		808,500
Net loss					$( 14,700 )

Prior to October 2017, the company had been profitable every month. The company’s president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.

1. Inventory balances at the beginning and end of October were:

		October 1		October 31
Raw materials		$ 20,700		$ 35,900
Work in process		20,900		14,100
Finished goods		30,200		53,000

2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.

Q1: Prepare a schedule of cost of goods manufactured for October 2017. (Round answers to 0 decimal places, e.g. 125.)
Q2: Prepare a correct income statement for October 2017.

Answer 1

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