Question

Waterway Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020.

WATERWAY COMPANY Income Statement For the Month Ended October 31, 2020
Sales revenue					$794,700
Less:	Operating expenses
	Raw materials purchases		$263,200
	Direct labor cost		188,000
	Advertising expense		92,400
	Selling and administrative salaries		77,500
	Rent on factory facilities		62,800
	Depreciation on sales equipment		45,100
	Depreciation on factory equipment		32,600
	Indirect labor cost		28,600
	Utilities expense		12,600
	Insurance expense		8,300		811,100
Net loss					$(16,400)

Prior to October 2020, 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		$19,000		$35,600
Work in process		19,200		14,600
Finished goods		30,400		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.

Prepare a schedule of cost of goods manufactured for October 2020.

WATERWAY COMPANY Cost of Goods Manufactured Schedule choose the accounting period                                                                      October 31, 2020For the Year Ended October 31, 2020For the Month Ended October 31, 2020
						$enter a dollar amount
		$enter a dollar amount
		enter a dollar amount
		enter a total of the two previous amounts
		enter a dollar amount
				$enter a total amount for section one
				enter a dollar amount
		enter a dollar amount
		enter a dollar amount
		enter a dollar amount
		enter a dollar amount
		enter a dollar amount
				enter a total amount for section two
						enter a total amount for the first part
						enter a total amount for the second part
						enter a dollar amount
						$enter a total amount for this schedule

  

  

Prepare a correct income statement for October 2020.

WATERWAY COMPANY Income Statement choose the accounting period                                                                      For the Month Ended October 31, 2020For the Year Ended October 31, 2020October 31, 2020
				$enter a dollar amount
		$enter a dollar amount
		enter a dollar amount
		enter a total of the two previous amounts
		enter a dollar amount
				enter a total amount for section one
				enter a dollar amount
		enter a dollar amount
		enter a dollar amount
		enter a dollar amount
		enter a dollar amount
		enter a dollar amount
				enter a total amount for section two
				$enter a total net income or loss amount

Answer 1

Schedule of Cost of Goods manufactured
For month ended October 31, 2020
Direct Materials
Raw Material, Beginning Inventory	$        19,000.00
Add: Purchases	$    2,63,200.00
Total Raw Material Available	$    2,82,200.00
Deduct : Raw Material in inventory, ending	$        35,600.00
Raw Material used in production		$     2,46,600.00
Direct Labor		$     1,88,000.00
Manufacturing Overhead
Rent on Factory Facilities	$        62,800.00
Depreciation on Factory Equipment	$        32,600.00
Indirect Labor cost	$        28,600.00
Utilities Expense	$          9,450.00
Insurance Expense	$          4,980.00	$     1,38,430.00
Total Manufacturing Costs		$     5,73,030.00
Add: Beginning Work in Process Inventory		$        19,200.00
		$     5,92,230.00
Deduct: Ending Work in Process Inventory		$        14,600.00
Cost of Goods Manufactured		$    5,77,630.00
Schedule of Cost of Goods Sold
Finished Goods Inventory, Beginning		$        30,400.00
Add: Cost of Goods Manufactured		$     5,77,630.00
Cost of Goods Available for sale		$     6,08,030.00
Deduct : Finished Goods Inventory, Ending		$        53,000.00
Cost of goods sold		$    5,55,030.00

Income Statement
For month ended October 31, 2020
Sales Revenue		$     7,94,700.00
Cost of Goods Sold		$     5,55,030.00
Gross Profit		$     2,39,670.00
Operating Expenses
Selling and administrative salaries	$        77,500.00
Depreciation on sales equipment	$        45,100.00
Utilities Expense	$          3,150.00
Insurance Expense	$          3,320.00
Total Operating Expenses		$     1,29,070.00
Net Income (Loss)		$    1,10,600.00