Question

   

The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Leone Company.
   

Advertising expense	$	25,400		Direct labor	$	671,600
Depreciation expense—Office equipment		8,400		Income taxes expense		286,600
Depreciation expense—Selling equipment		11,000		Indirect labor		55,100
Depreciation expense—Factory equipment		33,400		Miscellaneous production costs		9,900
Factory supervision		133,300		Office salaries expense		72,000
Factory supplies used		7,900		Raw materials purchases		952,000
Factory utilities		38,000		Rent expense—Office space		22,000
Inventories				Rent expense—Selling space		25,100
Raw materials, December 31, 2016		164,300		Rent expense—Factory building		81,200
Raw materials, December 31, 2017		188,000		Maintenance expense—Factory equipment		35,100
Work in process, December 31, 2016		16,300		Sales		4,505,000
Work in process, December 31, 2017		21,100		Sales salaries expense		392,500
Finished goods, December 31, 2016		162,600
Finished goods, December 31, 2017		136,700

2. Prepare the company’s 2017 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.
  

	LEONE COMPANY Income Statement For Year Ended December 31, 2017 Cost of goods sold Goods available for sale Cost of goods sold Operating expenses Selling expenses Total selling expenses General and administrative expenses Total general and administrative expenses Total operating expenses Income before taxes Net income

Answer 1

Solution:

Leone company
Schedule of cost of goods manufactured
For the year ended December 31, 2017
Direct Materials:
Raw Materials inventory, December 31, 2016	$1,64,300
Add: Purchases of Raw Materials	$9,52,000
Cost of material available for use	$11,16,300
Less: Raw Material Inventory, December 31, 2017	$1,88,000
Raw material used in production		$9,28,300
Direct Labor cost		$6,71,600
Factory Overhead:
Depreciation Expense-Factory Equipment	$33,400
Factory Supervision	$1,33,300
Factory Supplies used	$7,900
Factory Utilities	$38,000
Indirect Labor	$55,100
Miscellaneous production cost	$9,900
Rent expense- Factory Building	$81,200
Maintenance expense-Factory Equipment	$35,100
Total Factory Overhead		$3,93,900
Total Manufacturing Costs Incurred in 2017		$19,93,800
Add: Work in Process, December 31, 2016		$16,300
Subtotal		$20,10,100
Less: Work in process inventory, December 31, 2017		$21,100
Cost of goods manufactured		$19,89,000

2.

Leone company
Income Statement
For the year ended December 31, 2017
Sales		$45,05,000
Cost of Goods sold:
Finished Goods, December 31, 2016	$1,62,600
Add: Cost of Goods manufactured	$19,89,000
Cost of Goods available for sale	$21,51,600
Less: Finished Goods, Decemebr 31, 2017	$1,36,700	$20,14,900
Gross Profit		$24,90,100
Operating Expenses:
Administrative expenses:
Depreciation Expense- Office Equipment	$8,400
Office Salaries expense	$72,000
Rent expense- Office space	$22,000	$1,02,400
Selling Expenses:
Advertising Expense	$25,400
Depreciation Expense- Selling Equipment	$11,000
Sales Salaries expenses	$3,92,500
Rent expense- Selling space	$25,100	$4,54,000
Total Operating Expenses		$5,56,400
Income Before Income Tax		$19,33,700
Less: Income Tax expense		$2,86,600
Net Income		$16,47,100