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	$	32,900		Direct labor	$	677,400
Depreciation expense—Office equipment		11,500		Income taxes expense		257,800
Depreciation expense—Selling equipment		9,900		Indirect labor		56,700
Depreciation expense—Factory equipment		38,500		Miscellaneous production costs		11,300
Factory supervision		131,000		Office salaries expense		68,000
Factory supplies used		8,700		Raw materials purchases		996,000
Factory utilities		43,000		Rent expense—Office space		29,000
Inventories				Rent expense—Selling space		26,000
Raw materials, December 31, 2016		160,800		Rent expense—Factory building		80,000
Raw materials, December 31, 2017		181,000		Maintenance expense—Factory equipment		39,000
Work in process, December 31, 2016		19,300		Sales		4,546,100
Work in process, December 31, 2017		22,500		Sales salaries expense		397,000
Finished goods, December 31, 2016		165,800
Finished goods, December 31, 2017		140,000

Part 1. Prepare the company’s 2017 schedule of cost of goods manufactured.

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

Answer 1

1.

LEONE COMPANY
Schedule of Cost of Goods Manufactured
For Year Ended December 31, 2017
Direct materials
Raw materials inventory, December 31, 2016	160800
Raw materials purchases	996000
Raw materials available for use	1156800
Less: Raw materials inventory, December 31, 2017	181000
Direct materials used		975800
Direct labor		677400
Factory overhead
Depreciation expense-factory equipment	38500
Factory supervision	131000
Factory supplies used	8700
Factory utilities	43000
Rent expense-Factory building	80000
Maintenance expense-Factory equipment	39000
Miscellaneous production costs	11300
Indirect labor	56700
Total factory overhead costs		408200
Total manufacturing costs		2061400
Add: Work in process inventory, December 31, 2016		19300
Total cost of work in process		2080700
Less: Work in process inventory, December 31, 2017		22500
Cost of goods manufactured		2058200

2.

LEONE COMPANY
Income Statement
For Year Ended December 31, 2017
Sales		4546100
Cost of goods sold
Cost of goods manufactured	2058200
Finished goods inventory, December 31, 2016	165800
Goods available for sale	2224000
Less: Finished goods inventory, December 31, 2017	140000
Cost of goods sold		2084000
Gross profit		2462100
Operating expenses
Selling expenses
Depreciation expense-selling equipment	9900
Rent expense-selling space	26000
Sales salaries expense	397000
Advertising expense	32900
Total selling expenses		465800
General and administrative expenses
Depreciation expense-office equipment	11500
Rent expense-office space	29000
Office salaries expense	68000
Total general and administrative expenses		108500
Total operating expenses		574300
Income before income taxes		1887800
Income taxes expense		257800
Net income		1630000