Question

Information for Russell Factory as of December 31 follows. Prepare (a) the company’s Schedule of Cost of Goods Manufactured for the year ended December 31 and (b) prepare the company’s Cost of Goods Sold section of the Income Statement.

Administrative salaries expense.........................	$ 135,000
Depreciation expense - Factory equipment........	62,400
Depreciation expense - Office equipment..........	24,800
Advertising expense..........................................	22,350
Direct labor........................................................	368,000
Factory supplies used.........................................	12,000
Income taxes expense.......................................	91,500
Indirect labor.....................................................	35,000
Indirect material.................................................	24,000
Factory utilities...................................................	14,000
Inventories
Raw materials inventory, January 1...................	32,000
Raw materials inventory, December 31.............	28,000
Goods in process inventory, January 1..............	33,780
Goods in process inventory, December 31........	37,460
Finished goods inventory, January 1.................	56,970
Finished goods inventory, December 31...........	62,000
Raw materials purchases....................................	325,000
Sales salaries expense........................................	97,500
Sales..................................................................	1,452,000

Answer 1

Schedule of cost of goods manufactured
For Year Ended December 31,
Direct materials
Raw materials inventory, January 1	$       32,000
Raw materials purchases	$    3,25,000
Raw materials available for use	$    3,57,000
Less: Raw materials inventory, December 31	$     -28,000
Direct materials used		$ 3,29,000
Direct labour		$ 3,68,000
Factory overhead
Indirect Material	$       24,000
Factory supplies used	$       12,000
Factory utilities	$       14,000
Depreciation expense—Factory equipment	$       62,400
Indirect labour	$       35,000
Miscellaneous production costs
Total factory overhead costs		$ 1,47,400
Total manufacturing costs		$ 8,44,400
Add: Work in process inventory,Jnauray 1		$     33,780
Total cost of goods in process		$ 8,78,180
Less: Work in process inventory, December 31		$    -37,460
Cost of goods manufactured		$ 8,40,720
Income Statement
For Year Ended December 31
Sales		$14,52,000
Cost of goods sold
Cost of goods manufactured	$    8,40,720
Finished Goods inventory January 1	$       56,970
Goods available for sales	$    8,97,690
Less: Finished Goods inventory December 31	$     -62,000
Cost of goods sold		$ 8,35,690
Gross profit from sales		$ 6,16,310
Operating expenses
Selling expenses
Rent expenses selling space
Sales salary expenses	$       97,500
Advertising expenses	$       22,350
Total selling expenses		$ 1,19,850
General and administrative expenses
Depreciation expenses office equipment	$       24,800
Administrative salaries expense	$    1,35,000
Total general and administrative expenses		$ 1,59,800
Income before tax		$ 3,36,660
Income tax expenses		$     91,500
Net income		$ 2,45,160