Question

Question 2: Manufacturing Statement and Income Statement

Lake Ltd.’s accounting department provided following financial information:

Depreciation Expense - Factory Equipment	$ 90,000
Direct Labour	$  1,284,000
Raw Material Inventory (1st July, 2016)	$ 183,000
Raw Material Inventory (30th June, 2017)	$ 186,000
Factory Rent	$ 152,820
Finished Goods (1st July, 2016)	$ 264,000
Finished Goods (30th June, 2017)	$ 345,000
Indirect Labour	$ 75,000
Indirect Materials	$ 52,500
Sales Revenue	$  6,751,500
Administration Expenses	$ 600,000
Selling & Distribution Expenses	$  1,200,000
Purchase of Raw Material	$  1,200,360
Freight In	$ 90,000
Work in Process (1st July, 2016)	$ 60,600
Work in Process (30th June, 2017)	$ 57,330

Required: prepare a statement of Cost of Goods Manufactured and an Income Statement for Lake Ltd. for the year ended 30^th June 2017. You can prepare the statements in an Excel spreadsheet then paste into Word.

Answer 1

• All working forms part of the answer
• Statement of Cost of Goods manufactured

Statement of Cost of Goods manufactured
Direct material used:
Raw material Inventory - 1 Jul, 2016	$                      183,000.00
Raw material purchases	$                   1,200,360.00
Freight In	$                         90,000.00	$                                 1,473,360.00
Less: Raw material inventory - 30 Jun, 2017		$                                     186,000.00
Direct Materials Used		$                                 1,287,360.00
Direct Labor		$                                 1,284,000.00
Manufacturing Overhead:
Indirect Labor	$                         75,000.00
Indirect material	$                         52,500.00
Factory Rent	$                      152,820.00
Depreciation expenses - factory equipment	$                         90,000.00	$                                     370,320.00
		$                                 2,941,680.00
Add: Beginning WIP - 1 Jul, 2016		$                                       60,600.00
		$                                 3,002,280.00
Less: Ending WIP - 30 Jun 2017		$                                       57,330.00
Cost of Goods manufactured		$                                 2,944,950.00

• Working #1: Cost of Goods Sold

Finished Goods - 1 Jul, 2016	$                      264,000.00
Add: Cost of Goods manufactured	$                   2,944,950.00
Cost of goods available for sale	$                   3,208,950.00
Less: Finished Goods - 30 Jun, 2017	$                      345,000.00
Cost of Goods Sold	$                   2,863,950.00

• Income Statement, for the period ended 30 Jun 2017

Sales revenue		$                                 6,751,500.00
Cost of Goods Sold		$                                 2,863,950.00
Gross Profits		$                                 3,887,550.00
Operating Expenses:
Administrative expenses	$                      600,000.00
Selling & Distribution expenses	$                   1,200,000.00
Total Operating expenses		$                                 1,800,000.00
Operating Income		$                                 2,087,550.00