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	$	29,200		Direct labor	$	694,600
Depreciation expense—Office equipment		11,600		Income taxes expense		295,300
Depreciation expense—Selling equipment		10,300		Indirect labor		57,100
Depreciation expense—Factory equipment		33,400		Miscellaneous production costs		10,500
Factory supervision		126,900		Office salaries expense		62,000
Factory supplies used		9,200		Raw materials purchases		929,000
Factory utilities		40,000		Rent expense—Office space		29,000
Inventories				Rent expense—Selling space		27,100
Raw materials, December 31, 2016		154,300		Rent expense—Factory building		80,700
Raw materials, December 31, 2017		191,000		Maintenance expense—Factory equipment		37,000
Work in process, December 31, 2016		18,600		Sales		4,585,200
Work in process, December 31, 2017		24,200		Sales salaries expense		390,000
Finished goods, December 31, 2016		161,000
Finished goods, December 31, 2017		143,100

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

Answer 1

Formula sheet

A	B	C	D	E	F	G	H
2
3
4		Advertising expense	29200		Direct labor	694600
5		Depreciation expense—Office equipment	11600		Income taxes expense	295300
6		Depreciation expense—Selling equipment	10300		Indirect labor	57100
7		Depreciation expense—Factory equipment	33400		Miscellaneous production costs	10500
8		Factory supervision	126900		Office salaries expense	62000
9		Factory supplies used	9200		Raw materials purchases	929000
10		Factory utilities	40000		Rent expense—Office space	29000
11		Inventories			Rent expense—Selling space	27100
12		Raw materials, December 31, 2016	154300		Rent expense—Factory building	80700
13		Raw materials, December 31, 2017	191000		Maintenance expense—Factory equipment	37000
14		Work in process, December 31, 2016	18600		Sales	4585200
15		Work in process, December 31, 2017	24200		Sales salaries expense	390000
16		Finished goods, December 31, 2016	161000
17		Finished goods, December 31, 2017	143100
18
19		Cost of Goods Sold Schedule for manufacturing company:
20
21		Calculation of cost of goods Manufactured:
22		Direct Material used:
23		Beginning raw material inventory	=D12
24		Add Raw materials purchased	=G9
25		Total Raw materials Available	=SUM(D23:D24)
26		Less: Ending raw material inventory	=D13
27		Total Raw materials Used		=D25-D26
28
29		Direct Labour		=G4
30
31		Manufacturing overhead
32		Depreciation expense—Factory equipment	=D7
33		Factory Supervision	=D8
34		Factory Supplies	=D9
35		Factory Utilities	=D10
36		Indirect labor	=G6
37		Miscellaneous production costs	=G7
38		Rent Expense-Factory Building	=G12
39		Maintenance expense-Factory Equipments	=G13
40		Total Manufacturing Overhead		=SUM(D32:D39)
41		Total Manufacturing cost		=E27+E29+E40
42		Add: Beginning work in progress		=D14
43		Less: Ending work in progress		=D15
44		Cost of goods Manufactured		=E41+E42-E43
45
46		Calculation of cost of goods:
47		Beginnings finished goods inventory		=D16
48		Cost of goods manufactured		=E44
49		Total goods available for sales		=E47+E48
50		Less: Ending finished goods inventory		=D17
51		Cost of goods sold		=E49-E50
52
53		Selling expenses can be calculated as follows:
54		Advertising expense	=D4
55		Depreciation expense—Selling equipment	=D6
56		Rent expense—Selling space	=G11
57		Sales salaries expense	=G15
58		Total Selling Expense	=SUM(D54:D57)
59
60		General and administrative expenses can be calculated as follows:
61		Depreciation expense—Office equipment	=D5
62		Office salaries expense	=G8
63		Rent expense—Office space	=G10
64		Total General and administrative expenses	=SUM(D61:D63)
65
66		Income Statement
67		Revenue		=G14
68		Cost of goods Sold		=E51
69		Gross Profit		=E67-E68
70		Operating Expenses:
71		Selling Expenses	=D58
72		Administrative expenses	=D64
73		Total operating expenses		=D71+D72
74		Operating Income		=E69-E73
75		Income taxes expense		=G5
76		Net Income		=E74-E75
77