Question

The following cost and inventory data are taken from the accounting records of a Company for the year just completed:

Costs incurred:

Direct labor cost ................................................... $140,000
Purchases of raw materials .................................. $236,000
Manufacturing overhead ...................................... $160,000
Advertising expense ............................................. $180,000
Sales salaries ....................................................... $100,000
Depreciation, office equipment ............................ $6,000

Inventories: Beginning the Year End the Year
Raw materials ............................ $14,000 $30,000
Work in process .......................... $20,000 $10,000
Finished goods ............................ $40,000 $70,000

Required:
1. Prepare the cost of goods sold section of Company’s income statement for the year.

Answer 1

Schedule of cost of goods sold
Beginning Finished Goods Inventory		$     40,000.00
Cost of Goods manufactured (Working note 1)		$ 5,30,000.00
Goods Available for sale		$ 5,70,000.00
Less :Ending Finished goods Inventory		$     70,000.00
Cost of Goods Sold		$ 5,00,000.00

Working note 1 - Schedule of Cost of Goods Manufactured

Schedule of Cost of Goods Manufactured
Direct Material
Raw material Inventory Beginning	$       14,000.00
Raw material Purchased	$   2,36,000.00
Raw material available for use	$   2,50,000.00
Less: Raw material Inventory Ending	$       30,000.00
Direct Material Used		$   2,20,000.00
Direct labor		$   1,40,000.00
Manufacturing overheads applied		$   1,60,000.00
Total manufacturing Cost incurred during the period		$   5,20,000.00
Add: Work in process Beginning		$       20,000.00
Total Manufacturing cost to account for		$   5,40,000.00
Less: Work in process Ending		$       10,000.00
Cost of Goods Manufactured		$   5,30,000.00