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Problem 14-3A Schedule of cost of goods manufactured and income statement; inventory analysis LO P2, A1

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The following calendar year-end information is taken from the December 31, 2019, adjusted trial balance and other records of Leone Company.
   

Advertising expense	$	32,500		Direct labor	$	680,900
Depreciation expense—Office equipment		9,700		Income taxes expense		239,800
Depreciation expense—Selling equipment		10,700		Indirect labor		56,200
Depreciation expense—Factory equipment		34,500		Miscellaneous production costs		9,800
Factory supervision		108,800		Office salaries expense		66,000
Factory supplies used		9,400		Raw materials purchases		996,000
Factory utilities		40,000		Rent expense—Office space		26,000
Inventories				Rent expense—Selling space		29,100
Raw materials, December 31, 2018		155,100		Rent expense—Factory building		79,500
Raw materials, December 31, 2019		192,000		Maintenance expense—Factory equipment		39,700
Work in process, December 31, 2018		19,200		Sales		4,516,200
Work in process, December 31, 2019		18,100		Sales salaries expense		392,100
Finished goods, December 31, 2018		165,700
Finished goods, December 31, 2019		137,000

Problem 14-3A Part 2

2. Prepare the company’s 2019 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.

Answer 1

LEON COMPANY
Manufacturing Statement
For Year Ended December 31, 2019
Direct materials
Raw materials inventory, December 31, 2018	$         155,100
Raw materials purchases	$         996,000
Raw materials available for use	$      1,151,100
Less: Raw materials inventory, December 31, 2019	$       (192,000)
Direct materials used		$                                   959,100
Direct labor		$                                   680,900
Factory overhead:
Factory supervision	$         108,800
Factory supplies used	$             9,400
Factory utilities	$           40,000
Maintenance expense—Factory equipment	$           39,700
Rent expense—Factory building	$           79,500
Depreciation expense—Factory equipment	$           34,500
Indirect labor	$           56,200
Miscellaneous production costs	$             9,800
Total factory overhead costs		$                                   377,900
Total manufacturing costs		$                                2,017,900
Add: Work in process Inventory, December 31, 2018		$                                     19,200
Total cost of goods in process		$                                2,037,100
Less: Work in Process inventory, December 31, 2019		$                                   (18,100)
Cost of goods manufactured		$                                2,019,000
2) Prepare the company’s 2019 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.
LEON COMPANY
Income Statement
For Year Ended December 31, 2019
Sales		$                                4,516,200
Cost of goods sold:
Cost of goods manufactured	$      2,019,000
Finished goods inventory, December 31, 2018	$         165,700
Goods available for sale	$      2,184,700
Less: Finished goods inventory, December 31, 2019	$         137,000
Cost of goods sold		$                                2,047,700
Gross profit from sales		$                                2,468,500
Operating expenses
Selling expenses
Depreciation expense—Selling equipment	$           10,700
Rent expense—Selling space	$           29,100
Sales salaries expense	$         392,100
Advertising expense	$           32,500
Total selling expenses		$                                   464,400
General and administrative expenses
Rent expense—Office space	$           26,000
Office salaries expense	$           66,000
Depreciation expense—Office equipment	$             9,700
Total general and administrative expenses		$                                   101,700
Total operating expenses		$                                   566,100
Income before taxes		$                                1,902,400
Income taxes expense		$                                   239,800
Net income		$                                1,662,600