Question

Coronado Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020.

Prepare a correct income statement for October 2020.

CORONADO COMPANY Income Statement For the Month Ended October 31, 2020
Sales revenue					$794,300
Less:	Operating expenses
	Raw materials purchases		$264,700
	Direct labor cost		192,000
	Advertising expense		92,000
	Selling and administrative salaries		76,100
	Rent on factory facilities		62,300
	Depreciation on sales equipment		44,100
	Depreciation on factory equipment		32,900
	Indirect labor cost		28,400
	Utilities expense		12,600
	Insurance expense		8,600		813,700
Net loss					$(19,400)

Prior to October 2020, the company had been profitable every month. The company’s president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.

1. Inventory balances at the beginning and end of October were:

		October 1		October 31
Raw materials		$19,100		$35,700
Work in process		19,600		14,300
Finished goods		29,500		53,500

2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.

Answer 1

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