Question

Exercise 2-40 Prepare Statements for a Manufacturing Company (LO 2-2, 4)

The following balances are from the accounts of Crabtree Machining Company:

	January 1 (Beginning)			December 31 (Ending)
Direct materials inventory	$	97,300		$	109,400
Work-in-process inventory		108,400			107,200
Finished goods inventory		43,000			46,300

Direct materials purchased during the year amount to $513,200, and the cost of goods sold for the year was $1,875,000.

Required:

Prepare a cost of goods sold statement.

Answer 1

The amount of goods in cost price that is sold in the market is the cost of goods sold.

Cost of goods sold statement:

Particulars	Amount $
Beginning direct material	97,300
Add: Purchase of raw material	513,200
Less: Ending direct material	109,400
Direct material consumed	501,100
Direct labor	1,376,000
Prime cost	1,877,100
Add: Beginning work-in-process	108,400
Less: Ending work-in-process	107,200
Manufacturing cost	1,878,300
Add: Beginning Finished goods	43,000
Less: Ending finished goods	46,300
Cost of goods sold	1,875,000

Working: Direct labor is appeared as balancing figure.

Direct labor = Cost of goods sold – (Material consumed + Beginning work-in process – Ending work-in process + Beginning finished goods – Ending finished goods)

                     = 1,875,000 – (501,100 + 108,400 – 107,200 + 43,000 – 46,300)

                     = 1,875,000 – 499,000

                     = $1,376,000