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	$	26,000		Direct labor	$	675,900
Depreciation expense—Office equipment		11,700		Income taxes expense		238,500
Depreciation expense—Selling equipment		9,800		Indirect labor		55,700
Depreciation expense—Factory equipment		39,800		Miscellaneous production costs		10,300
Factory supervision		137,000		Office salaries expense		67,000
Factory supplies used		8,200		Raw materials purchases		971,000
Factory utilities		42,000		Rent expense—Office space		21,000
Inventories				Rent expense—Selling space		28,600
Raw materials, December 31, 2016		150,400		Rent expense—Factory building		80,300
Raw materials, December 31, 2017		191,000		Maintenance expense—Factory equipment		36,100
Work in process, December 31, 2016		17,000		Sales		4,516,600
Work in process, December 31, 2017		23,900		Sales salaries expense		393,400
Finished goods, December 31, 2016		165,500
Finished goods, December 31, 2017		142,200
1. Prepare the company’s 2017 schedule of cost of goods manufactured.    2. Prepare the company’s 2017 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.

Answer 1

Leone Company cost of goods manufactured for year ended december 31 2017
Direct materials
Add: Raw material Inventory, december 31 2016	150400
Add: Purchase of raw material	971,000
Raw material avaliable for use	1121400
Less: Raw material inventory ending	-191,000
Direct materials used		930400
Direct labor		675900
Factory overhead
Depriciation expense-factory equipment	39,800
Factory supervision	137,000
Factory supplies used	8,200
Factory utilities	42,000
Rent expense- factory building	80,300
Miscellaneous expense - factory equipment	36,100
Miscellaneous produciton cost	10,300
indirect labor	55,700
Total factory overhead cost		409,400
Total manufacturing cost		2,015,700
Addd: Work in progress inventory beginning		17,000
Total cost of work in progress		2,032,700
Less; Work In progress inventory ending		23,900
Cost of goods manufactured		2,008,800

Income statement For Year ended 31 December 2017
Sales		4,516,600
Cost of goods manufactured	2,008,800
Finished goods inventory, dec 31 206	165,500
Goods available for sale	2,174,300
Less: Finished goods inventory, December 31 ,2016	-142,200
Cost of goods sold		2,032,100
Gross profit from sales		2,484,500
Operating expenses
Selling expenses
Depreciation expense—Selling equipment	9,800
Rent expense—Selling space	28600
Sales salaries expense	393,400
Advertising expense	26000
Total Selling expense		457,800
General and administrative expense
Depreciation expense—Office equipment	11700
Office salaries expense	67000
Rent expense—Office space	21000
Total General and administrative expense		99700
Total Operating expense		557,500
Income before taxes		1,927,000
Income taxes expense		238,500
Net income		1,688,500