Question

Waterways Problem 01 b1-b3 (Part Level Submission)

Waterways Corporation is a private corporation formed for the purpose of providing the products and the services needed to irrigate farms, parks, commercial projects, and private lawns. It has a centrally located factory in a U.S. city that manufactures the products it markets to retail outlets across the nation. It also maintains a division that performs installation and warranty servicing in six metropolitan areas.

The mission of Waterways is to manufacture quality parts that can be used for effective irrigation projects that also conserve water. By that effort, the company hopes to satisfy its customers, perform rapid and responsible service, and serve the community and the employees who represent them in each community.

The company has been growing rapidly, so management is considering new ideas to help the company continue its growth and maintain the high quality of its products.

Waterways was founded by Will Winkman who is the company president and chief executive officer (CEO). Working with him from the company’s inception is Will’s brother, Ben, whose sprinkler designs and ideas about the installation of proper systems have been a major basis of the company’s success. Ben is the vice president who oversees all aspects of design and production in the company.

The factory itself is managed by Todd Senter who hires his line managers to supervise the factory employees. The factory makes all of the parts for the irrigation systems. The purchasing department is managed by Helen Hines.

The installation and training division is overseen by vice president Henry Writer, who supervises the managers of the six local installation operations. Each of these local managers hires his or her own local service people. These service employees are trained by the home office under Henry Writer’s direction because of the uniqueness of the company’s products.

There is a small human resources department under the direction of Sally Fenton, a vice president who handles the employee paperwork, though hiring is actually performed by the separate departments. Teresa Totter is the vice president who heads the sales and marketing area; she oversees 10 well-trained salespeople.

The accounting and finance division of the company is headed by Ann Headman, who is the chief financial officer (CFO) and a company vice president; she is a member of the Institute of Management Accountants and holds a certificate in management accounting. She has a small staff of accountants, including a controller and a treasurer, and a staff of accounting input operators who maintain the financial records.

A partial list of Waterways’ accounts and their balances for the month of November follows.

Accounts Receivable		$272,200
Advertising Expenses		53,700
Cash		261,100
Depreciation—Factory Equipment		16,800
Depreciation—Office Equipment		2,400
Direct Labor		41,800
Factory Supplies Used		16,600
Factory Utilities		10,300
Finished Goods Inventory, November 30		69,200
Finished Goods Inventory, October 31		72,300
Indirect Labor		48,300
Office Supplies Expense		1,600
Other Administrative Expenses		71,300
Prepaid Expenses		41,500
Raw Materials Inventory, November 30		52,600
Raw Materials Inventory, October 31		37,700
Raw Materials Purchases		183,100
Rent—Factory Equipment		46,600
Repairs—Factory Equipment		4,400
Salaries		326,000
Sales Revenue		1,357,500
Sales Commissions		40,900
Work In Process Inventory October 31		52,700
Work In Process Inventory, November 30		42,200

A list of accounts and their values are given above. From this information, prepare an income statement.

Answer 1

Waterways Corporation
Income Statement
for month ended 30 November
Sales Revenue		$ 13,57,500.00
Less: Cost of Goods Sold
Opening Finished Goods Inventory	$          72,300.00
Cost of Goods manufactured	$      3,46,900.00
Goods Available for sale	$      4,19,200.00
Less: Closing Inventory of Finished Goods	$          69,200.00
Cost of Goods Sold		$    3,50,000.00
Gross profit		$ 10,07,500.00
Operating Expenses
Depreciation -Office Equipment	$            2,400.00
Advertising Expense	$          53,700.00
Office Supplies expense	$            1,600.00
Other administrative expenses	$          71,300.00
Salaries	$      3,26,000.00
sales Commission	$          40,900.00
Total Operating Expenses		$    4,95,900.00
Net Income		$    5,11,600.00

Working Notes:

Waterways Corporation
Cost of Goods manufactured
for month ended 30 November
Raw material
Beginning Inventory	$       37,700.00
Plus: Purchases	$      1,83,100.00
Raw material available for use	$      2,20,800.00
Less: Raw material Inventory Ending	$          69,200.00
Cost of raw material used		$    1,51,600.00
Direct labor		$        41,800.00
Manufacturing Overheads
Depriciation-Factory Equipment	$          16,800.00
Factory supplies used	$          16,600.00
Factory Utilities	$          10,300.00
indirect labour	$          48,300.00
Rent - Factory Equipment	$          46,600.00
Repairs- Factory Equipment	$            4,400.00
Total Manufacturing Overheads		$    1,43,000.00
Total manufacturing Cost		3,36,400.00
Plus: Beginning Work in Progress		$        52,700.00
Total Work in process		$    3,89,100.00
Minus: Ending Work in process Inventory		$        42,200.00
Cost of Goods Manufactured		$    3,46,900.00