Manufacturinig and Income statements with inventory analysis. Need some guidence?

Question

The following calendar year-end information is taken from the December 31, 2005, adjusted trial balance

and other records of Plaza CompanyAdvertising expense $ 30,750

Depreciation expense—Office equipment 9,250

Depreciation expense—Selling equipment 10,600

Depreciation expense—Factory equipment 35,550

Factory supervision . 104,600

Factory supplies used 9,350

Factory utilities 35,000

Inventories

Raw materials, December 31, 2004 . 168,850

Raw materials, December 31, 2005 184,000

Goods in process, December 31, 2004 17,700

Goods in process, December 31, 2005 21,380

Finished goods, December 31, 2004 169,350

Finished goods, December 31, 2005 138,490

Direct labor 235,725

Indirect labor 58,875

Miscellaneous production costs 10,425

Office salaries expense 65,000

Raw materials purchases 927,000

Rent expense—Office space 24,000

Rent expense—Selling space 28,100

Rent expense—Factory building 78,800

Maintenance expense—Factory equipment 37,400

Sales 4,527,000

Sales discounts 64,500

Sales salaries expense 394,560

1. Prepare the company’s 2005 manufacturing statement.

2. Prepare the company’s 2005 income statement that reports separate categories for (a) selling

expenses and (b) general and administrative expenses.

Answer 1

Statement of Goods Manufactured

Direct Materials

...Beginning raw materials 168,850

...Purchases of raw materials 927,000

...Less ending raw materials (184,000)

...Sub-total $911,850

Direct Labor $235,725

Factory Overhead

...Factory supplies used 9,350

...Factory utilities 35,000

...Indirect labor 58,875

...Factory supervision 104,600

...Depreciation expense—Factory equipment 35,550

...Rent expense—Factory building 78,800

...Miscellaneous production costs 10,425

...Maintenance expense—Factory equipment 37,400

...Sub-total $370,000

Total manufacturing costs $1,517,575

Beginning WIP 17,700

Less Ending WIP (21,380)

Cost of goods manufactured $1,513,895

Income Statement

Sales $4,527,000

less sales discounts (64,500)

Net sales $4,462,500

Less:

COGS

...Beginning Finished Goods 169,350

...Cost of goods mfd 1,513,895

...Less ending Finished Goods (138,490)

...COGS $1,544,755

Gross profit $2,917,745

Less:

Selling expenses-

...Advertising expense $ 30,750

...Sales salaries expense 394,560

...Depreciation expense—Selling equipment 10,600

...Rent expense—Selling space 28,100

...Sub-total $464,010

General & Admin expenses-

...Office salaries expense 65,000

...Depreciation expense—Office equipment 9,250

...Rent expense—Office space 24,000

...Sub-total $98,250

Income before taxes $2,355,485