P1-5A Phillips Company is a manufacturer of computers. Its controller resigned in October 2014. An inexperienced assistant accountant has prepared the following income statement for the month of October 2014. Phillips Company Income Statement For the Month Ended October 31, 2014 Sales revenue Less: Operating expenses Raw materials purchases Direct labor cost Advertising expense Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense Insurance expense $264,000 190,000 Raw materials Work in process Finished goods 90,000 75,000 60,000 45,000 31,000 28,000 12,000 8,000 $780,000 803,000 $ (23,000) Net loss Prior to October 2014, 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 examin- ing 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 $29,000 $18,000 16,000 14,000 30,000 45,000 2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory opera- tions. The remaining amounts should be charged to selling and administrative activities. Instructions Prepare a correct income statement for October 2014.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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P1-5A Phillips Company is a manufacturer of computers. Its controller resigned in October
2014. An inexperienced assistant accountant has prepared the following income statement
for the month of October 2014.
Phillips Company
Income Statement
For the Month Ended October 31, 2014
Sales revenue
Less: Operating expenses
Raw materials purchases
Direct labor cost
Advertising expense
Selling and administrative salaries
Rent on factory facilities
Depreciation on sales equipment
Depreciation on factory equipment
Indirect labor cost
Utilities expense
Insurance expense
$264,000
190,000
Raw materials
Work in process
Finished goods
90,000
75,000
60,000
45,000
31,000
28,000
12,000
8,000
Net loss
Prior to October 2014, 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 examin-
ing 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
$18,000
16,000
30,000
$780,000
$29,000
14,000
45,000
Prepare a correct income statement for October 2014.
803,000
$ (23,000)
2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory opera-
tions. The remaining amounts should be charged to selling and administrative activities.
Instructions
Transcribed Image Text:P1-5A Phillips Company is a manufacturer of computers. Its controller resigned in October 2014. An inexperienced assistant accountant has prepared the following income statement for the month of October 2014. Phillips Company Income Statement For the Month Ended October 31, 2014 Sales revenue Less: Operating expenses Raw materials purchases Direct labor cost Advertising expense Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense Insurance expense $264,000 190,000 Raw materials Work in process Finished goods 90,000 75,000 60,000 45,000 31,000 28,000 12,000 8,000 Net loss Prior to October 2014, 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 examin- ing 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 $18,000 16,000 30,000 $780,000 $29,000 14,000 45,000 Prepare a correct income statement for October 2014. 803,000 $ (23,000) 2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory opera- tions. The remaining amounts should be charged to selling and administrative activities. Instructions
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