P19.5A (LO 3) Empire Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020. Prepare a cost of goods manufactured schedule and a correct income statement. Empire Company Income Statement For the Month Ended October 31, 2020 Sales revenue $780,000 Less: Operating expenses Raw materials purchases $264,000 Empire Company Income Statement For the Month Ended October 31, 2020 Direct Jabor cost Advertising expense 190,000 90,000 Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense 75,000 60,000 45,000 31,000 28,000 12,000 Insurance expense 8,000 803,000 Net loss $(23,000) Prior to October 2020, 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 examining 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 Raw materials $18,000 $29,000 Work in process Finished goods 20,000 30,000 14,000 50,000 •2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities. Instructions •a. Prepare a schedule of cost of goods manufactured for October 2020. •b. Prepare a correct income statement for October 2020.
P19.5A (LO 3) Empire Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020. Prepare a cost of goods manufactured schedule and a correct income statement. Empire Company Income Statement For the Month Ended October 31, 2020 Sales revenue $780,000 Less: Operating expenses Raw materials purchases $264,000 Empire Company Income Statement For the Month Ended October 31, 2020 Direct Jabor cost Advertising expense 190,000 90,000 Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense 75,000 60,000 45,000 31,000 28,000 12,000 Insurance expense 8,000 803,000 Net loss $(23,000) Prior to October 2020, 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 examining 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 Raw materials $18,000 $29,000 Work in process Finished goods 20,000 30,000 14,000 50,000 •2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities. Instructions •a. Prepare a schedule of cost of goods manufactured for October 2020. •b. Prepare a correct income statement for October 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:QUESTION 5
P19.5A (Pg. 19-37)
P19.5A (LO 3) Empire Company is a manufacturer of smart phones. Its controller
resigned in October 2020. An inexperienced assistant accountant has prepared the
following income statement for the month of October 2020.
Prepare a cost of goods manufactured schedule and a correct income statement.
Empire Company
Income Statement
For the Month Ended October 31, 2020
Sales revenue
$780,000
Less: Operating expenses
Raw materials purchases
$264,000
Empire Company
Income Statement
For the Month Ended October 31, 2020
Direct labor cost
Advertising expense
190,000
90,000
Selling and administrative salaries
Rent on factory facilities
Depreciation on sales equipment
Depreciation on factory equipment
Indirect labor cost
Utilities expense
75,000
60,000
45,000
31,000
28,000
12,000
Insurance expense
8,000
803,000
Net loss
$(23,000)
Prior to October 2020, 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 examining 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
Raw materials
$18,000
$29,000
Work in process
Finished goods
20,000
14,000
30,000
50,000
•2. Only 75% of the utilities expense and 60% of the insurance expense apply
to factory operations. The remaining amounts should be charged to selling
and administrative activities.
Instructions
•a. Prepare a schedule of cost of goods manufactured for October 2020.
•b. Prepare a correct income statement for October 2020.
a. CGM $581,800
b. NI $ 2,000
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