Swift Company Income Statement For the Month Ended August 31 $ 450,000 Sales... Less operating expenses: Direct labor cost....... Raw materials purchased Manufacturing overhead Selling and administrative expenses $ 70,000 165,000 85,000 142,000 462,000 Net operating loss.... $ (12,000) After seeing the $12,000 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets-if we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. Inventory balances at the beginning and end of August were: August 1 August 31 Raw materials. Work in process. Finished goods $8.000 $16,000 $13,000 $21,000 $40,000 $ 60,000 The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. 2. As a second step, prepare a new income statement for August. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the com- pany look for a buyer?
Swift Company Income Statement For the Month Ended August 31 $ 450,000 Sales... Less operating expenses: Direct labor cost....... Raw materials purchased Manufacturing overhead Selling and administrative expenses $ 70,000 165,000 85,000 142,000 462,000 Net operating loss.... $ (12,000) After seeing the $12,000 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets-if we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. Inventory balances at the beginning and end of August were: August 1 August 31 Raw materials. Work in process. Finished goods $8.000 $16,000 $13,000 $21,000 $40,000 $ 60,000 The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. 2. As a second step, prepare a new income statement for August. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the com- pany look for a buyer?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![PROBLEM 2-16 Schedule of Cost of Goods Manufactured; Income Statement [LO2, LO3, LO4, LO5]
Swift Company was organized on March 1 of the current year. After five months of start-up
losses, management had expected to earn a profit during August. Management was disappointed,
however, when the income statement for August also showed a loss. August's income statement
follows:
eXcel
Swift Company
Income Statement
For the Month Ended August 31
Sales...
Less operating expenses:
Direct labor cost.
Raw materials purchased
Manufacturing overhead
Selling and administrative expenses
$450,000
$ 70,000
165,000
85,000
142,000
462,000
Net operating loss
$ (12,000)
After seeing the S12,000 loss for August, Swift's president stated, "I was sure we'd be profitable
within six months, but our six months are up and this loss for August is even worse than July's. I
think it's time to start looking for someone to buy out the company's assets-if we don't, within a
few months there won't be any assets to sell. By the way, I don't see any reason to look for a new
controller. We'll just limp along with Sam for the time being."
The company's controller resigned a month ago. Sam, a new assistant in the controller's
office, prepared the income statement above. Sam has had little experience in manufacturing
operations.
Inventory balances at the beginning and end of August were:
August 1
August 31
Raw materials
Work in process.
Finished goods
$8,000
$13,000
$16,000
$21,000
$60,000
$40,000
The president has asked you to check over the income statement and make a recommendation
as to whether the company should look for a buyer for its assets.
Required:
1. As one step in gathering data for a recommendation to the president, prepare a schedule of
cost of goods manufactured for August.
2.
As a second step, prepare a new income statement for August.
3.
Based on your statements prepared in (1) and (2) above, would you recommend that the com-
pany look for a buyer?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd6540370-05b4-487f-841b-3c75203204db%2Fd924152a-bc29-4915-b231-21c5d9c2de48%2Fxq3qn1t_processed.jpeg&w=3840&q=75)
Transcribed Image Text:PROBLEM 2-16 Schedule of Cost of Goods Manufactured; Income Statement [LO2, LO3, LO4, LO5]
Swift Company was organized on March 1 of the current year. After five months of start-up
losses, management had expected to earn a profit during August. Management was disappointed,
however, when the income statement for August also showed a loss. August's income statement
follows:
eXcel
Swift Company
Income Statement
For the Month Ended August 31
Sales...
Less operating expenses:
Direct labor cost.
Raw materials purchased
Manufacturing overhead
Selling and administrative expenses
$450,000
$ 70,000
165,000
85,000
142,000
462,000
Net operating loss
$ (12,000)
After seeing the S12,000 loss for August, Swift's president stated, "I was sure we'd be profitable
within six months, but our six months are up and this loss for August is even worse than July's. I
think it's time to start looking for someone to buy out the company's assets-if we don't, within a
few months there won't be any assets to sell. By the way, I don't see any reason to look for a new
controller. We'll just limp along with Sam for the time being."
The company's controller resigned a month ago. Sam, a new assistant in the controller's
office, prepared the income statement above. Sam has had little experience in manufacturing
operations.
Inventory balances at the beginning and end of August were:
August 1
August 31
Raw materials
Work in process.
Finished goods
$8,000
$13,000
$16,000
$21,000
$60,000
$40,000
The president has asked you to check over the income statement and make a recommendation
as to whether the company should look for a buyer for its assets.
Required:
1. As one step in gathering data for a recommendation to the president, prepare a schedule of
cost of goods manufactured for August.
2.
As a second step, prepare a new income statement for August.
3.
Based on your statements prepared in (1) and (2) above, would you recommend that the com-
pany look for a buyer?
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