1) Introduction: Cost of Goods Sold: • Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead . • Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period. • Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses. Contingent expenses and contingent liabilities • These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events. • An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period. • Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements. To Determine: Why shipping, handling and warranty expenses are included in the cost of goods sold.

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Answer 1

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 20, Problem 1BTN

To determine

1)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

Why shipping, handling and warranty expenses are included in the cost of goods sold.

To determine

2)

Introduction:

Effect of costs on Profits

• Profitability analysis takes place after costs have been allocated and bifurcated into direct and indirect costs.

• Direct costs are costs directly attributable to cost of goods sold such as material, labor and overheads. Indirect costs are costs indirectly attributable to cost of goods sold such as selling and distribution expenses.

• Inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold leads to reduced profitability and has an adverse impact on ratio analysis of financial statements.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

• Examples of Ratios for analysis of financial statements includes Net profit Margin Ratio, Asset Turnover ratio etc.

To Determine:

Effect of inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold and analysis of financial statements.

To determine

3)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

If policy with respect to costs included in cost of sales have changed.

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Reciprocal Method Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments: Support Departments Producing Departments General Factory Receiving Assembly Finishing Direct overhead $400,000 $150,000 $45,000 $71,000 Square footage 2,700 5,400 5,400 Number of receiving orders 300 1,680 1,020 Direct labor hours 25,000 40,000 Required: 1. Allocate the overhead costs of the support departments to the producing departments using the reciprocal method. (Round allocation ratios to two decimal places. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".) Allocation ratios: Square footage General Factory Receiving Assembly Finishing 0 0 Number of receiving orders 0.10 0 0.56 0.34 Allocations: Direct overhead cost General Factory Receiving Total General Factory Receiving Assembly Finishing $ $ $ $ 400,000 150,000 45,000 71,000 $ $ $ $ 2. Using direct labor hours, compute departmental overhead…

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Windsor Fabrication estimates its manufacturing overhead to be $720,000 and its direct labor costs to be $600,000 for year 5. Windsor worked three jobs for the year. Job 5-1, which was sold during year 5, had actual direct labor costs of $180,000. Job 5-2, which was completed but not sold at the end of the year, had actual direct labor costs of $270,000. Job 5-3, which is still in work-in-process inventory, had actual direct labor costs of $150,000. The actual manufacturing overhead for year 5 was $700,000. Manufacturing overhead is applied on the basis of direct labor costs. a) How much overhead was applied to each job in year 5? b) What was the over- or underapplied manufacturing overhead for year 5?

Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 20, Problem 1BTN

To determine

1)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

Why shipping, handling and warranty expenses are included in the cost of goods sold.

To determine

2)

Introduction:

Effect of costs on Profits

• Profitability analysis takes place after costs have been allocated and bifurcated into direct and indirect costs.

• Direct costs are costs directly attributable to cost of goods sold such as material, labor and overheads. Indirect costs are costs indirectly attributable to cost of goods sold such as selling and distribution expenses.

• Inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold leads to reduced profitability and has an adverse impact on ratio analysis of financial statements.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

• Examples of Ratios for analysis of financial statements includes Net profit Margin Ratio, Asset Turnover ratio etc.

To Determine:

Effect of inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold and analysis of financial statements.

To determine

3)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

If policy with respect to costs included in cost of sales have changed.

Expert Solution & Answer

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Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 20, Problem 1BTN

To determine

1)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

Why shipping, handling and warranty expenses are included in the cost of goods sold.

To determine

2)

Introduction:

Effect of costs on Profits

• Profitability analysis takes place after costs have been allocated and bifurcated into direct and indirect costs.

• Direct costs are costs directly attributable to cost of goods sold such as material, labor and overheads. Indirect costs are costs indirectly attributable to cost of goods sold such as selling and distribution expenses.

• Inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold leads to reduced profitability and has an adverse impact on ratio analysis of financial statements.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

• Examples of Ratios for analysis of financial statements includes Net profit Margin Ratio, Asset Turnover ratio etc.

To Determine:

Effect of inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold and analysis of financial statements.

To determine

3)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

If policy with respect to costs included in cost of sales have changed.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 20, Problem 1BTN

To determine

1)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

Why shipping, handling and warranty expenses are included in the cost of goods sold.

To determine

2)

Introduction:

Effect of costs on Profits

• Profitability analysis takes place after costs have been allocated and bifurcated into direct and indirect costs.

• Direct costs are costs directly attributable to cost of goods sold such as material, labor and overheads. Indirect costs are costs indirectly attributable to cost of goods sold such as selling and distribution expenses.

• Inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold leads to reduced profitability and has an adverse impact on ratio analysis of financial statements.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

• Examples of Ratios for analysis of financial statements includes Net profit Margin Ratio, Asset Turnover ratio etc.

To Determine:

Effect of inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold and analysis of financial statements.

To determine

3)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

If policy with respect to costs included in cost of sales have changed.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 20, Problem 1BTN

To determine

1)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

Why shipping, handling and warranty expenses are included in the cost of goods sold.

To determine

2)

Introduction:

Effect of costs on Profits

• Profitability analysis takes place after costs have been allocated and bifurcated into direct and indirect costs.

• Direct costs are costs directly attributable to cost of goods sold such as material, labor and overheads. Indirect costs are costs indirectly attributable to cost of goods sold such as selling and distribution expenses.

• Inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold leads to reduced profitability and has an adverse impact on ratio analysis of financial statements.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

• Examples of Ratios for analysis of financial statements includes Net profit Margin Ratio, Asset Turnover ratio etc.

To Determine:

Effect of inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold and analysis of financial statements.

To determine

3)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

If policy with respect to costs included in cost of sales have changed.

Answer 6

Chapter 20, Problem 1BTN

To determine

1)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

Why shipping, handling and warranty expenses are included in the cost of goods sold.

Answer 7

Chapter 20, Problem 1BTN

To determine

1)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

Why shipping, handling and warranty expenses are included in the cost of goods sold.

Answer 8

To determine

2)

Introduction:

Effect of costs on Profits

• Profitability analysis takes place after costs have been allocated and bifurcated into direct and indirect costs.

• Direct costs are costs directly attributable to cost of goods sold such as material, labor and overheads. Indirect costs are costs indirectly attributable to cost of goods sold such as selling and distribution expenses.

• Inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold leads to reduced profitability and has an adverse impact on ratio analysis of financial statements.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

• Examples of Ratios for analysis of financial statements includes Net profit Margin Ratio, Asset Turnover ratio etc.

To Determine:

Effect of inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold and analysis of financial statements.

Answer 9

To determine

2)

Introduction:

Effect of costs on Profits

• Profitability analysis takes place after costs have been allocated and bifurcated into direct and indirect costs.

• Direct costs are costs directly attributable to cost of goods sold such as material, labor and overheads. Indirect costs are costs indirectly attributable to cost of goods sold such as selling and distribution expenses.

• Inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold leads to reduced profitability and has an adverse impact on ratio analysis of financial statements.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

• Examples of Ratios for analysis of financial statements includes Net profit Margin Ratio, Asset Turnover ratio etc.

To Determine:

Effect of inclusion of items such as of shipping, handling and warranty expenses in the cost of goods sold and analysis of financial statements.

Answer 10

To determine

3)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

If policy with respect to costs included in cost of sales have changed.

Answer 11

To determine

3)

Introduction:

Cost of Goods Sold:

• Cost of goods manufactured is the total cost of producing goods that are later sold to realize revenues. It includes direct and indirect materials, labor and overhead.

• Cost of Goods sold is used to compute the cost of producing goods and selling goods for a particular period.

• Cost of Goods sold comprises of Cost of Materials, Labor and Overhead attributable to goods manufactured i.e. Cost of Goods Manufactured as well as selling and distribution costs such as shipping and handling expenses.

Contingent expenses and contingent liabilities

• These are expenses and liabilities that are conditional in nature and their future occurrence is conditional on the happening or not happening of certain events.

• An example of this category of expense and liability are warranties. Warranty expenses and warranty liability refer to the costs of repairing defect products that have been sold and are in the warranty period.

• Every sold finished good comes with a warranty. A warranty can be invoked when the product is defective and there is no fault of the consumer. Warranty costs are recorded as estimates based on studies and past trends in the financial statements.

To Determine:

If policy with respect to costs included in cost of sales have changed.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 20 - Prob. 1DQ Ch. 20 - Prob. 2DQ Ch. 20 - Prob. 3DQ Ch. 20 - Prob. 4DQ Ch. 20 - Prob. 5DQ Ch. 20 - Prob. 6DQ Ch. 20 - Prob. 7DQ Ch. 20 - Prob. 8DQ Ch. 20 - Prob. 9DQ Ch. 20 - Prob. 10DQ

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