
Income statement with variances:
The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement. In the income statement with variances, the balance of each variances account indicates the favorable and unfavorable variance at the end of the period.
Gross Profit:
Gross Profit is the difference between the net sales, and the cost of goods sold. Gross profit usually appears on the income statement of the company.
To prepare: An income statement through gross profit for the month ended March 31.

Explanation of Solution
The income statement through gross profit for the month ended March 31 for Company LB is as follows:
Company LB Income statement through gross profit For the month ended March 31,2016 |
|||
Sales
|
$1,000,000 | ||
Less: Cost of goods sold- at standards (1) | 675,200 | ||
Gross- profit- at standards | $324,800 | ||
Unfavorable $ (a) | Favorable $ (b) |
||
Less: Variances adjustments to gross profit at standards | |||
Direct materials price (5) | 2,050 | ||
Direct materials quantity (6) | (4,000) | ||
Direct labor rate (8) | (6,700) | ||
Direct labor time (9) | (21,000) | ||
Factory overhead controllable (11) | (3,240) | ||
Factory overhead volume (12) | (480) | ||
Net variances from |
(33,370) | ||
Gross-profit | $291,430 |
Table (1)
Working notes:
To determine the cost of goods sold-at standards:
Determine the direct materials:
Determine the direct labor:
Determine the factory overheads:
The direct materials price variance is determined as follows:
The direct materials quantity variance is determined as follows:
The direct labor rate variance is determined as follows:
The direct labor time variance is determined as follows:
Determine the standard direct labor hours:
Determine the variable factory overhead controllable variance.
The fixed factory overhead volume variance is determined as follows:
Standard hours for actual units produced are determined as follows:
Therefore, the gross profit for Company LB is $291,430.
Want to see more full solutions like this?
Chapter 22 Solutions
Financial & Managerial Accounting
- Can you explain this financial accounting question using accurate calculation methods?arrow_forwardIn the first two years of operations, Expos company reports taxable income of $125,000 and $65,000, respectively. In the first two years, the company paid $50,000 and $13,000. It is now the end of the third year, and the company has a loss of $160,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 25%. Required Compute the amount of income tax payable or receivable in the current (third) year.arrow_forwardFinancial Accountingarrow_forward
- Can you solve this financial accounting problem with appropriate steps and explanations?arrow_forwardPlease provide the answer to this financial accounting question using the right approach.arrow_forwardOn January 1, 2024, Sunfish Co. issued a $22 million, 8%, 6-year convertible bond with annual coupon payments. Each $1,000 bond was convertible into 35 shares of Sunfish's common shares. Shark Investments purchased the entire bond issue for $22.7 million on January 1, 2024. Shark estimated that without the conversion feature, the bonds would have sold for $21,013,098 (to yield 9%). On January 1, 2025, Shark converted bonds with a par value of $8.8 million. At the time of conversion, the shares were selling at $30 each. Required Prepare the journal entry to record the issuance of convertible bonds. Prepare the journal entry to record the conversion according to IFRS (book value method). Prepare the journal entry to record the conversion according ASPE (market value method).arrow_forward
- RoseBud Motel Ltd. (RM) had 100,000 ordinary shares outstanding during all of 2025, all owned by the owner Johnny Rose. In 2023, RM issued $500,000, 3% non-cumulative preferred shares. Each $100 preferred share is convertible into one ordinary share. RM also had 6,000, $100 cumulative preferred shares outstanding that are each entitled to an annual dividend of $1.60. Each preferred share is convertible into two ordinary shares. RM’s net income for the year ended December 31, 2025, was $400,000. Its income tax rate was 20%. The annual dividend was declared and paid during 2025 on the cumulative preferred shares but not on the non-cumulative shares. Required Calculate RM’s basic EPS for 2025. Are the non-cumulative convertible preferred shares dilutive or antidilutive in nature? The cumulative convertible preferred shares? Support your answer with calculations. Calculate RM’s diluted EPS for 2025.arrow_forwardGive correct answer this general accounting questionarrow_forwardHogwarts Inc. (HI) had 80,000 ordinary shares outstanding on January 1, 2025. Transactions throughout 2025 affecting its shareholdings follow. February 1: HI issued 200,000, $10, cumulative 10% preferred shares. March 1: HI issued 40,000 ordinary shares. April l: HI declared and issued an 8% stock dividend on the ordinary shares. July 1: HI repurchased and cancelled 30,000 ordinary shares. October 1: HI declared and issued a 3-for-l stock split on the ordinary shares. December 31: HI declared $99,600 in dividends on the ordinary shares. Net income for the year ended December 31, 2025, was $600,000. Its tax rate was 40%. Required What was the weighted average number of ordinary shares outstanding in 2025? What was the basic EPS in 2025? If the preferred shares issued on February 1, 2025, were non-cumulative, what would basic EPS for 2025 have been?arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning


