Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 25

Reconstruct Financial Statements

San Ysidro Company manufactures hiking equipment. The company’s administrative and manufacturing operations share the company's one building. Eighty percent of the building is used for manufacturing and the remainder is used for administrative activities. Indirect labor is 8 percent of direct labor.

The cost accountant at San Ysidro has compiled the following information for the year ended December 31:

	A	?B	?C
1	Administrative salaries	$ 192,000
2	Attorney fees to settle zoning dispute	22,960
3	Building depreciation (manufacturing portion only)	181,440
4	Cost of goods manufactured	2,776,760
5	Direct materials inventory, December 31	248,000
6	Direct materials purchased during the year	1,008,000
7	Direct materials used	1,069,880
8	Distribution costs	4,480
9	Finished goods inventory, January 1	224,000
10	Finished goods inventory, December 31	252,000
11	Insurance (on plant machinery)	53,200
12	Maintenance (on plant machinery)	33,880
13	Marketing costs	103,600
14	Other plant costs	82,160
15	Plant utilities	104,160
16	Sales revenue	4,550,000
17	Taxes on manufacturing property	38,800
18	Total (direct and indirect) labor	1,209,600
19	Work-in-process inventory, January 1	72,520
20	Work-in-process inventory, December 31	68,880
21

Required

Prepare a cost of goods manufactured and sold statement and an income statement.

Step 1 of 6

Income statement

Income statement is one of the financial statement prepared by the company which shows how much the company has earned by undertaking its business. The income statement shows the revenues for the year and expenses for business which company has incurred and the net figure of revenue less expenses shows the net income earned by the company. If the revenues are more than the expenses, company has net profit and if revenues are less than the expenses then the company would have net loss.