Accounting
The following income statement for 2015 was prepared by an inexperienced accountant:
Sales (net) Less: Operating expenses $675,000 Raw materials purchased $200,000 Direct labour costs $160,000 Advertising expense $ 75,000 Selling and admin salaries $ 70,000 Rent on factory facilities $ 60,000 Depreciation — Sales equipment $ 50,000 Depreciation — Factory equipment $ 35,000 Indirect labour cost $ 20,000 Utilities expense $ 10,000 Insurance expense $ 5,000 $685.000 Net loss $ (10,000)
The company president is concerned about the statement’s accuracy. Additional information is as follows: Inventory balances Beginning of year End of year RM $19,500 $30,000 WIP $25,000 $21,000 FG $40,000 $64,000
Only 60% of the utilities expense and 70% of the insurance expense apply to factory operations. The rest apply to selling and administration operations.
Required: Correct the income statement, and prepare a cost of goods manufactured statement for the year.
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