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Problem: 02

The following information has been taken from the accounting records of Klear-Seal Company for last year:

Selling expense

$140,000

Raw materials stock, 1 January

90,000

Raw material stock, 31 December

60,000

Utilities, factory

36,000

Direct Labor cost

150,000

Depreciation, factory

162,000

Purchase of raw material

750,000

Sales

2,500,000

Insurance, factory

40,000

Supplies, factory

15,000

Administrative expenses

270,000

Indirect labor

300,000

Maintenance, factory

87,000

Work in progress stock, 1 January

180,000

Work in progress stock, 31 December

100,000

Finished goods stock, 1 January

260,000

Finished goods stock, 31 December

210,000

Management wants to organize these data into a better format so that financial statements can be prepared for the year.

Required:

1. Prepare a schedule of cost of goods manufactured.

2. Compute the cost of goods sold

3. Using data as needed from 1 & 2 above, prepare a profit and loss account.

Solution:

Kiear-Seal Company Schedule of cost of goods manufactured For the year ended 31 December

 

Req-1 Cost of Goods Manufactured

   

Direct Materials:

   

Raw materials stock, 1 January

$90,000

 

Add: Purchases of raw materials

750,000

 

Raw materials available for use

840,000

 

Deduct: Raw materials stock, 31 December

60,000

 

Raw materials used in production

 

$780,000

Direct Labor

 

150,000

Manufacturing overhead:

   

Utilities, factory

36,000

 

Depreciation, factory

162,000

 

Insurance, factory

40,000

 

Supplies, factory

15,000

 

Indirect labor

300,000

 

Maintenance, factory

87,000

 

Total overhead costs

 

640,000

Total manufacturing costs

 

1,570,000

Add: Work in progress stock, 1 January

 

180,000

   

1,750,000

Deduct: Work in progress stock, 31 December

 

100,000

Cost of goods manufactured

 

$1,650,000

Req-2: Cost of goods sold

 

Finished goods stock, 1 January

$260,000

Add: Cost of goods manufactured

1,650,000

Goods available for sale

1,910,000

Deduct: Finished goods stock, 31 December

210,000

Cost of goods sold

$1,700,000

Req-3: Profit

   

Sales

 

$2,500,000

Less: Cost of goods sold

 

1,700,000

Gross margin

 

800,000

Less: Selling and Administrative expenses:

   

Selling expenses

$140,000

 

Administrative expenses

270,000

 

Total expenses

 

410,000

Profit

 

$390,000