ACC 560 Week 2 Assignment
P1-5A Tombert Company is a manufacturer of computers. Its controller resigned in October 2008. An inexperienced assistant accountant has prepared the following income statement for the month of October 2008.
TOMBERT COMPANY
Income Statement
For the Month Ended October 31, 2008
Sales (net) $780,000
Less: Operating expenses
Raw materials purchases $264,000
Direct labor cost 190,000
Advertising expense 90,000
Selling and administrative salaries 75,000
Rent on factory facilities 60,000
Depreciation on sales equipment 45,000
Depreciation on factory equipment 31,000
Indirect labor cost 28,000
Utilities expense 12,000
Insurance expense 8,000 803,000
Net loss $(23,000)
Prior to October 2008 the company had been profitable every month. The company's president is concerned about the accuracy of the income statement. As his friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.
1. Inventory balances at the beginning and end of October were:
October 1 October 31
Raw materials $18,000 $34,000
Work in process 16,000 14,000
Finished goods 30,000 48,000
2. Only 70% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.
Required:
a. Prepare a schedule of cost of goods manufactured for October 2008.
b. Prepare a correct income statement for October 2008
Click here for the solution: Tombert Company is a manufacturer of computers
