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Chapter 16: Q3TI (page 876)

ABC Manufacturing Company has the following data for 2019 (amounts in millions):

Direct Materials, January 1 $ 5

Direct Materials, December 31 7

Work-in-Process Inventory, January 1 12

Work-in-Process Inventory, December 31 16

Finished Goods Inventory, January 1 8

Finished Goods Inventory, December 31 6

Direct Materials Purchased, including Freight In 25

Direct Labor 36

Manufacturing Overhead 17

Prepare the schedule of cost of goods manufactured and the cost of goods sold section of the income statement for the year ended December 31, 2019.

Short Answer

Expert verified

The cost of goods manufactured is $72 and the cost of goods sold is $74.

Step by step solution

01

Preparation of schedule of cost of goods manufactured

02

Preparation of statement of cost of goods sold

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Most popular questions from this chapter

Match the term with the correct definition.

1. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services while meeting organizational objectives. Requires improving quality and eliminating defects and waste.

2. Use of the Internet for business functions such as sales and customer service. Enables companies to reach customers around the world.

3. Evaluating a company’s performance by its economic, social, and environmental impact.

4. Software system that integrates all of a company’s functions, departments, and data into a single system.

5. A system in which a company produces products just when they are needed to satisfy needs. Suppliers deliver materials when they are needed to begin production, and finished units are completed at the right time for delivery to customers.

a. ERP b. JIT c. E-commerce d. TQM e. Triple bottom line

What are prime costs? Conversion costs?

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

h. Cost to purchase wood pulp.

Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company

Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and income statement of Charlie Manufacturing Company. Fill in the blanks with the missing words, and replace the Xs with the correct amounts.

ing Direct Ending Direct Direct Manufacturing Overhead Total Costs Total Costs Ending Direct Materials Beginning Direct Materials Purchases of Direct Materials \( 26,000 \) X \( X X X (29,000) 177,000 50,000 \) X 51,000 81,000 (26,000) C

Net Sales Revenue Cost of Goods Sold Total Income Cost of Goods Sold: Gross Profit Expenses: Selling Expenses Administrative Expenses Cost of Goods Ending Beginning \( X 232,000 268,000 X 150,000 90,000 \) 118,000 X X X $ X CHARLIE MANUFACTURING COMPANY June 30

Question:Applying ethical standards

Natalia Wallace is the new controller for Smart Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, James Cauvet, the company president, asks Wallace how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 13% for the first time in the company’s five-year history. Cauvet explains that financial analysts have again predicted a 13% earnings growth for the company and that he does not intend to disappoint them. He suggests that Wallace talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:

a. Persuade suppliers to postpone billing \(13,000 in invoices until January 1.

b. Record as sales \)115,000 in certain software awaiting sale that is held in a public warehouse.

c. Delay the year-end closing a few days into January of the next year so that some of the next year’s sales are included in this year’s sales.

d. Reduce the estimated Bad Debts Expense from 5% of Sales Revenue to 3%, given the company’s continued strong performance.

e. Postpone routine monthly maintenance expenditures from December to January.

Requirements

1. Which of these suggested strategies are inconsistent with IMA standards?

2. How might these inconsistencies affect the company’s creditors and stockholders?

3. What should Wallace do if Cauvet insists that she follow all of these suggestions?
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