Problem 3 (Textbook Reference: P2-3)-Prepare statement of costs of goods manufac

Question

Problem 3 (Textbook Reference: P2-3)-Prepare statement of costs of goods manufactured and an income statement Good Vibrations, Inc., produces recordings of musical performances. A newly hired executive of the company has asked you to sort through the records and prepare a statement of the company's cost of goods manufactured. You find the following data from records prepared by Good Vibrations, Inc., for the year ended December 31, 2013 Inventories Beginning Diect Materials Inventory, January 1, 2013 S 6,000 Ending Direct Materials Inventory, December, 31, 2013 S10,500 Beginning Work in Process Inventory, January 1, 2013 S10,000 Ending Work in Process Inventory, December 1, 2013 S 9,500 Materials Purchases Direct Labor Indirect Labor Factory Utilities Expense Factory Supplies Expense Depreciation Expense - Factory Buildng Depreciaton Expense-Factory Equpment Other Manufacturing Overhead Applied Manufacturing Overhead $50,000 $40,000 $15,000 S 7,000 5,000 $14,000 $10,500 $25,000 $76,500 You also learn that Beginning Finished Goods Inventory on January 1, 2013, was $20,000 and Ending Finished Goods Inventory on December 31, 2013, was S5,000. Sales for the year were 5400,000. Selling expenses were 550,000 and ative expenses were $75,000 Required Prepare a statement of cost of goods manufactured for Good Vibrations, Inc., for the year ended December 31, 2013 (Hint: Use the space below to recreate the T-Account Template we made together in class) Prepare an income statement for Good Vibrations, Inc., for the year ended December 31, 2013 a. b. ***Templates for (a) and (b) have been provided on the next page***

Explanation / Answer

Statement of Cost of Goods Manufactured Direct Materials Materials inventory,January 1 6,000 plus:material purchases 50,000 materials available for use 56,000 less:Materials inventory ,December 31 10,500 Materials used in production 45,500 Direct labor 40,000 Manufacturing overhead Applied manufacturing overhead 76,500 cost to manufacture 162,000 Plus :work in process inventory ,January 1 10,000 less:Work in process inventory ,December 31 9,500 Cost of goods manufactured 162,500 Income Statement Sales 400,000 less:Cost of goods sold finished goods inventory ,January 1 20,000 Cost of goods manufactured 162,500 cost of goods available for sale 182,500 less:Finished goods inventory,December 31 5,000 cost of goods sold 177,500 Gross margin 222,500 less:operating expense Selling expenses 50,000 Administrative expense 75,000 total operating expense 125,000 operating income 97,500

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