The following calendar year-end information is taken from the December 31, 2015,

Question

The following calendar year-end information is taken from the December 31, 2015, adjusted trial balance and other records of Leone Company. Advertising expense $ 25,300 Direct labor $ 675,700 Depreciation expense—Office equipment 11,000 Income taxes expense 266,400 Depreciation expense—Selling equipment 10,500 Indirect labor 57,400 Depreciation expense—Factory equipment 36,900 Miscellaneous production costs 10,600 Factory supervision 120,800 Office salaries expense 61,000 Factory supplies used 8,900 Raw materials purchases 954,000 Factory utilities 35,000 Rent expense—Office space 20,000 Inventories Rent expense—Selling space 26,500 Raw materials, December 31, 2014 168,200 Rent expense—Factory building 79,700 Raw materials, December 31, 2015 185,000 Maintenance expense—Factory equipment 35,700 Work in process, December 31, 2014 16,600 Sales 4,605,900 Work in process, December 31, 2015 19,900 Sales salaries expense 397,200 Finished goods, December 31, 2014 160,300 Finished goods, December 31, 2015 136,300

Prepare the company’s 2015 schedule of cost of goods manufactured.

Prepare the company’s 2015 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.

Explanation / Answer

Manufacturing Statement Direct materials Raw materials, December 31, 2014 1,68,200 Raw materials purchases 9,54,000 Raw materials available for use 11,22,200 Less Raw materials, December 31, 2015 1,85,000 Direct materials used 9,37,200 Direct labor 6,75,700 Factory overhead Factory supervision 1,20,800 Factory supplies used 8,900 Factory utilities 35,000 Maintenance expense—Factory equipment 79,700 Rent expense—Factory building 20,000 Depreciation expense—Factory equipment 36,900 Indirect labor 57,400 Miscellaneous production costs 10,600 Total factory overhead costs 3,69,300 Total manufacturing costs 19,82,200 Work in process, December 31, 2014 16,600 Total cost of goods in process 19,98,800 Less Work in process, December 31, 2015 19,900 Cost of goods manufactured 19,78,900 Income statement Sales 46,05,900 Cost of goods sold Cost of goods manufactured 19,78,900 Finished goods, December 31, 2014 1,60,300 Goods available for sale 21,39,200 Finished goods, December 31, 2015 1,36,300 Cost of goods sold 20,02,900 Gross profit from sales 26,03,000 Operating expenses Selling expenses Depreciation expense—Selling equipment 10,500 Rent expense—Selling space 26,500 Sales salaries expense 3,97,200 Advertising expense 25,300 Total selling expenses 4,59,500 General and administrative expenses Rent expense—Office space 20,000 Office salaries expense 61,000 Depreciation expense—Office equipment 11,000 Total general and administrative expenses 92,000 Total operating expenses 5,51,500 Income before state and federal taxes 20,51,500 Income taxes expense 2,66,400 Net income 17,85,100

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