Problem 2-23A Schedules of Cost of Goods Manufactured and Cost of Goods Sold; In

ID: 2492550 • Letter: P

Question

Problem 2-23A Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement [LO2-6] Superior Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses $ 214,000 Purchases of raw materials $ 267,000 Direct labor ? Administrative expenses $ 153,000 Manufacturing overhead applied to work in process $ 333,000 Total actual manufacturing overhead costs $ 357,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 54,000 $ 31,000 Work in process ? $ 24,000 Finished goods $ 35,000 ? The total manufacturing costs for the year were $670,000; the cost of goods available for sale totaled $725,000; the unadjusted cost of goods sold totaled $663,000; and the net operating income was $34,000. The company’s overapplied or underapplied overhead is closed entirely to Cost of Goods Sold. Required:

a. Prepare a schedule of cost of goods manufactured.

b. Prepare a schedule of cost of goods sold.

c. Prepare an income statement for the year.

Explanation / Answer

Superior Company

Answer to part a.

Schedule of Cost of Goods Manufactured

For the Year Ended December 31

Direct materials:

Raw materials inventory, beginning (given)....................

$54,000

Add: Purchases of raw materials (given).........................

267,000

Raw materials available for use.......................................

321,000

Deduct: Raw materials inventory, ending (given)...........

31,000

Raw materials used in production...................................

$290,000

Direct labor (Balancing Figure)...........................................

23,000

Manufacturing overhead (given).........................................

357,000

Total manufacturing costs (given).......................................

670,000

Add: Work in process inventory, beginning (Balancing Figure)..............................................................................

44,000

714,000

Deduct: Work in process inventory, ending (given)...........

24,000

Cost of goods manufactured...............................................

$690,000

Answer to Part b.

The cost of goods sold section of the income statement follows:

Finished goods inventory, beginning (given).....................

$35,000

Add: Cost of goods manufactured (Balancing figure).......

690,000

Goods available for sale (given).........................................

725,000

Deduct: Finished goods inventory, ending (Balancing Figure)

62,000

Cost of goods sold (given).................................................

$663,000

* These items are computed by working backwards up through the statements.

Answer to Part c.

Income Statement

Net Sales

1,064,000

Less: Cost of goods sold

663,000

Less: Selling Expenses

214,000

Less: Administrative Expenses

153,000

Net Income

34,000