ACCT 2101 Lecture 6: Chapter 6 Notes - Accounting 2101

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greyleopard748

7 Nov 2017

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Chapter 6: inventory and cost of goods sold. Lo6-1 trace the flow of inventory costs from manufacturing companies to merchandising companies. Inventory: merchandise company, wholesaler, retailer, manufacturing company, raw materials, work in process, finished goods, key point, service companies record revenues when providing services to customers, merchandising and manufacturing companies record revenues when selling inventory to customers. Income before income taxes = operating income + investment income + (- Interest expense: net income = all revenues all expenses. Lo6-3 determine the cost of goods sold and ending inventory using different inventory cost methods. Inventory cost methods: specific identification, matches each unit of inventory with its actual cost, first-in, first-out (fifo, assumes first units purchased are first ones sold. Lifo method: cost of goods sold reflects current cost. Lifo conformity rule: companies that use lifo for tax reporting must also use lifo for. Lo6-4 explain the financial statement effects and tax effects of inventory cost methods average cost: perpetual vs.

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Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of May:

1		Rainier Company ($)	Yakima Company ($)
2	Materials inventory, May 1	100,000.00	48,200.00
3	Materials inventory, May 31	(a)	50,000.00
4	Materials purchased	950,000.00	710,000.00
5	Cost of direct materials used in production	938,500.00	(a)
6	Direct labor	2,860,000.00	(b)
7	Factory overhead	1,800,000.00	446,000.00
8	Total manufacturing costs incurred May	(b)	$2,484,200.00
9	Total manufacturing costs	5,998,500.00	2,660,600.00
10	Work in process inventory, May 1	400,000.00	176,400.00
11	Work in process inventory, May 31	382,000.00	(c)
12	Cost of goods manufactured	(c)	2,491,500.00
13	Finished goods inventory, May 1	615,000.00	190,000.00
14	Finished goods inventory, May 31	596,500.00	(d)
15	Sales	9,220,000.00	4,550,000.00
16	Cost of goods sold	(d)	2,470,000.00
17	Gross profit	(e)	(e)
18	Operating expenses	1,000,000.00	(f)
19	Net income	(f)	1,500,000.00

Required:

For both companies, determine the amounts of the missing items (A) through (F), identifying them by letter.
Prepare Yakima Company's statement of cost of goods manufactured for May.
Prepare Yakima Company's income statement for May.

sangriamarten871

1.) When products held in inventory are sold:

A.)Cost of Goods Sold is credited.

B.)Work in Process Inventory is credited.

C.)Finished Goods Inventory is credited.

D.)Finished Goods Inventory is debited.

2.)Since manufacturing costs (direct materials, direct labor,and overhead) are incurred in the process of manufacturing units ofproduct, these costs are credited t

A.)	The Direct Materials Inventory, Direct Labor, and ManufacturingOverhead accounts respectively.
B.)	Liability accounts.
C.)	The Work in Process Inventory account.
D.)	The Cost of Goods Sold account.

3.)Management accounting systems are designed to assistorganizations in the performance of all of the following functionsexcept:

A.)	The assignment of decision-making authority over companyassets.
B.)	Planning and decision-making.
C.)	Monitoring, evaluating, and rewarding performance.
D.)	The preparation of income tax returns.

4.)In a schedule of cost of finished goods manufactured, thefigure for total manufacturing costs:

	A.) May be less than the cost of direct materials used.
	B.) May be less than the direct labor costs assigned toproduction.
	C.) May be less than the manufacturing overhead applied toproduction.
	D.) May be less than the cost of finished goodsmanufactured.

5.) When a manufacturing company purchases raw materials orcomponent parts to be used in manufacturing finished goods, thesecosts are initially debited to:

	A.) Expense accounts.
	B.) Raw Materials Inventory.
	C.) Finished Goods Inventory.
	D.) Manufacturing Overhead.

6.) The wages paid to employees working directly on a company'sproducts would be shown as a:

	A.) Credit to Direct Labor.
	B.) Debit to Direct Labor.
	C.) Credit to Work in Process.
	D.) Debit to Manufacturing Overhead.

7.) Amounts credited to the Work in Process inventory accountmay best be described as:

	A.) The cost of finished goods manufactured.
	B.) Total manufacturing costs charged to production.
	C.) The cost of goods sold.
	D.) Direct materials purchased, direct labor costs paid, andpayments for items classified as manufacturing overhead.

chocolatetiger413

Exercise 10-14 Cost of goods manufactured and sold LO 10-5 Thefollowing information pertains to Flaxman Manufacturing Company forMarch 2018. Assume actual overhead equaled applied overhead. March1 Inventory balances Raw materials $ 125,000 Work in process118,900 Finished goods 77,200 March 31 Inventory balances Rawmaterials $ 86,700 Work in process 146,200 Finished goods 80,500During March Costs of raw materials purchased $ 119,000 Costs ofdirect labor 101,900 Costs of manufacturing overhead 62,700 Salesrevenues 359,000 Required Prepare a schedule of cost of goodsmanufactured and sold. Calculate the amount of gross margin on theincome statement.

ACCT 2101 Lecture 6: Chapter 6 Notes - Accounting 2101

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