Accounting ACCT 2610 Chapter Notes - Chapter 7: Income Statement, Current Asset, Weighted Arithmetic Mean

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oliveleopard31

22 Feb 2017

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Chapter 7: Reporting and Interpreting Cost of Goods Sold and Inventory

1. cost of goods sold = on the income statement

a. cost of goods sold is subtracted from net sales to produce gross profit

on the income statement

2. inventory = tangible property that is held for sale in the normal course of

business or used to produce goods or services for sale

a. reported on the balance sheet as a current asset

b. manufacturing businesses hold three types of inventory

i. raw materials inventory = items acquired for processing into

finished goods

ii. work in process inventory = goods in the process of being

manufactured but not yet complete

iii. finished goods inventory = manufactured goods that are

complete and ready for sale

3. costs included in inventory purchases

a. goods in inventory initially recorded at cost

b. inventory cost includes the sum of the costs incurred in bringing an

article to usable or salable condition and location

i. freight charges, inspection and preparation costs

c. the company should cease accumulating purchase costs when the raw

materials are ready for use or when the merchandise inventory is

ready for shipment

4. flow of inventory costs

a. what happens when merchandise is purchased?

i. the merchandise inventory account is increased

b. what happens to cost of goods sold and merchandise inventory when

goods are sold?

i. cost of goods sold is increased and merchandise inventory is

decreased

c. merchandiser

i. stage 1: purchasing/production activities

1. merchandise purchased

ii. stage 2: additions to inventory on the balance sheet

1. merchandise inventory

iii. stage 3: sale – cost of goods sold on income statement

1. cost of goods sold

d. manufacturer

i. stage 1: purchasing/production activities

1. raw materials purchased

2. direct labor incurred

3. factory overhead incurred

ii. stage 2: additions to inventory on the balance sheet

1. raw materials inventory

2. work in process inventory

3. finished goods inventory

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Pirkl Corporation has providedthe following data for the month of March:

Inventories	Beginning		Ending
Raw materials	$	24,000	$	39,000
Work in process	$	13,000	$	20,000
Finished goods	$	46,000	$	35,000

Additional Information:


Raw materialspurchases	$	78,000
Direct laborcost	$	84,000
Manufacturingoverhead cost incurred	$	43,000
Indirect materialsincluded in manufacturing overhead cost incurred	$	6,400
Manufacturingoverhead cost applied to work in process	$	44,600

Required:
Prepare a Schedule ofCost of Goods Manufactured and a Schedule of Cost of Goods Sold.(Input all amounts as positive values. Omit the "$" sign inyour response.)

Schedule of Cost of Goods Manufactured
Directmaterials:
(Click to select)Beginning work inprocess inventoryBeginning finished goods inventoryEnding rawmaterials inventoryBeginning materials inventoryEnding work inprocess inventory	$
(Click to select)DeductAdd : (Clickto select)Ending work in process inventoryBeginning work in processinventoryFinished goods inventory, beginningPurchases of rawmaterialsRaw materials inventory, ending

Raw materials available for use
(Click to select)DeductAdd : (Clickto select)Ending work in process inventoryPurchases of rawmaterialsBeginning materials inventoryEnding raw materialsinventoryBeginning work in process inventory

Raw materials used in production
(Click to select)DeductAdd : (Clickto select)Beginning work in process inventoryindirect materialsincluded in manufacturing overhead incurredRaw materials inventory,endingEnding work in process inventoryRaw materials inventory,beginning
(Click toselect)Direct laborDirect materialsIndirect materialsIndirectlaborPurchase of raw materials		$
(Click to select)Rawmaterials inventory, endingEnding work in process inventoryRawmaterials inventory, beginningDirect laborPurchases of rawmaterials
(Click toselect)Manufacturing overhead applied to work in processinventoryBeginning work in process inventoryPurchases of rawmaterialsRaw materials inventory, beginningRaw materials inventory,ending

Total manufacturingcosts
(Click toselect)AddDeduct : (Click to select)Raw materials inventory,beginningRaw materials inventory, endingPurchases of rawmaterialsEnding work in process inventoryBeginning work in processinventory


(Click toselect)DeductAdd : (Click to select)Beginning work in processinventoryRaw materials inventory, beginningRaw materials inventory,endingPurchases of raw materialsEnding work in processinventory

Cost of goodsmanufactured		$

Schedule of Cost of Goods Sold
(Click toselect)Cost of goods manufacturedCost of goods available forsaleFinished goods inventory, endingOverapplied overheadFinishedgoods inventory, beginning	$
(Click toselect)DeductAdd : (Click to select)Unadjusted cost of goodssoldOverapplied overheadCost of goods manufacturedCost of goodsavailable for saleUnderapplied overhead

(Click toselect)Unadjusted cost of goods soldCost of goods available forsaleCost of goods manufacturedFinished goods inventory,beginningFinished goods inventory, ending
(Click toselect)AddDeduct : (Click to select)Overapplied overheadCost ofgoods manufacturedEnding finished goods inventoryUnderappliedoverheadCost of goods available for sale

(Click toselect)Finished goods inventory, beginningUnderappliedoverheadFinished goods inventory, endingUnadjusted cost of goodssoldCost of goods manufactured
(Click toselect)AddDeduct : (Click to select)Overapplied overheadCost ofgoods manufacturedUnderapplied overheadFinished goods inventory,endingCost of goods available for sale

Adjusted cost ofgoods sold	$

sangriaporpoise205

Determine the missing amounts in each of the following independent cases. Case A Case B Case C $240,000 7,500 15,000 Sales Beginning inventory, raw material Ending inventory, raw material Purchases of raw material Direct material used Direct labor Manufacturing overhead Total manufacturing costs Beginning inventory, work in process Ending inventory, work in process Cost of goods manufactured Beginning inventory, finished goods Cost of goods available for sale Ending inventory, finished goods Cost of goods sold Gross margin Selling and administrative expenses Income before taxes Income tax expense Net income 60,000 180,000 200,000 140,000 255,000 285,000 300,000 62,500 80,000 170,000 500,000 1,040,000 1,035,000 60,000 105,000 70,000 2,500 1,050,000 100,000 175,000 120,000 185,000 12,500 1,090,000 510,000 990,000 510,000 225,000 300,000 80,000 45,000 135,000 27,500

orangeraven660

Zachary Modems, Inc. acquired a subsidiary named Anywhere, Inc. (AI). AI manufactures a wireless modem that enables users to access the Internet through cell phones. The following trial balance was drawn from the accounts of the subsidiary:


Cash	$	184,600
Raw materials inventory		3,680
Work in process inventory		5,530
Finished goods inventory		6,450
Common stock			$	119,060
Retained earnings				81,200
Totals	$	200,260	$	200,260

The subsidiary completed the following transactions during 2017:

1. Paid $55,380 cash for direct raw materials.

2. Transferred $46,160 of direct raw materials to work in process.

3. Paid production employees $73,860 cash.

4. Applied $48,910 of manufacturing overhead costs to work in process.

5. Completed work on products that cost $150,410.

6. Sold products that cost $131,950 for $167,950 cash. Record the recognition of revenue in a row labeled 6a and the cost of goods sold in a row labeled 6b.

7. Paid $18,450 cash for selling and administrative expenses.

8. Actual overhead costs paid in cash amounted to $50,710.

9. Closed the Manufacturing Overhead account. The amount of over- or underapplied overhead was insignificant (immaterial).

10. Made a $4,580 cash distribution to the owners

REQUIRED

A. Prepare a schedule of cost of goods manufactured and sold.

ANYWHERE, INC.
Schedule of Cost of Goods Manufactured and Sold
For Year Ended December, 31 2017
Beginning raw materials inventory
Purchases
Raw materials available for use	0
Ending raw materials inventory
Direct raw materials used	0
Direct labor
Manufacturing overhead
Total manufacturing costs	0
Beginning work in process inventory
Total work in process inventory	0
Ending work in process inventory
Cost of goods manufactured	0
Beginning finished goods inventory
Cost of goods available for sale	0
Ending finished goods inventory
Cost of goods sold	$0

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Accounting ACCT 2610 Chapter Notes - Chapter 7: Income Statement, Current Asset, Weighted Arithmetic Mean

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