Question

The following selected account balances are provided for Delray Mfg.

Sales $ 1,250,000
Raw materials inventory, Dec. 31, 2016 37,000
Work in process inventory, Dec. 31, 2016 53,900
Finished goods inventory, Dec. 31, 2016 62,750
Raw materials purchases 175,600
Direct labor 225,000
Factory computer supplies used 17,840
Indirect labor 47,000
Repairs—Factory equipment 5,250
Rent cost of factory building 57,000
Advertising expense 94,000
General and administrative expenses 129,300
Raw materials inventory, Dec. 31, 2017 42,700
Work in process inventory, Dec. 31, 2017 41,500
Finished goods inventory, Dec. 31, 2017 67,300
Prepare an income statement for Delray Mfg. (a manufacturer).

DELRAY MFG. Income Statement For Year Ended December 31, 2017 Cost of goods sold: Cost of goods available for sale Cost of goods sold Operating expenses: Total operating expenses Operating income

Answer 1

Answer:

                  DELRAY MFG.  

               Income Statement  

For the year ended December 31, 2017  

 

Sales                           $1,250,000

Cost of goods sold       623,840

Gross profit                        626,160

General and

Administrative expenses       129,300

Net Income                    $496,860

 

              DELRAY MFG.  

Statement of Cost of Goods Sold  

For the year December 31, 2017  

 

Raw Material  

Raw material, beginning     $37,000

Add: Purchases                      175,600

Raw materials available    $212,600

Less: Raw material, end        42,700

Cost of raw material used      169,900

Add: Direct labor                     225,000

Prime Cost                             394,900

Add: Manufacturing overhead       221,090

Manufacturing cost              615,990

Add: Work in process, beginning    53,900

Less: Work in process, Ending       41,500

Cost of Goods Manufactured    628,390

Add: Finished goods, beginning      62,750

Cost of goods available for sale     691,140

Less: Finished goods, ending         67,300

Cost of goods sold         $623,840

Explanation:

Income statement is computed by deducting cost of goods sold from the sales of the period to get the gross profit, then deduct the general and administrative expenses to get the net income for the period.

To compute cost of goods sold it started from the raw materials beginning inventory then add the purchases of the raw materials including the handling cost to get the raw materials available. Then deduct the raw materials end to get the cost of raw material used for the period. Add direct labor to get the prime cost and then add manufacturing overhead to the prime cost to get the manufacturing cost. Lastly, add work in process beginning and deduct the work in process end to get the cost of goods manufactured then add the finished goods beginning to get the cost of goods available for sale. And from there we deduct the finished goods ending inventory to get the cost of goods sold for the period.

Answer 2

The income statement of Delray Mfg. is given in the attachment below:

Income statement:

Income statement is one of the financial statement that shows the revenues and expenses of an entity for a specific period or financial year. It further calculates the profit or loss for the year.

For the purpose of calculating profit/loss, the cost of goods sold and indirect operating expenses are deducted from the sales.

Cost of goods sold:

Cost of goods sold includes all the direct expenses incurred on the production of finish goods. Indirect expenses do not form part of cost of goods sold.

 

Operating expenses:

Operating expenses refers to all the expense either direct or indirect that are incurred to operate a business or product. These include all the day to day expense of an entity.

Total operating expense for the given question are:

Factory computer supplies used              17,840

Repairs—Factory equipment                      5,250

Rent cost of factory building                     57,000

Advertising expense                                  94,000

General and administrative expenses    129,300

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