Dibene
Company is a manufacturer of computers. Its controller resigned in October
2012. An inexperienced assistant accountant has prepared the following income
statement for the month of October 2012.
P19-5A, Prepare a cost of goods manufactured
schedule and a correct income statement.
P19-5A Dibene Company is a manufacturer of computers. Its
controller resigned in October 2012. An inexperienced assistant accountant has
prepared the following income statement for the month of October 2012.
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DIBENE COMPANY
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Income Statement
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For the Month Ended October 31, 2012
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Sales (net)
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$780,000
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Less: Operating expenses
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Raw materials purchases
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$264,000
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Direct labor cost
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190,000
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Advertising expense
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90,000
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Selling and administrative salaries
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75,000
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Rent on factory facilities
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60,000
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Depreciation on sales equipment
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45,000
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Depreciation on factory equipment
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31,000
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Indirect labor cost
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28,000
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Utilities expense
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12,000
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Insurance expense
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8,000
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803,000
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Net loss
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($23,000)
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Prior to
October 2012, the company had been profitable every month. The company’s
president is concerned about the accuracy of the income statement. As her
friend, you have been asked to review the income statement and make necessary
corrections. After examining other manufacturing cost data, you have acquired
additional information as follows.
1.
Inventory balances at the beginning and end of October were:
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October 1
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October 31
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Raw materials
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$18,000
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$34,000
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Work in process
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16,000
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14,000
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Finished goods
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30,000
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48,000
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2. Only 70%
of the utilities expense and 60% of the insurance expense apply to factory
operations.
The
remaining amounts should be charged to selling and administrative activities.
Instructions
(a) Prepare a
schedule of cost of goods manufactured for October 2012.
(b) Prepare
a correct income statement for October 2012.
TUTORIAL PREVIEW
(a) Prepare a
schedule of cost of goods manufactured for October 2012.
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DIBENE COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended October 31, 2012
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Work in process, October 1
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$16,000
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Direct materials
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Raw materials inventory, October 1
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$18,000
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Raw materials purchases
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264,000
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Total Raw materials available for use
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282,000
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Less: Raw materials inventory, October 31
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34,000
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