Question: suppliers that carry out services, such together Ernst & Young (accounting) and also Accenture LLP (consulting), execute not sell goods and also therefore have no inventory. The accounting procedure and income statement for business companies are reasonably simple. Merchandising companies (also referred to as retail companies) like Macy’s and Home Depot buy and sell goods but typically carry out not to produce goods. Due to the fact that merchandising companies have to account because that the purchase and also sale that goods, their accounting systems room more complex than those of business companies. Production companies, such together Johnson & Johnson and Honda engine Company, produce and also sell goods. Such suppliers require an bookkeeping system the goes fine beyond audit solely because that the purchase and also sale of goods. Why are audit systems more complicated for manufacturing companies?

 

Answer: accountancy systems room more facility for production companies because they require a device that tracks manufacturing expenses throughout the production procedure to the allude at which products are sold. Because income explanation for manufacturing companies have tendency to be more complicated than for company or merchandising companies, we devote this section to revenue statements for production companies. Understanding earnings statements in a manufacturing setup begins through the inventory price flow equation.

You are watching: Which of the following is not an example of an inventory account a manufacturing firm might use?


Inventory price Flow Equation

Question: How do companies usage the cost flow equation to calculate unknown balances?

 

Answer: We deserve to use the straightforward cost circulation equation to calculate unknown balances because that just about any balance paper account (e.g., cash, accounts receivable, and inventory). The equation is together follows:


Key Equation

beginning balance (BB) + transfers in (TI) – ending balance (EB) = Transfers out (TO)

We will use this equation to the 3 inventory asset accounts debated earlier (raw materials, occupational in process, and finished goods) to calculation the cost of raw materials used in production, expense of goods manufactured, and also cost of products sold.

Raw products used in production shows the cost of direct and also indirect materials inserted into the production process. Cost of products manufactured to represent the expense of goods completed and transferred out of work-in-process (WIP) inventory right into finished products inventory. Cost of goods sold represents the expense of goods that space sold and transferred the end of finished products inventory into expense of items sold.

Accountants require all these amounts—raw materials inserted in production, expense of items manufactured, and cost of products sold—to prepare an income statement because that a manufacturing company. We define how to calculation these amounts using 3 formal schedules in the adhering to order:

Schedule of raw materials placed in production Schedule of price of items manufactured Schedule of cost of goods sold

 

Question: The simple cost circulation equation have the right to be used in three supporting schedules to assist us identify the expense of goods sold quantity on the revenue statement for production companies. What info is included in these schedules, and what execute they look favor for custom Furniture Company?

 

Answer: number 1.7 "Income Statement schedules for practice Furniture Company" reflects these three schedules for custom Furniture firm for the month that May. As you evaluation these schedules, keep in mind that each schedule gives information forced for the next schedule, as indicated by the arrows. Psychic the inventory expense flow equation is provided for every schedule. This is why you check out abbreviations for each element of the equation: start balance (BB), transfers in (TI), ending balance (EB), and transfers the end (TO).

The goal of going v the process shown in number 1.7 "Income Statement schedules for tradition Furniture Company" is to come at a cost of items sold amount, which is gift on the revenue statement. Tradition Furniture Company’s earnings statement for the month finished May 31 is shown in figure 1.8 "Income declare for custom Furniture Company". Together you review number 1.7 "Income Statement schedule for tradition Furniture Company" and Figure 1.8 "Income statement for practice Furniture Company", look earlier at figure 1.6 "Flow the Product expenses through Balance Sheet and Income explain Accounts" to watch how costs flow v the three inventory accounts and the price of items sold account.

In thing 2 "How Is project Costing offered to Track production Costs?", we administer the comprehensive information necessary to prepare the schedules and income statement presented in number 1.7 "Income Statement schedule for tradition Furniture Company" and also Figure 1.8 "Income declare for tradition Furniture Company". In ~ this point, your task is come understand just how we use the inventory cost flow equation to calculation raw materials inserted in production, price of items manufactured, and also cost of products sold. (Note: service providers using a perpetual inventory mechanism do not necessarily prepare this formal schedules because perpetual equipment update records instantly when perform is transferred from one perform account to another. However, these service providers take a physical count periodically come ensure the accuracy of perform accounts and also use the price flow equation and similar schedules to ensure your perpetual system balances room accurate. Note 1.62 "Business in activity 1.8" shows exactly how the cost flow equation deserve to be offered to analysis the effects of fraud that was allegedly cursed at Rite Aid.)


Figure 1.7 earnings Statement schedules for custom Furniture Company

*

a From the company’s balance paper at April 30 (April 30 ending balance is the very same as may 1 start balance).

b From the that company balance sheet at may 31.

c This is actual manufacturing overhead for the period and includes indirect materials, indirect labor, factory rent, manufacturing facility utilities, and other factory-related expenses for the month. In chapter 2 "How Is task Costing provided to Track production Costs?", we look in ~ an alternate approach come recording production overhead referred to as normal costing.


Figure 1.8 revenue Statement for tradition Furniture Company

*

*$135,000 originates from the schedule of expense of items sold in number 1.7 "Income Statement schedule for tradition Furniture Company".


Business in activity 1.8

Using the cost Flow Equation to analysis Fraud

Rite assist Corporation operates 3,400 drug stores in the unified States. In 2002, the Securities and also Exchange the supervisory board (SEC) filed bookkeeping fraud charges versus several former executives the Rite Aid. The SEC complaint alleged the Rite Aid had substantially overstated income for number of years.

According to the complaint, Rite Aid executives committed financial fraud in several areas, among which associated inventory. In ~ the end of the company’s budget year, the physics inventory count proved $9,000,000 much less than Rite Aid’s perform balance ~ above the books, presumably as result of physical destruction of the items or theft. Rite Aid executives accused failed to document this shrinkage, thereby overstating ending inventory ~ above the balance sheet and understating expense of goods sold on the revenue statement.

Using the cost flow equation, you deserve to see how failing to record the $9,000,000 loss would understate price of products sold.



By failing to record the inventory loss, Rite Aid exaggeration inventory (an asset) top top the balance paper by $9,000,000 and understated expense of goods sold (an expense) through $9,000,000 ~ above the revenue statement. This at some point increased benefit by $9,000,000 since reported expenses were also low.

This perform fraud to be a relatively small part of the fraud allegedly committed by Rite Aid executives. In fact, Rite Aid’s net income was restated bottom by $1,600,000,000 in 2002. Several former executives pled guilty to conspiracy charges. The previous chief executive, martin Grass, was sentenced to eight years in prison and the former chief jae won officer, Franklyn Bergonzi, to be sentenced come 28 month in prison. Rite Aid’s stock dropped from a high that $50 every share to $5 every share in 2003.


Sources: Securities and also Exchange Commission, “Release 2002–92,” news release, http://www.sec.gov; AP wires dated July 10, 2003, and also May 27, 2004.


Manufacturing matches Merchandising earnings Statements

Question: manufacturing companies plainly have more complicated accounting solution to account for every the costs affiliated in producing products. However, the earnings statement for a manufacturing agency is no all the much various than the income statement for a merchandising company. What are main differences in between manufacturing and also merchandising firm income statements?

 

Answer: The primary distinctions are as follows:

Merchandisers purchase items from suppliers instead of manufacturing goods. The price of these purchases from companies is often dubbed net purchases in the revenue statement, in comparison to cost of products manufactured in a manufacturer’s earnings statement. The net purchases line consists of purchases, purchase returns and allowances, purchases discounts, and also freight in. Merchandisers do not use the schedule of cost of products manufactured (and connected schedule of raw materials put in production). Merchandisers use an account dubbed merchandise inventory, or just inventory, rather of finished products inventory. This reflects that merchandisers perform not develop goods.

Table 1.5 "Income explain Terminology in Manufacturing and also Merchandising Companies" summarizes the differences in revenue statement terminology between manufacturing companies and merchandising companies.


Table 1.5 income Statement hatchet in Manufacturing and also Merchandising Companies

The adhering to terms are used by manufacturing and also merchandising companies: sales, cost the goods obtainable for sale, cost of goods sold, operating expenses, selling, general and also administrative, and also operating profit.
Finished goods inventory is supplied by manufacturing companies. Merchandise inventory is provided by merchandising companies.
Cost of products manufactured is used by manufacturing companies. Net purchases is provided by merchandising companies.

Figure 1.9 "Merchandising firm Income Statement for Fashion, Inc." presents an earnings statement for Fashion, Inc., a retail firm that sells clothing. Notification that the schedule of cost of products manufactured (and related schedule of raw materials put in production) is not necessary for merchandising companies, and the state merchandise inventory and net purchases are used instead of finished goods inventory and cost of items manufactured. Also, the schedule of price of items sold is simply consisted of in the earnings statement. Plenty of companies favor this method because it means they do not have to prepare a different schedule.


Figure 1.9 Merchandising firm Income Statement because that Fashion, Inc.

*

Key Takeaways

Three schedule are crucial to prepare an income statement because that a manufacturing company, in the following order:

Schedule of life materials inserted in production, i beg your pardon shows cost of straight materials included to work-in-process inventory and cost of indirect materials added to manufacturing overhead Schedule of expense of products manufactured, i beg your pardon shows cost of products completed and also transferred out of work-in-process inventory right into finished goods inventory Schedule of cost of items sold, which shows cost of goods sold and also transferred out of finished products inventory into expense of products sold The revenue statements of merchandising carriers differ from those of manufacturing companies in numerous areas. Merchandising companies execute not usage a schedule of raw materials put in production or a schedule of cost of products manufactured, and also they usage a merchandise inventory account rather of a finished goods inventory account. In addition, they usage the term net purchases instead of expense of goods manufactured and also often include the schedule of price of items sold in the earnings statement quite than presenting that separately.

Review difficulty 1.8

Fine Cabinets, Inc., produces practice cabinets. The following inventory balances showed up on its balance sheet. (Note that the most existing financial information is presented in the very first column.)


December 31, 2012 December 31, 2011
Raw materials inventory $ 8,000 $ 10,000
Work-in-process inventory 600,000 550,000
Finished items inventory 350,000 410,000

Fine Cabinets had actually $1,265,000 in sales because that the year ended December 31, 2012. The agency also had the following costs for the year:


Selling $ 90,000
General and administrative $240,000
Raw products purchases $100,000
Direct labor offered in production $125,000
Manufacturing overhead $630,000

Of the total raw materials inserted in manufacturing for the year, $12,000 was for indirect materials and must be deducted come find straight materials inserted in production.

Required:

Prepare the schedules noted in the complying with for the year ended December 31, 2012. Use the format presented in number 1.7 "Income Statement schedule for tradition Furniture Company". (Note that number 1.7 "Income Statement schedule for custom Furniture Company" shows details for a month and also this review problem presents info for a year.)

Schedule of raw materials inserted in manufacturing Schedule of expense of items manufactured Schedule of cost of items sold

Solution to Review problem 1.8

 

 

 


*

*

*$90,000 originates from the direct materials placed in manufacturing in component 1a.


*

*$795,000 originates from the price of goods manufactured (TO) in component 1b.


End-of-Chapter Exercises

Questions

define the features of managerial accounting and jae won accounting. What room nonfinancial steps of performance? carry out several examples.

Which accountant (financial or managerial) would prepare each of the following reports:

revenue statement for the Chevrolet department of General Motors Balance sheet because that PepsiCo all set in accordance v U.S. GAAP The Boston Symphony Orchestra’s budgeted income statement for following quarter Defect rate of computer system chips created by Intel declare of cash flows because that Hewlett-Packard prepared in accordance with U.S. GAAP define the planning and also control attributes performed by most managers. What is the controller’s main responsibility? just how do the treasurer’s responsibilities differ native those the the controller? describe why ethical habits is so important for finance and accounting personnel. What is one enterprise source planning system? Why do manufacturing companies use product costing equipment to track costs throughout the manufacturing process? describe manufacturing costs and also nonmanufacturing costs. Provide examples of each. Describe the difference in between direct materials and also direct job versus indirect materials and indirect labor. Why are the state product costs and period costs provided to describe manufacturing costs and nonmanufacturing costs? how does the time of recording expenses differ between product and period costs? explain the three inventory accounts provided to record product costs. What space the three categories that product expenses that circulation through the work-in-process list account? describe each one. As soon as is the cost of goods sold account (often dubbed cost that sales) used, and also how is the dissension amount videotaped in this account determined? how does a merchandising company income statement differ from a manufacturing agency income statement?

Brief Exercises

Accounting details at Sportswear Company. describe the dialogue between the president and accountant in ~ Sportswear firm presented at the beginning of the chapter. Why can not the president uncover information for each product line (hats and jerseys) in the jae won statements? that within the firm typically offers this form of information? Financial versus Managerial Accounting. Maria is the loan officer at a local financial institution that lends money to Old town Market, a tiny grocery store. She requests number of quarterly financial reports ~ above an continuous basis to assess the store’s ability to repay the loan. Administer one example of a financial accounting report and two examples of managerial bookkeeping reports that Maria might request. Planning and Control. 2 college graduates newly started a web page architecture firm. The very first month was just completed, and also the owners space in the process of comparing budgeted revenues and also expenses with actual revenues and expenses for the month. Would this it is in considered component of the planning duty or the regulate function? Explain.

Finance and bookkeeping Personnel. identify whether the chief financial officer, controller, treasurer, internal auditor, managerial accountant, jae won accountant, or tax accountant would do the following tasks. (Hint: Some project titles may be used more than once, and others might not be supplied at all.)

Prepares yearly reports because that shareholders and creditors gives a quarterly an introduction of financial outcomes to the CEO and also board of directors provides profit and also loss reports by product line Calculates approximated quarterly taxes payments oversees the treasurer and also internal auditor Obtains sources of financing and manages momentary investments Verifies that yearly report financial info is accurate Enterprise resource Planning (ERP) System. Enterprise resource planning (ERP) systems are designed come record and share information across functional and geographical areas on a real-time basis. However, these equipment tend come be i have lot of money to purchase and also maintain. Why carry out organizations proceed to invest countless dollars in ERP systems regardless of the cost?

Manufacturing cost Terms. suggest whether each of the adhering to costs linked with manufacturing would be classified as straight materials, straight labor, or manufacturing overhead.

Salaried supervisor responsible for several product lines Hourly employees assembling products Grease supplied to maintain equipments Maintenance personnel Bike structure used to develop a gyeongju bike factory property count Glue offered to assemble playthings

Manufacturing expense Terms. indicate whether every of the complying with costs connected with production would it is in classified as straight materials, straight labor, or production overhead.

Depreciation top top production tools Paint used to create wagons audit staff performing tax services for a client Nails provided to rally cabinets Fiberglass offered to create a custom boat Hourly employees assembling goods factory utilities

Manufacturing and Nonmanufacturing cost Terms. Burns agency incurred costs for the following items.

salary of chef financial officer manufacturing facility insurance Salary because that salespeople Raw materials used in production quickly traced to the product computer equipment depreciation for audit department Insurance for headquarters building Production line workers Clerical assistance for manufacturing supervisors

Required:

suggest whether every item must be categorized as a product or duration cost. Suggest whether each item have to be categorized as straight materials, direct labor, production overhead, selling, or general and administrative.

Manufacturing and Nonmanufacturing cost Terms. Leighton, Inc., incurred prices for the following items.

Janitorial solutions in the manufacturing facility Personnel department provides Shipping expenses for raw materials purchased native a supplier, conveniently traced to the product Newspaper advertisements at sight of several manufacturing lines Insurance for factory equipment Production line workers Clerical support for sales staff

Required:

suggest whether each item should be categorized together a product or period cost. Suggest whether every item should be categorized as straight materials, straight labor, production overhead, selling, or general and administrative.

Accounts offered to record Product Costs. enhance each of the adhering to accounts through the suitable description that follows.

_____ Raw products inventory _____ Work-in-process perform _____ Finished products inventory _____ price of items sold offered to record product costs connected with products that room sold provided to record the price of materials not however put right into production offered to record product costs associated with products that room complete and also ready to sell supplied to document product costs connected with incomplete products in the production process

Income statement Terminology: manufacturing Versus Merchandising. enhance each of the adhering to terms used in a manufacturing company’s revenue statement v the identical term supplied in a merchandising company’s income statement.

 

Manufacturing Company

_____ cost of products manufactured _____ Work-in-process perform _____ Finished goods inventory _____ expense of items sold

 

Merchandising Company

goods inventory exact same term is offered by a merchandising company Net purchases no applicable because that a merchandising company.

Exercises: collection A

Financial matches Managerial bookkeeping (Manufacturing). The income statement indigenous Ford’s annual report appears as follows in an overview form. (This information was acquired from the company’s net site, http://www.ford.com.)


Required:

The financial details in the company’s annual report was prepared generally for shareholders and creditors in accordance with U.S. Normally Accepted accountancy Principles (U.S. GAAP). Does the earnings statement provide enough in-depth information for managers at Ford? Explain. Provide at the very least three added detailed piece of financial info that would aid managers evaluate power at Ford. Provide at least two nonfinancial actions that would help managers evaluate performance at Ford.

Organizational Structure. The complying with list that personnel within organizations originates from Figure 1.2 "IMA declare of honest Professional Practice".

plank of director Chief gaue won officer Controller Managerial accountant gaue won accountant taxation accountant Treasurer internal auditor

Required:

Match every previous item v the most accurate description as follows.

Assists in preparing details used because that decision making in ~ the company Assists in preparing tax reports because that governmental agencies, consisting of the interior Revenue company Responsible because that confirming the controls within the company are reliable in ensuring specific financial data, and also serves together an independent attach with the plank of director Responsible for all finance and accountancy functions within the organization and also typically reports to the chief executive, management officer elected by the shareholders of the agency Oversees the managerial accountant, gaue won accountant, and also tax accountant Responsible because that obtaining financing for the organization, projecting cash circulation needs, and also managing cash and short-term investments Assists in preparing financial information, normally in accordance through U.S. GAAP, for those external the firm

Schedule of raw Materials put in Production. The balance in Sedona company’s raw products inventory account to be $110,000 at the start of September and also $135,000 in ~ the finish of September. Raw materials purchased during the month totaled $50,000. Sedona supplied $8,000 in indirect products for the month.

Required:

Prepare a schedule of life materials put in manufacturing for the month the September.

Schedule of price of items Manufactured. The balance in Reid this firm work-in-process perform account was $300,000 in ~ the beginning of March and $320,000 at the end of March. Manufacturing costs for the month follow.


Direct products (from the schedule of life materials put in production) $ 40,000
Direct labor $ 70,000
Manufacturing overhead $200,000

Required:

Prepare a schedule of cost of items manufactured for the month the March.

Schedule of price of products Sold. The balance in Blue Oak that company finished goods inventory account to be $25,000 at the beginning of September and also $28,000 in ~ the finish of September. Cost of products manufactured because that the month totaled $17,000.

Required:

Prepare a schedule of expense of items sold because that the month that September.

Income Statement. Auto Products, Inc., had the following activity for the month that October.


Sales revenue $1,100,000
Selling expenses $ 300,000
General and administrative expenses $ 230,000
Cost of products sold $ 475,000

Required:

Prepare an earnings statement for the month of October.

Exercises: set B

Financial versus Managerial bookkeeping (Merchandising). Residence Depot’s yearly report appears as adheres to in an overview form. (This details was obtained from the company’s net site, http://www.homedepot.com.)


Required:

The financial details in the company’s yearly report was prepared primarily for shareholders and creditors in accordance v U.S. GAAP. Does the income statement provide enough detailed information for supervisors at Home Depot? Explain. Administer at least three added detailed piece of financial info that would help managers evaluate performance at Home Depot. Provide at least two nonfinancial actions that would assist managers evaluate power at Home Depot.

Organizational Structure. The complying with list the personnel within organizations originates from Figure 1.2 "IMA statement of moral Professional Practice".

board of director Chief gaue won officer Controller Managerial accountant jae won accountant taxation accountant Treasurer internal auditor

Required:

Match each previous item through the many accurate description as follows:

Responsible for hiring and overseeing the chief executive, management officer Assists in prepare financial info for those external the company, such together shareholders and also bondholders Responsible because that reviewing internal controls within the agency and ensuring accurate financial data Responsible because that controller, treasurer, and internal auditor attributes within the company Responsible because that projecting cash circulation needs and also managing cash and short-term investments monitor the managerial accountant, gaue won accountant, and also tax accountant Prepares profit information by product, i beg your pardon is provided for decision making within the organization Assists in developing tax strategies for the company

Schedule of raw Materials inserted in Production. The balance in Clay this firm raw products inventory account to be $45,000 in ~ the start of April and $38,000 in ~ the end of April. Raw products purchased throughout the month totaled $55,000. Clay used $14,000 in indirect products for the month.

Required:

Prepare a schedule of life materials put in manufacturing for the month the April.

Schedule of price of goods Manufactured. The balance in the work-in-process perform account of Verdi Production, Inc., to be $900,000 at the start of May and also $750,000 in ~ the end of May. Manufacturing prices for the month follow.


Direct materials (from the schedule of life materials put in production) $340,000
Direct labor $810,000
Manufacturing overhead $660,000

Required:

Prepare a schedule of expense of goods manufactured because that the month that May.

Schedule of expense of products Sold. The balance in Posada company’s finished goods inventory account was $650,000 at the start of March and also $625,000 at the end of March. Price of goods manufactured for the month totaled $445,000.

Required:

Prepare a schedule of cost of goods sold because that the month that March.

Income Statement. game Products, Inc., had actually the following task for the month the June.


Sales revenue $800,000
Selling expenses $100,000
General and also administrative expenses $200,000
Cost of goods sold $360,000

Required:

Prepare an income statement for the month the June.

Problems

Financial versus Managerial accountancy (Service). The income statement native the annual report that United Parcel company (UPS) shows up as complies with in summary form. (This information was obtained from the company’s internet site, http://www.ups.com.)


Required:

The financial information in the company’s yearly report to be prepared primarily for shareholders and creditors in accordance v U.S. GAAP. Does the revenue statement administer enough comprehensive information for supervisors at UPS? Explain. Provide at least three added detailed piece of financial info that would aid managers evaluate performance at UPS. Provide at least two nonfinancial steps that would aid managers evaluate performance at UPS.

Income Statement and Supporting Schedules. The complying with financial information is for industrial Company. (Note the the most present financial details is gift in the first column.)


December 31, 2011 December 31, 2010
Raw products inventory $ 24,000 $ 30,000
Work-in-process inventory 1,800,000 1,650,000
Finished items inventory 1,050,000 1,230,000

Of the total raw materials put in manufacturing for the year, $36,000 to be for indirect materials. Industrial had $3,795,000 in sales because that the year finished December 31, 2011. The company also had the following expenses for the year:


Selling $ 270,000
General and also administrative $ 720,000
Raw materials purchases $ 300,000
Direct labor used in production $ 375,000
Manufacturing overhead $1,890,000

Required:

Prepare a schedule of life materials put in production for the year finished December 31, 2011. Prepare a schedule of expense of items manufactured because that the year finished December 31, 2011. Prepare a schedule of cost of goods sold because that the year finished December 31, 2011. Prepare an income statement because that the year ended December 31, 2011. Define the three species of costs consisted of in cost of products sold ~ above the income statement. (Dollar quantities are not necessary in her descriptions.)

Income Statement and Supporting Schedules. The adhering to financial info is for Danville Company. (Note that the most current financial details is gift in the very first column.)


December 31, 2011 December 31, 2010
Raw products inventory $ 8,000 $ 10,000
Work-in-process inventory 600,000 550,000
Finished items inventory 350,000 410,000

Of the complete raw materials put in production for the year, $12,000 was for indirect materials. Danville had $1,265,000 in sales for the year ended December 31, 2011. The company also had actually the following expenses for the year:


Selling $ 90,000
General and administrative $240,000
Raw materials purchases $100,000
Direct labor supplied in production $125,000
Manufacturing overhead $630,000

Required:

Prepare a schedule of life materials put in manufacturing for the year ended December 31, 2011. Prepare a schedule of expense of goods manufactured for the year ended December 31, 2011. Prepare a schedule of cost of products sold for the year finished December 31, 2011. Prepare an income statement for the year ended December 31, 2011. Define the three types of costs contained in cost of items manufactured. (Dollar amounts are not important in her descriptions.)

Income Statement and Supporting Schedules. The adhering to information is because that Ciena, Inc., for the year finished December 31, 2011.


Raw materials inventory start balance $ 15,000
Raw products inventory finishing balance $ 12,000
Work-in-process inventory start balance $ 825,000
Work-in-process inventory finishing balance $ 900,000
Finished items inventory beginning balance $ 615,000
Finished items inventory finishing balance $ 525,000
Raw product purchases $ 150,000
Direct labor offered in production $ 187,500
Manufacturing overhead $ 945,000
Selling costs $ 135,000
General and administrative $ 360,000
Sales revenue $1,897,500

Of the complete raw materials inserted in production for the year, $18,000 was for indirect materials.

Required:

Prepare a schedule of raw materials inserted in manufacturing for the year finished December 31, 2011. Prepare a schedule of cost of goods manufactured for the year finished December 31, 2011. Prepare a schedule of expense of products sold for the year finished December 31, 2011. Prepare an income statement because that the year finishing December 31, 2011.

Income Statement and also Supporting Schedules. The adhering to information is for Diablo, Inc., for the year finished December 31, 2011.


Raw materials inventory start balance $ 60,000
Raw products inventory finishing balance $ 48,000
Work-in-process inventory beginning balance $3,300,000
Work-in-process inventory finishing balance $3,600,000
Finished items inventory start balance $2,460,000
Finished items inventory finishing balance $2,100,000
Raw material purchases $ 600,000
Direct labor provided in production $ 750,000
Manufacturing overhead $3,780,000
Selling costs $ 540,000
General and administrative $1,440,000
Sales revenue $7,590,000

Of the total raw materials inserted in production for the year, $72,000 to be for indirect materials.

Required:

Prepare a schedule of life materials put in production for the year ended December 31, 2011. Prepare a schedule of cost of goods manufactured for the year ended December 31, 2011. Prepare a schedule of expense of products sold because that the year finished December 31, 2011. Prepare an revenue statement because that the year finishing December 31, 2011.

One step Further: Skill-Building Cases

Internet Project: Sarbanes-Oxley plot of 2002. go to the Securities and Exchange Commission’s web site (http://www.sec.gov) and click on Laws and also Regulations. Click the full text that the Sarbanes-Oxley plot of 2002.

Required:

walk to section 302, Corporate responsibility for financial Reports, and also summarize the six requirements in this section. I think you space the chef financial officer the a public company. What involves might friend have about these requirements? go to ar 404, subsection a, Management assessment of interior Controls. Assume you room an executive officer that a publicly company. What 2 items are you forced to present in the yearly report? Ethics: suppliers Accused of Committing Fraud. making use of a resource like The wall Street Journal, BusinessWeek, or an web search engine, discover an article around an organization accused the committing accounting fraud. Write a one-page an overview of your findings. Include a copy of the post with your summary. Internet Project: Finding firm with values Policy. utilizing the Internet, find a company that has actually standards for moral behavior. (Some providers refer to these requirements as a “code of ethics”; others might use various terminology.) compose a one-page summary of her findings. Group Activity: Inventory accounts for production Company. In teams of 2 to 4 students, use the web to find a manufacturing company that presents 3 inventory accounts on the balance paper or in the note to the jae won statements. Include a printout of your findings, and also explain what each account and related dollar quantity represents.

Comprehensive Case

Ethics: accounting for Revenues and Expenses. devices Group produce excavating tools for contractors. Equipment Group is functioning on the yearly financial statements because that its shareholders, who are expecting profits of $200,000,000 for the year ending December 31. The controller (Jeff) and CFO (Kathy) will obtain bonuses totaling 50 percent that their incomes if company profits exceed $200,000,000. Buy it is a staff accountant who works because that the controller. One week prior to the finish of the fiscal year, a customer decides to delay a far-ranging purchase of devices until march of the next year. As a result, tools Group’s earnings will diminish by $2,000,000 come $198,000,000 for the year.

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Jeff, the controller, ideologies Sarah and also asks her to think the a means to boost profits by $2,500,000. He argues looking in ~ sales developing in early January and perhaps moving them as much as December. He also hints that some December costs could be pushed back and videotaped in January.

Required:

Is over there a difficulty with the controller’s request? explain your answer. What room the potential consequences for sarah if she agrees to execute what Jeff suggests?