1.
Merchandising company
ABC Company Beginning Ending of
of 2017 2017
Inventory 30,000 40,000
Purchases of inventory 75,000
Depreciation of office building 5,000
Marketing and distribution costs 50,000
Salary of managing director 40,000
Advertisement and selling costs 65,000
Free gift and sample 10,000
Net sales revenues 3,20,000
Required:
a. Calculate the cost of goods sold for 2017.
b. Prepare the income statement for 2017.
Solution:
a) Cost of Goods sold = Beginning inventory + Purchase - Ending inventory
= 30,000 + 75,000 - 40,000
= 65,000
b)
ABC Company
Income Statement
For the year ended 31st December, 2017
Particulars Amount Amount
Income /Revenues:
Net sales revenues 3,20,000
Less: Cost of goods sold 65,000
Gross profit 2,55,000
Less: Operating expenses:
Administrative expenses:
Depreciation of office building 5,000
Salary of managing director 40,000
Selling expenses:
Marketing and distribution costs 50,000
Advertisement and selling costs 65,000
Free gift and sample 10,000
Total administrative and selling expenses 1,70,000
Net income 85,000
2. Manufacturing company
ABC Company Beginning Ending of
of 2016 2016
Direct materials inventory 22,000 26,000
Work-in-process inventory 21,000 20,000
Finished goods inventory 18,000 23,000
Purchases of direct materials 75,000
Direct manufacturing labor 25,000
Indirect manufacturing labor 15,000
Factory insurance 9,000
Factory repairs and maintenance 4,000
Depreciation of factory equipment and building 11,000
Marketing and distribution costs 45,000
Salary of managing director 29,000
Advertisement and selling costs 48,000
Required:
a. Prepare a schedule for the cost of goods manufactured for 2016.
b. Revenues for 2016 were tk. 3, 00,000. Prepare the income statement for 2016.
Solution-2:
a)
ABC Company
Schedule of cost of goods manufactured
For the year ended December 31, 2016
Beginning work-in-process inventory 21,000
Direct materials:
Beginning Direct material inventory tk. 22,000
(+) Purchases of direct materials 75000
Cost of direct materials available for use 97,000
(-) Ending Direct material inventory (26,000)
Direct materials used 71,000
Direct manufacturing labor 25,000
Manufacturing overhead costs:
Indirect manufacturing labor 15,000
Factory insurance 9,000
Depreciation of Factory equipment and building 11,000
Factory Repairs and maintenance 4,000
Total indirect manufacturing costs 39,000
Manufacturing costs incurred during 2016 135,000
Total manufacturing costs to account for 156,000
Less: ending work-in-process inventory, December 31, 2016 (20,000)
Cost of goods manufactured (to Income Statement) tk.136,000
b)
ABC Company
Income statement
For the year ended December 31, 2016
Revenues 300,000
(-) Cost of goods sold:
Beginning finished goods, January 1, 2009 18,000
(+) Cost of goods manufactured 136,000
Cost of goods available for sale 154,000
(-) Ending finished goods, December 31, 2009 (23,000)
Cost of goods sold 131,000
Gross profit 169,000
(-) Selling and administrative costs:
Advertising and selling costs 48000
Marketing and distribution costs 45,000
Salary of managing Director 29,000
Total selling and administrative costs 122,000
Net income 47,000
