Consider the following information for Huntersville Inc. for the fiscal year ended December 31. Depreciation expense—administrative office $ 33,050 Depreciation expense—plant and equipment 87,500 Direct labor—wages 499,200 Materials Inventory, Dec. 31 28,250 Materials Inventory, Jan. 1 20,500 Direct materials purchases 162,500 Finished goods inventory, Dec. 31 24,400 Finished goods inventory, Jan. 1 15,300 Heat, light, and power—plant 44,900 Indirect labor 25,600 Property taxes—plant 34,750 Sales representatives’ salaries 146,500 Sales revenue 1,516,000 Factory supervisor’s salary 66,450 Supplies—administrative office 16,600 Supplies—plant 29,300 Work-in-process inventory, Dec. 31 9,600 Work-in-process inventory, Jan. 1 23,750 Required: Prepare a statement of cost of goods manufactured and an income statement for Huntersville for the year ended December 31.

Statement of cost of goods manufactured

Depreciation expense—plant and equipment     87,500

Direct labor—wages                                            499,200

Materials (20,500+162,500-28,250)                   157,750

Heat, light, and power—plant                               44,900

Indirect labor                                                          25,600

Property taxes—plant                                            34,750

Factory supervisor’s salary                                   66,450

Supplies—plant                                                      29,300

Total Cost of Goods Manufactured                    945,450

Add Opening Work-in-process inventory            23,750

Less Closing Work-in-process inventory              (9,600)

Cost of Goods Manufactured                             959,600

Income statement for Huntersville for the year ended December 31

Sales revenue                                                                      1,516,000

Less Cost of Goods Sold :

Opening Finished goods inventory                 24,400

Add Cost of Goods Manufactured                959,600

Less  Closing Finished goods inventory        (15,300)      (968,700)

Gross Profit                                                                           547,300

Less Expenses ;

Depreciation expense—administrative office                     (33,050)

Sales representatives’ salaries                                           (146,500)

Supplies—administrative office                                            (16,600)

Net Income/(loss)                                                                    351,150

Explanation:

Be careful to consider only manufacturing (Plant related costs) in the computation of cost of goods manufactured.

Cost of Goods manufactured is transferred to Income Statement. Account for non-manufacturing costs in the Income Statement.