Empire Company is a manufacturer of smart phones. Its controller resigned in October 2017. An inexperienced assistant accountant has prepared the following income statement for the month of October 2017.

Prior to October 2017, 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:

2. Only 75% 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 2017.
(b) Prepare a correct income statement for October2017.

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EMPIRE COMPANY Income Statement For the Month Ended October 31, 2017 Sales revenue Less: Operating expenses $780,000 Raw materials Direct labor cost Advertising expense Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense Insurance expense $264,000 190,000 90,000 75,000 60,000 45,000 31,000 28,000 12,000 8,000 purchases 803,000 $ (23,000) Net loss Raw materials Work in process Finished goods October 1 $18,000 20,000 30,000 October 31 $29,000 14,000 0,000