Correcting errors in the financial statements of a manufacturing firm Below and on the next page are the income statement and cost of goods manufactured schedule of Wallace Com- pany. The statements were prepared by Kevin, the new accountant recently hired by the firm. Kevin has worked for three years as the accountant for a retailing operation, but this is his first accounting job in manufacturing.

The president of the company realized immediately that this year's financial statements were not entirely correct. The president called and asked you to evaluate the statements and make any necessary corrections. Your analysis indicates that all of the accounts used in the statements had their correct titles and balances. In addition, the Work in Process account on 1 / I /92 had a balance of $42,000, and the Finished Goods account on 1 / I /92 had a balance of $78,000.

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REQUIRED Prepare the income statement and cost of goods manufactured schedule in good form for the Wallace Company. Sales Less cost of goods sold: WALLACE COMPANY Income Statement For the Year Ended December 31, 1992 Beginning raw materials inventory, 1/1/92 ... Add raw materials purchased during 1992 Total goods available for sale.... Less ending finished goods inventory, 12/31/92 $856,000 $ 46,000 214,000 $260,000 Cost of goods sold...... Gross margin. Less operating expenses: Advertising ..... Sales salaries and commissions Administrative salaries Production supervisors' salaries Depreciation on office and office equipment... Depreciation on production plant and equipment Fire and casualty insurance, office Property taxes, office Office supplies Utilities (70 percent factory) Total operating expenses Net income 109,500 150,500 $705,500 $ 84,300 9,200 77,100 56,000 21,000 44,000 5,700 6,000 3,300 42,000 348,600 $356,900