The North pole Company started operation one year ago. The general manager asks your opinion of its first year?s income statement which was prepared by a clerk who has very little knowledge of accounting. The income statement is as follows:

Required

What is your opinion? If you think that the income statement is poorly or even falsely prepared, prepare a correct income statement for North pole Company.

Support your statement with a Statement of Cost of Goods Manufactured.

Sales (10,000 units @ $4) Cost of sales: Materials purchased Direct labor Factory overhead Less: Material inventory, December 31 Work in process, December 31: 1,000 units, all materials 50% labor and overhead The North pole Company Income Statement For Year Ending December 31, 1989 Finished goods, December 31 (1,000 units) Gross Profit Operating expenses Selling costs Administrative costs Net loss $29,000 9,200 4,600 5,000 800 1,000 $42,800 6,800 $2,000 3,000 $40,000 36,000 $4,000 5,000 ($1,000)