Question
Below is financial information for Campus Fashion Inc. (The Company) for the year ended December 31, 2018 prepared by its inexperienced accountant. Campus Fashion Inc.
Below is financial information for Campus Fashion Inc. (The Company) for the year ended December 31, 2018 prepared by its inexperienced accountant.
Campus Fashion Inc. | ||||
Income Statement | ||||
at December 31, 2018 | ||||
Revenues: | | | | |
Sales revenue | | | $ 300,000 | |
Dividend Revenues | | | 1,800 | |
Sales commission payable | | 1,000 | ||
Allowance for Uncollectable accounts | 2,000 | |||
Royalty Revenue | | | 500 | |
Gain on sale of office equipment | | 1,500 | ||
Total revenues | | | 306,800 | |
Less: Cost of goods manufactured | | (243,100) | ||
Gross profit | | | 63,700 | |
Operating expenses: | | | | |
Selling | | | 30,000 | |
General and administrative | 34,000 | | ||
Restructuring Cost | | 6,000 | | |
Short-term investments | 5,400 | | ||
Dividend paid | | 600 | | |
Interest expense | | 2,000 | | |
Total operating expenses | | 78,000 | ||
Net loss | | | | (14,300) |
Campus Fashion Inc. | ||||||
Schedule of Cost of Goods Manufactured | ||||||
at December 31, 2018 | ||||||
Direct materials purchased | | | $ 100,000 | | | |
Direct manufacturing labor | | | 43,000 | | | |
Manufacturing overhead: | | | | | | |
Indirect materials | | | $ 3,000 | | | |
Factory Bonus Payable | | (2,500) | | | | |
Indirect manufacturing labor costs | 13,000 | | | | ||
Factory Equipment | | | 48,000 | | | |
Research and development expense | 6,000 | | | | ||
Factory rent | | | 18,000 | | | |
Prepaid Factory insurance | | 600 | | | | |
Repair of Delivery truck | | 400 | | | | |
Factory Insurance | | | 2,000 | | | |
Other Indirect manufacturing costs | 4,600 | | | | ||
Factory utilities | | | 7,000 | | | |
Total manufacturing overhead | | | 100,100 | | | |
Cost of goods manufactured | | | $ 243,100 | | |
The accountant did not take the following items into consideration when preparing the statements above.
a. Factory equipment was purchased on July 1, 2018 and has a useful life of 5 years with $2,000 salvage (residual) value.
The company uses the straight-line method of depreciation
b. Inventory balances for 2018 are:
The company’s tax rate is 21%
The company’s president is disappointed with the results of operations and has hired your accounting firm to review the financial statements.
Required:
1. As one step in gathering data for the president, prepare a revised schedule of cost of goods manufactured for the perido ended December 31, 2018.
2. As a second step, prepare a corrected multiple-step income statement for the year ended December 31, 2018.
3. Calculate the cost of producing one unit if the compan produced 50,000 units in 2018.Step by Step Solution
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