Below is financial information for Universal Fashion Inc. (The Company) for the year ended December 31, 2016 prepared by its inexperienced accountant.

Universal Fashion Inc.

Income Statement

at December 31, 2016

Revenues:

Sales revenue .. $300,000

Sales commission payable.. 700

Dividend revenue 500

Allowance for doubtful accounts 600

Unearned revenue 300

Gain on sale of office equipment . 1,000

Total revenues.. 303,100

Less: Cost of goods manufactured.. 238,000

Gross profit .. 65,100

Operating expenses:

Selling ... .. 40,000

General and administrative .. 28,000 Short-term investments.. 5,000 Prepaid office rent. 2,000

Dividend paid 600

Interest expense 1,400

Total operating expenses .. 77,000

Net loss .. . $(11,900)

Universal Fashion Inc.

Schedule of Cost of Goods Manufactured

at December 31, 2016

Direct materials purchased $98,000

Direct manufacturing labor 45,000

Manufacturing overhead:

Indirect materials. $2,000

Indirect manufacturing labor costs.. 7,000

Research and development expense. 5,000

Factory rent . 24,000

Factory insurance ... 3,000

Factory equipment 46,000

Factory utilities ..... . 6,000

Prepaid advertising expense... 1,000

Factory bonus payable . (3,000)

Other indirect manufacturing costs. 4,000

Total manufacturing overhead 95,000

Cost of goods manufactured. $238,000

The accountant did not take the following items into consideration when preparing the statements above.

a. Factory equipment was purchased October 1, 2016 and has a useful life of 5 years with $2,080 salvage (residual) value. The company uses the straight-line method of depreciation

b. Inventory balances for 2016 are:

January 1, 2016 December 31, 2016

Direct materials.. $6,000 $7,000

Work-in-process . 8,000 10,000

Finished goods 25,000 28,000

The companys tax rate is 15%.

The companys 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 period ended December 31, 2016.

2) As a second step, prepare a corrected multiple-step income statement for the year ended December 31, 2016.