1. Nilk Specialty Products is a manufacturer of remote controlled toys for the boys. Its accountant migrated to the United States in January 2021. The inexperienced staff has prepared the following income statement for the month of January 2021.

Nilk Specialty Products

Income Statement

For the month ended January 31, 2021

Sales (net) P 790,000

Less costs and expenses:

Raw materials purchases P 254,000

Direct labor cost 200,000

Advertising expense 95,000

Selling and administrative salaries 70,000

Rent on factory facilities 62,000

Depreciation on sales equipment 43,000

Depreciation on factory equipment 30,000

Indirect labor cost 29,000

Utilities expense 14,000

Insurance expense 6,000 803,000

Net loss (P13,000)

Prior to 2021, the company has been operating with a profit. Mr. Nilk, the owner is suspecting the accuracy of the report. As his friend, you were requested to review the income statement and make the necessary corrections. After examining the manufacturing costs record, you have acquired the following additional data.

1. Inventory balances at the beginning and end of January 2021 were:

January 1 January 31

Raw materials P20,000 P32,000

Work in process 14,000 16,000

Finished goods 30,000 48,000

2. Only 60% of the utilities expense and 70% insurance expense apply to the factory, the rests should be charged to the selling and administrative activities.

Required:

1. Prepare a schedule of the cost of goods sold.
2. Prepare a schedule of the selling and administrative expenses.
3. Prepare a correct income statement.