On February 1, 2017 Scan House, Inc., LLC was incorporated. During the first six months in business, the company experienced significant start-up losses. The owners of the company had expected to begin earning a profit during August. They were disappointed, however, when the income statement for August also showed a loss. August's income statement follows:

Scan House Inc. LLC Income Statement For the Month Ended August 31, 2017

Sales: 450,000 (Credit) Less: operating expenses:

Direct labor cost: 70,000 (Debit) Raw materials purchased: 165,000 (Debit)

Manufacturing overhead: 85,000 (Debit)

Selling and administratinve expenses: 142,000 (Debit) 462,000 (Credit)

Net operating loss: (12,000)

After seeing the $12,000 loss for August, Scan Houses president stated, I was sure we'd be profitable by this time. We have been in business over six months now, and our loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assetsif we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Jesse for the time being.

The company's controller resigned a month ago. Jesse, a new assistant in the controller's office, prepared the income statement above. Jesse has had little experience in manufacturing operations.

Inventory balances at the beginning and end of August were

.............................August 1.................. August 31

Raw materials .......$8,000...................$13,000

Work in process.....$16,000.................$21,000

Finished goods.......$40,000................$60,000

The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets.

Required:

As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. (see exhibit 14.16 in text)

As a second step, prepare a new income statement for August. (see exhibit 14.14 in text)

(include the proper three-line heading for the schedule of cost of goods manufactured and the income statement)

Based on your statements prepared in (1) and (2) above, would you recommend that the company look for a buyer?