P1-5A Prepare a cost of goods manufactured schedule and a correct income statement 2 Empire Company is a manufacturer of smart phones. Its controller resigned in October 2020. 3 An inexperienced assistant accountant has prepared the following income statement for 4 the month of October 2020. 5 EMPIRE COMPANY 7 income Statement For the Month Ended October 31, 2020 9 10 Sales Revenue $780,000 11 Less: Operating Expenses 12 Raw materials purchases $264,000 13 Direct labor costs 190,000 14 Advertising expense 90,000 15 Selling and administrative salaries 75,000 16 Rent on factory facilities 60,000 17 Depreciation on sales equipment 45,000 18 Depreciation on factory equipment 31,000 19 Indirect labor cost 28,000 20 Utilities expense 12,000 21 Insurance expense 8,000 $803,000 Net loss ($23,000) 23 24 Prior to October 2020, the company had been profitable every month. The company's president is concerned 25 about the accuracy of the income statement. As her friend, you have been asked to review the income statement 26 and make necessary corrections. After examining other manufacturing cost data, you have acquired additional 27 information as follows. 28 1. Inventory balances at the beginning and end of October were: 29 October 1 October 31 31 Raw materials $18,000 $29,000 32 Work in process 20,000 14,000 33 Finished goods 30,000 50,000 34 35 12 Only 75% of the utilities expense and 60% of the insurance expense apply to factory E1-16 P1-SA 22 30 P1-4A + 30 October 1 October 31 31 Raw materials $18,000 $29,000 32 Work in process 20,000 14,000 33 Finished goods 30,000 50,000 34 35 2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory 36 operations. The remaining amounts should be charged to selling and administrative 37 activities. 38 39 Instructions 40 (a) Prepare a schedule of cost of goods manufactured for October 2020. 41 (b) Prepare a correct income statement for October 2020. 42 NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?". 43 OWN 33 94 5 After you have completed P1-5A, consider the additional question. 96 1. Assume that utilities expense and insurance expense changed to $15,000 and $9,000 respectively. Also assume 97 that 80% of utilities expense and 65% of insurance expense apply to factory operations. Show the impact of these 98 changes on the cost of goods manufactured schedule and the income statement. 99 100