Prime Time Company was organized on January 1, 2018 to produce and sell a revolutionary smart watch. At the beginning of its second year (2019) finished goods inventory was 2,000 watches. During 2019 ETech accountant resigned and the accounting was done by an accounting student who worked part-time for the company. The income statement below was prepared by the accounting student. ETech Company Income Statement As of December 31, 2019 Revenues: Sales revenue (38,000 watches)............... $1,140,000 Royalty revenue.............. 500 Gain on sale of trading investment.. 7,000 Deferred rent revenue. 3,500 Interest payable..... 3,700 Total revenues ........... $1,154,700 Operating expenses: Cost of goods manufactured. ................ $1,113,000 Selling and distribution expenses..... 195,000 General and administrative expenses.... 95,000 Restructuring costs...... 25,000 Short-term investments........ 17,000 Interest expense. 5,000 Dividend paid..... 1,000 Total operating expenses .... 1.451,000 (S296,300) Net loss..... 360,000 79,000 ETech Company Schedule of Cost of Goods Manufactured As of December 31, 2019 Purchase of direct materials... Direct manufacturing labor costs ... Indirect Manufacturing Overhead: Factory maintenance................. Factory insurance ................. Indirect manufacturing labor costs....... Rent expense ....... Utilities expense ............. Research & development expense.............. Prepaid factory utilities....... Factory equipment ...... Accumulated depreciation - factory equipment .......... Total indirect manufacturing overhead. Cost of goods manufactured $35,000 3,000 105,000 84,000 30,000 15,000 2,000 500,000 (100,000) 674,000 $1.113.000 Additional information about the company's activities during the year is as follows: a. In 2019 the company produced 40,000 watches. b. Inventories at the beginning and end of the year were as follows: January, 2019 December 31, 2019 Direct materials... $8,000 $10,000 Work in process $25,200 49,000 Finished goods $37,800 C. Seventy five percent (75%) of rent expense relates to manufacturing. Add 15% of the rent expense to general and administrative expense and the remaining 10% to selling and distribution expense. : 90% of utilities expense relates to manufacturing. Add 6% of utilities expense to general and administrative expenses and the remaining 4% to selling and distribution expenses. d. Factory equipment was purchased January 2 2018 and is estimated to have a useful life of 10 years with a $5,000 salvage value remaining at the end of its useful life. The company uses the double- declining-balance method of depreciation. The accumulated depreciation of $100,000 reported in the Schedule of Cost of Goods Manufactured resulted from 2018 factory equipment depreciation. No depreciation was charged for 2019. e. The company's tax rate is 21 %. The company's CEO is concerned about the large net loss and hires your accounting firm to review the above financial statements. Required: 1. Prepare a corrected Schedule of Cost of Goods Manufactured for the year ended December 31, 2019. Also, calculate the cost of producing one watch (show calculation) 2. Prepare a revised multiple-step income statement for the year ended December 31, 2019. INSTRUCTIONS: A. This assignment must be completed in Excel. Handwritten work or late assignments will not be accept B. Grading of this project will be based on: 1. Accuracy of your schedule of cost of goods manufactured and income statement 2. Use of formulas, neatness and formatting of your Excel schedule of cost of goods manufactured and income statement. NOTE: a) Do not use .00 after each number, or color your work. b) Do not use excessive S signs on your statements. c) This Project is due Wednesday April 22. Attach printed copies of your schedule of cost of goods manufactured and income statement to this project sheet and give it to me on or before the due date. Also, email me your Excel schedule of cost of goods manufactured and income statement on or before the due date
