Question
Question 1 Philips Computer Enterprise is a manufacturer of computers. Its controller resigned in October 2019. An inexperienced assistant accountant has prepared the following income
Question 1
Philips Computer Enterprise is a manufacturer of computers. Its controller resigned in October 2019. An inexperienced assistant accountant has prepared the following income statement for the month of October 2019.
Philips Computer Enterprise
Income Statement for the Month Ended October 31, 2019
RM
RM
Sales revenue
800,000
Operating expenses
Raw materials purchases
264,000
Direct labour cost
190,000
Advertising expense
90,000
Selling and administrative salaries
75,000
Rent on factory facilities
60,000
Depreciation on factory equipment
31,000
Depreciation on sales equipment
45,000
Indirect labour cost
28,000
Utilities expense
13,000
Insurance expense
9,000
805,000
Net loss
(5,000)
Prior to October 2019, the company has been profitable every month. The company's president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement and make the necessary corrections. After examining other manufacturing cost data, you had acquired additional information as follows.
1.Inventory balances at the beginning and end of October were:
October 1October 31
RMRM
Raw materials18,00029,000
Work in process16,00014,000
Finished goods30,00045,000
2.Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.
Required:
a)Compute cost of goods manufactured.(15 marks)
b)Compute cost of goods sold.(4 marks)
c)Prepare the correct income statement for October 2019.(11 marks)
(Total: 30 Marks)
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