Question 7

The Swift Company has just completed its operations for September 2005. The company's accountant resigned two weeks ago, subsequently a very inexperienced clerk has prepared the following income statement of the month's activities: INCOME STATEMENT FOR THE MONTH ENDED 30 SEPTEMBER 2005 mess 1203 R R 450 000 476 000 Sales less: Operating expenses: Indirect labour cost Electricity and water Direct labour cost Depreciation: factory equipment Raw materials purchased Depreciation: sales equipment Insurance Rent Selling and administrative salaries Advertising 12 000 15 000 90 000 21 000 159 000 18 000 4000 50 000 32 000 75 000 Net loss R26 000 You have been asked to check the statement and make corrections as needed. You have discovered the following additional information. i. The Swift Company is a manufacturing firm. ii. Some 60% of the electricity and water and 75% of the insurance apply to factory operations, the remaining amounts apply to selling and administrative activities, iii. Balances in the stock accounts at the beginning and end of the month were: 1/9/2005 R 8 000 30/9/2005 R 27 000 21 000 60 000 Raw materials Work in progress Finished goods 16 000 40 000 iv. Only 80% of the rent applies to factory operations. Required [20] (a) Prepare a schedule for cost of goods manufactured in good form, for September 2005. (b) Prepare a corrected income statement for the month. TOTAL: [130] ICG/ Page 64