Required: 1. Describe two conceptual errors that the accountant made in preparing the income statement shown in Exhibit one 2. Prepare a schedule of the cost of goods manufactured for the quarter ending June 30th. 3. Prepare a corrected income statement for the quarter.

Seylynn Mountain Supplies has been in business for three months. The company was formed by two outdoor enthusiasts to produce high quality sleeping bags, which can used in all kinds of weather conditions. The owners of the company were well skilled in production and had developed an excellent relationship with a boutique store that specializes in selling outdoor equipment. The administration work and the accounting have been managed by the brother of one of the owner's. The brother had a business degree but no special training in accounting. The owners had just received the income statement for the latest quarter and were somewhat dismayed by the results. The company had almost reached its productive capacity for producing sleeping bags and most of them had been sold. Still, the income statement, presented in exhibit one, showed an operating loss for the quarter. Believing something was not correct, the owners have hired you to review the accounting information and to report back to them. During the quarter, the company completed 10,000 sleeping bags. The owners completed a physical inventory count and valuation on June 30th. The opening and closing inventory values are as follows