Pedriani Company is a manufacturer of computers. Its controller resigned in October 2011. An inexperienced assistant accountant has prepared the following income statement for the month of October 2011.

Prior to October 2011 the company had 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 necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.
1. Inventory balances at the beginning and end of October were:

2. Only 70% 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.

Instructions
(a) Prepare a schedule of cost of goods manufactured for October 2011.
(b) Prepare a correct income statement for October 2011.

Transcribed Image Text:

PEDRIANI COMPANY Income Statement For the Month Ended October 31, 2011 Sales (net) Less: Operating expenses $780,000 Raw materials purchases Direct labor cost Advertising expense Selling and administrative salaries Rent on factory facilities Depreciation on sales Depreciation on factory equipment Indirect labor cost Utilities expense Insurance expense $264,000 190,000 90,000 75,000 60,000 45,000 31,000 28,000 12,000 8,000 equipment 803,000 Net loss (23,000) Raw materials Work in process Finished goods October 1 $18,000 16,000 30,000 October 31 $34,000 14,000 48,000