Below is financial information for Campus Fashion Inc. (The Company) for the year ended December 31, 2018
Question:
Below is financial information for Campus Fashion Inc. (The Company) for the year ended December 31, 2018 prepared by its inexperienced accountant.
Campus Fashion Inc. | ||||
Income Statement | ||||
at December 31, 2018 | ||||
Revenues: | | | | |
Sales revenue | | | $ 300,000 | |
Dividend Revenues | | | 1,800 | |
Sales commission payable | | 1,000 | ||
Allowance for Uncollectable accounts | 2,000 | |||
Royalty Revenue | | | 500 | |
Gain on sale of office equipment | | 1,500 | ||
Total revenues | | | 306,800 | |
Less: Cost of goods manufactured | | (243,100) | ||
Gross profit | | | 63,700 | |
Operating expenses: | | | | |
Selling | | | 30,000 | |
General and administrative | 34,000 | | ||
Restructuring Cost | | 6,000 | | |
Short-term investments | 5,400 | | ||
Dividend paid | | 600 | | |
Interest expense | | 2,000 | | |
Total operating expenses | | 78,000 | ||
Net loss | | | | (14,300) |
Campus Fashion Inc. | ||||||
Schedule of Cost of Goods Manufactured | ||||||
at December 31, 2018 | ||||||
Direct materials purchased | | | $ 100,000 | | | |
Direct manufacturing labor | | | 43,000 | | | |
Manufacturing overhead: | | | | | | |
Indirect materials | | | $ 3,000 | | | |
Factory Bonus Payable | | (2,500) | | | | |
Indirect manufacturing labor costs | 13,000 | | | | ||
Factory Equipment | | | 48,000 | | | |
Research and development expense | 6,000 | | | | ||
Factory rent | | | 18,000 | | | |
Prepaid Factory insurance | | 600 | | | | |
Repair of Delivery truck | | 400 | | | | |
Factory Insurance | | | 2,000 | | | |
Other Indirect manufacturing costs | 4,600 | | | | ||
Factory utilities | | | 7,000 | | | |
Total manufacturing overhead | | | 100,100 | | | |
Cost of goods manufactured | | | $ 243,100 | | |
The accountant did not take the following items into consideration when preparing the statements above.
a. Factory equipment was purchased on July 1, 2018 and has a useful life of 5 years with $2,000 salvage (residual) value.
The company uses the straight-line method of depreciation
b. Inventory balances for 2018 are:
The company’s tax rate is 21%
The company’s president is disappointed with the results of operations and has hired your accounting firm to review the financial statements.
Required:
1. As one step in gathering data for the president, prepare a revised schedule of cost of goods manufactured for the perido ended December 31, 2018.
2. As a second step, prepare a corrected multiple-step income statement for the year ended December 31, 2018.
3. Calculate the cost of producing one unit if the compan produced 50,000 units in 2018.