Empire Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020.

Prior to October 2020, the company had been profi table 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 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.

Instructions
a. Prepare a schedule of cost of goods manufactured for October 2020.

b. Prepare a correct income statement for October 2020.

Transcribed Image Text:

Empire Company Income Statement For the Month Ended October 31, 2020 Sales revenue Less: Operating ex penses Raw materials purchases $780,000 $264,000 190,000 90,000 75,000 60,000 45,000 31,000 28,000 Direct labor cost Advertising expense Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense Insurance expense 12,000 8,000 803,000 $ (23,000) Net loss October 1 October 31 Raw materials Work in process Finished goods $18,000 20,000 $29,000 50,000 30,000