Required information

ATC $1-2($Algo$)$ Group Assignment: Product versus upstream and downstream costs

$[$The following information applies to the questions displayed below.$]$

Victor Holt, the accounting manager of Rundle, Incorporated, gathered the following information for year $4.$ Some of it can

be used to construct an income statement for year $4.$ Ignore items that do not appear on an income statement. Some

computation may be required. For example, the cost of manufacturing equipment would not appear on the income

statement. However, the cost of manufacturing equipment is needed to compute the amount of depreciation. All units of

product were started and completed in year $4.$

Issued $$876,000$ of common stock.

Paid engineers in the product design department $$8,000$ for salaries that were accrued at the end of the previous year.

Incurred advertising expenses of $$74,000.$

Paid $$800,000$ for materials used to manufacture the company's product.

Incurred utility costs of $$190,000.$ These costs were allocated to different departments on the basis of square footage of

floor space. Mr$.$ Holt identified three departments and determined the square footage of floor space for each

department to be as shown in the following table.

Department

Research and development

Manufacturing

Selling and administrative

Total

Square Footage

$10,000$

$60,000$

$30,000$

$100,000$

Paid $$845,000$ for wages of production workers.

Paid cash of $$627,000$ for salaries of administrative personnel. There was $$15,800$ of accrued salaries owed to

administrative personnel at the end of year $4.$ There was no beginning balance in the Salaries Payable account for

administrative personnel.

Purchased manufacturing equipment two years ago at a cost of $$14,000,000.$ The equipment had an eight$-$year useful

life and a $$2,800,000$ salvage value.

Paid $$374,000$ cash to engineers in the product design department.

Paid a $$276,000$ cash dividend to owners.

Paid $$84,000$ to set up manufacturing equipment for production.

Paid a one$-$time $$127,000$ restructuring cost to redesign the production process to implement a just$-$in$-$time inventory

system.

Prepaid the premium on an insurance policy covering nonmanufacturing employees. The policy cost $$86,400$ and had a

one$-$year term with an effective starting date of May $1.$ Four employees work in the research and development

department and eight employees work in the selling and administrative department. Assume a December $31$ closing

date.

Made $108,100$ units of product and sold $101,300$ units at a price of $$64$ each.

ATC $1-2($Algo$)$ Part b

b$.$ Construct an income statement for Rundle, Incorporated.

Answer is not complete.