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Following are the selected account balances of Shanta Company:
| Sales | $ | 1,250,000 |
| Raw materials inventory, Dec. 31, 2012 | 37,000 | |
| Goods in process inventory, Dec. 31, 2012 | 53,900 | |
| Finished goods inventory, Dec. 31, 2012 | 62,750 | |
| Raw materials purchases | 175,600 | |
| Direct labor | 225,000 | |
| Factory computer supplies used | 17,840 | |
| Indirect labor | 47,000 | |
| Repairs—Factory equipment | 5,250 | |
| Rent cost of factory building | 57,000 | |
| Advertising expense | 94,000 | |
| General and administrative expenses | 129,300 | |
| Raw materials inventory, Dec. 31, 2013 | 42,700 | |
| Goods in process inventory, Dec. 31, 2013 | 41,500 | |
| Finished goods inventory, Dec. 31, 2013 | 67,300 | |
| Prepare an income statement for Shanta Company (a manufacturer). Assume that its cost of goods manufactured is $534,390. |
Expert Answer
1. Schedule of Raw Materials Placed in Production
| Particulars | Amount |
| Raw material inventory, Beginning balance | 37000 |
| Add : Raw material purchased | 175600 |
| Less : Raw material inventory, Closing balance | (42700) |
| Raw Material placed in production | 169900 |
| Less : Indirect labor | (47000) |
| Direct Material placed in production | 122900 |
2. Schedule of Cost of Goods Sold
| Particulars | Amount |
| Finished goods inventory, Beginning Balance | 62750 |
| Add : Cost of goods manufactured | 534390 |
| Cost of goods available for sale | 597140 |
| Less : Finished goods inventory, Ending Balance | (67300) |
| Cost of Goods Sold | 529840 |
3. Income Statement
| Particulars | Amount |
| Sales | 1250000 |
| Less : Cost of Goods Sold (Refer statement 2 above) | (529840) |
| Gross Profit | 720160 |
Less : Operating expenses:
|
223300 |
| Operating Profit | 496860 |
