Chapter 14 Basic Accounting for Manufacturing Operations Exercises Exercise Southern Manufacturing Corporation Statement of Cost of Goods Manufactured For the Year Ended June 30, 2008 Raw materials used Raw materials inventory, July 1, 2007 Add: Purchases Add (Deduct) Freight in Purchase returns & allowances Purchase discount Net purchases Raw materials available for use Less: Raw materials inventory, June 30, 2008 Raw materials used Direct labor Factory overhead Indirect labor Factory – rent expense Depreciation – machinery and equipment Superintendence Indirect materials Factory supplies used Machinery – repairs and maintenance Amortization of patents Factory insurance expense Total manufacturing costs for the period P400,000 P1,300,000 28,000 (78,000) (18,000) 1,232,000 P1,632,000 340,000 P1,292,000 640,000 P 164,000 120,000 100,000 96,000 80,000 74,400 70,000 40,000 14,400 758,800 P2,690,800 Chapter 14 Exercise Requirement (1) Cookie Factory Statement of Cost of Goods Manufactured For the Year Ended December 31, 2008 Raw materials used Raw materials inventory, January Add: Raw materials purchases Add (Deduct) Purchase returns & allowances Purchase discounts Transportation-in Net purchases Raw materials available for use Less: Raw materials inventory, December 31 Raw materials used Direct labor Factory overhead Indirect materials Indirect labor Depreciation – factory building Factory supervisor Machine maintenance Factory supplies expense Freight and power Expired factory insurance Total manufacturing costs Add: Work in process inventory, January 1, 2008 Total cost of goods placed in process Less: Work in process inventory, December 31, 2008 Cost of Goods Manufactured P 720,000 2,200,000 (66,000) (24,600) 30,000 2,139,400 P2,859,400 540,000 P2,319,400 1,020,000 P 360,000 130,000 100,000 96,000 82,000 58,000 26,000 12,000 P4,203,400 860,000 P5,063,400 840,000 P4,223,400 Basic Accounting for Manufacturing Operations Requirement (2) Cookie Factory Statement of Income For the Year Ended December 31, 2008 Sales Less: Sales Returns and Allowances Sales Discounts Net Sales Less: Cost of Sales Cost of Goods Manufactured Add: Finished Goods Inventory, January Total Available for Sale Less: Finished Goods Inventory, December 31 Cost of Goods Sold Gross Profit Less: Operating Expenses Selling Expenses Sales Commission Advertising Expense Transportation Cost Depreciation – Store Fixtures Store Supplies Expense Total Administrative Expenses Office Salaries Depreciation Office Furniture Bad Debts Expense Office Supplies Used Total Total Operating Expenses Net Operating Income Add (Deduct) Other Income (Expenses) Rent Income Interest Income Interest Expense Net Income P5,928,000 P 86,000 58,400 144,400 P5,783,600 P4,223,400 900,000 5,123,400 960,000 P4,163,400 P1,620,200 P592,800 62,000 52,000 24,000 16,800 747,600 P368,000 36,000 32,000 14,000 450,000 1,197,600 P 422,600 P 19,200 4,000 (11,200) 12,000 434,600 Chapter 14 Requirement (3) A Balance Sheet Statement cannot be prepared for lack of information Requirement (4) Closing Entries, December 31, 2008 (1) Cost of Goods Manufactured P4,223,400 Raw Materials Inventory, December 31 540,000 Work in Process Inventory, December 31 840,000 Raw Materials Purchase Returns and Allowances 66,000 Raw Materials Purchase Discount 24,600 Raw Materials Inventory, January 720,000 Work in Process Inventory, January 860,000 Raw Materials Purchases 2,200,000 Transportation In 30,000 Direct Labor 1,020,000 Indirect Materials 360,000 Indirect Labor 130,000 Depreciation – Factory Building 100,000 Factory Supervisor 96,000 Machine Maintenance 82,000 Factory Supplies Expense 58,000 Light and Power 26,000 Expired Factory Insurance 12,000 (2) Cost of Sales Finished Goods Inventory, December 31 Cost of Goods Manufactured Finished Goods Inventory, January 4,163,400 960,000 (3) Income Summary Cost of Sales 4,163,400 4,223,400 900,000 4,163,400 Basic Accounting for Manufacturing Operations (4) Sales Rent Income Interest Income Sales Returns and Allowances Sales Discount Sales Commission Advertising Expense Transportation Out Depreciation – Store Fixture Store Supplies Expense Office Salaries Depreciation – Office Furniture Bad Debts Expense Office Supplies Expense Interest Expense Income Summary 5,928,000 19,200 4,000 86,000 58,400 592,800 62,000 52,000 24,000 16,800 368,000 36,000 32,000 14,000 11,200 4,598,000 Chapter 14 Exercise Requirement (1) Crown Manufacturing Co Worksheet June 30, 2008 Cash Raw Materials Inventory, Jan Work in Process Inventory, Jan Finished Goods Inventory, Jan Unexpired Factory Insurance Factory Supplies on Hand Machinery Accumulated Depreciation – Machinery Tools Patents Vouchers Payable Bonds Payable Share Capital Retained Earnings Sales Raw Materials Purchases Discount on Raw Materials Purchases Trial Balance DR CR P 87,500 Adjustments DR CR Adjusted Trial Balance DR CR P 87,500 Cost of Goods Manufactured DR CR 66,500 66,500 66,500 76,500 76,500 76,500 83,000 83,000 Income Statement DR CR Balance Sheet DR CR P 87,500 83,000 12,600 (1) 4,000 8,600 8,600 25,600 365,800 (2) 20,600 5,000 365,800 5,000 365,800 P 84,000 14,800 28,000 (5) 18,000 (3) 14,800 (4) 2,800 102,000 78,000 200,000 400,000 250,700 720,000 247,200 – 25,200 78,000 200,000 400,000 250,700 720,000 247,200 5,000 102,000 – 25,200 78,000 200,000 400,000 250,700 720,000 247,200 5,000 5,000 Basic Accounting for Manufacturing Operations Direct Labor Indirect Labor Supervision Machinery Repairs Other Factory Expenses Selling Expenses Administrative Expenses Interest Expense Insurance Expense – Factory Factory Supplies Expense Tools Expense Patent Amortization Depreciation – Machinery Interest Payable Wages Payable Trial Balance DR CR 356,400 53,200 44,000 16,000 Adjustments DR CR (7) 3,600 (7) 1,000 20,000 125,600 Adjusted Trial Balance DR CR 360,000 54,200 44,000 16,000 20,000 125,600 Cost of Goods Manufactured DR CR 360,000 54,200 44,000 16,000 Balance Sheet DR CR 20,000 125,600 110,000 5,000 (6) 1,000 P1,737,700 P1,737,700 110,000 6,000 (1) 4,000 4,000 4,000 (2) 20,600 (3) 14,800 (4) 2,800 20,600 14,800 2,800 20,600 14,800 2,800 (5) 18,000 Income Statement DR CR 110,000 6,000 18,000 18,000 (6) 1,000 1,000 1,000 (7) 4,600 4,600 4,600 Raw Materials Inventory, June 30 Work in Process Inventory, June 30 Finished Goods Inventory, June 30 48,000 48,000 56,000 56,000 944,600 109,000 835,600 324,600 835,600 944,600 944,600 1,160,200 60,000 780,000 60,000 656,100 1,036,300 380,200 1,160,200 380,200 1,036,300 1,036,300 Chapter 14 Requirement (2) Crown Manufacturing Co Statement of Cost of Goods Manufactured For the Period Ended June 30, 2008 Raw materials used: Raw materials inventory, January 1, 2008 Add Net material purchases Purchases Less: Discount on raw material purchases Raw materials available for use Less: Raw materials inventory, December 31, 2008 Raw materials used Direct labor Factory overhead costs: Indirect labor Supervision Machinery repairs Other factory expenses Insurance expense - factory Factory supplies expense Tools expense Patent amortization Depreciation expense - machinery Total manufacturing costs Add: Goods in process inventory, January 1, 2008 Total cost of goods placed in process Less: Goods in process inventory, December 31, 2008 Cost of goods manufactured P P247,200 (5,000) P 54,200 44,000 16,000 20,000 4,000 20,600 14,800 2,800 18,000 66,500 242,200 P 308,700 (48,000) P 260,700 360,000 194,400 P 815,100 76,500 P 891,600 (56,000) P 835,600 Basic Accounting for Manufacturing Operations Requirement (3) Crown Manufacturing Co Income Statement For the Period Ended June 30, 2008 Sales Less: Cost of goods sold: Finished goods inventory, January 1, 2008 Add: Cost of goods manufactured Total available for sale Less: Finished goods inventory, June 30, 2008 Cost of goods sold Gross profit Less: Selling and administrative expenses Selling expenses Administrative expenses Operating income Less: Interest expense Net income P720,000 P 83,000 835,600 918,600 (60,000) (858,600) P(138,600) P(125,600) (110,000) (235,600) P(374,200) (6,000) P(380,200) 10 Chapter 14 Requirement (4) Crown Manufacturing Co Balance Sheet June 30, 2008 ASSETS Current Assets Cash Raw materials inventory Goods in process inventory Finished goods inventory Unexpired factory insurance Factory supplies on hand Total current assets P 87,500 48,000 56,000 60,000 8,600 5,000 P 265,100 Non-current Assets Machinery (net of accumulated depreciation of P102,000) Patent Total non-current assets Total assets P 263,800 25,200 P 289,000 P 554,100 LIABILITIES AND EQUITY Current Liabilities Vouchers payable Interest payable Wages payable Total current liabilities P 78,000 1,000 4,600 P 83,600 Non-current Liabilities Bonds payable 200,000 Total liabilities Equity Share capital Retained earnings Deduct: Net loss Total equity Total liabilities and equity P 283,600 P 400,000 P 250,700 (380,200) (129,500) P 270,500 P 554,100 Basic Accounting for Manufacturing Operations 11 Test Material Test Material 14-1 Date 2008 April 10 13 20 30 May 20 Debit Accounts Payable Cash Purchase Discount 24,000 Raw Materials Purchases Cash 12,000 Direct Labor Withholding Taxes Payable Cash 36,000 Accounts Payable Purchase Returns Allowances Credit 480 23,520 12,000 712 35,288 2,000 and Factory Supplies Cash 2,000 9,000 9,000 Raw Materials Purchases Cash Notes Payable Accounts Payable 20,000 4,000 6,000 10,000 Indirect Materials Cash 4,000 4,000 Cash 3,000 Purchase Returns Allowances 15 Post Ref Account Titles and Explanation Indirect Labor Superintendence Sales Salaries Office Salaries Withholding Taxes Payable Cash Notes Payable Interest Expense Cash and 3,000 12,800 20,000 19,240 17,960 3,744 66,256 6,000 20 6,020 12 Chapter 14 Date 2008 June 10 Account Titles and Explanation Tools Post Ref Debit 15,600 Cash 14 19 25 28 30 30 Credit 15,600 Prepaid Insurance Cash 5,400 Indirect Materials Accounts Payable 9,200 Accounts Payable Indirect Materials 1,200 Freight-in Cash 3,000 Direct Labor Indirect Labor Wages Payable Depreciation Expense Accumulated Depreciation – Machinery and Equipment 5,400 9,200 1,200 3,000 14,000 9,000 23,000 6,000 6,000 13 Basic Accounting for Manufacturing Operations Test Material 14-2 Requirement (1) Bea Manufacturing Co Worksheet For the Year Ended December 31, 2008 Trial Balance DR CR Cash on hand and in banks Accounts receivable Allowance for bad debts Notes receivable Raw materials inventory, Jan Goods in process inventory, Jan Finished goods inventory, Jan Prepaid insurance Land Buildings Machinery and equipment Office furniture and equipment Tools Store furniture and fixtures Accumulated depreciation – Machinery and equipment Adjustments DR CR 1,060,000 2,280,000 Adjusted Trial Balance DR CR Cost of Goods Manufactured DR CR Income Statement DR CR 1,060,000 2,280,000 81,000 (2) 55,800 1,060,000 2,280,000 136,800 136,800 300,000 300,000 1,260,000 1,260,000 1,260,000 1,395,000 1,395,000 1,395,000 1,105,000 18,000 1,500,000 2,400,000 (4) 14,400 975,000 225,000 170,000 (5) 34,000 180,000 272,000 Trial Balance (5) 195,000 Adjustments Balance Sheet DR CR 300,000 1,105,000 3,600 1,500,000 2,400,000 1,105,000 3,600 1,500,000 2,400,000 975,000 975,000 225,000 136,000 225,000 136,000 180,000 180,000 467,000 Adjusted Trial Balance 467,000 Cost of Goods Manufactured Income Statement Balance Sheet 14 Chapter 14 DR Accumulated depreciation – Buildings Accumulated depreciation – Office furniture and fixtures Accumulated depreciation – Store furniture and fixtures Patent Vouchers payable Notes payable Mortgage payable Share capital (authorized, 50,000 shares, p.v P200) Premium on share capital Reserve for sinking fund Treasury shares (1,000 shares at cost) Retained earnings Sales Sales allowance and discounts Raw materials purchases Purchase allowances and discount Freight in Direct labor Indirect labor CR DR 720,000 CR DR (5) 480,000 27,000 (5) 45,000 22,500 (5) (6) 36,000 30,000 150,000 CR DR CR DR CR DR CR 1,200,000 1,200,000 72,000 72,000 58,500 120,000 120,000 1,380,000 270,000 800,000 1,380,000 270,000 800,000 1,380,000 270,000 800,000 6,000,000 6,000,000 6,000,000 600,000 600,000 600,000 100,000 100,000 100,000 240,000 240,000 2,419,500 13,680,000 408,000 408,000 4,400,000 4,400,000 480,000 540,000 2,900,000 840,000 Trial Balance 240,000 2,419,500 13,680,000 2,419,500 13,680,000 408,000 4,400,000 480,000 (8) (8) 40,000 30,000 Adjustments 540,000 2,940,000 870,000 Adjusted Trial Balance 480,000 540,000 2,940,000 870,000 Cost of Goods Manufactured Income Statement Balance Sheet 15 Basic Accounting for Manufacturing Operations Indirect materials Manufacturing supplies expenses Superintendence Advertising Sales salaries Office salaries Miscellaneous factory overhead Interest expense Interest income Freight out Miscellaneous selling expenses Miscellaneous general expenses DR 720,000 CR 240,000 460,000 600,000 700,000 800,000 DR (9) CR DR 720,000 24,000 216,000 460,000 480,000 710,000 800,000 216,000 460,000 260,000 30,000 260,000 (10) 120,000 260,000 18,000 (8) 10,000 (7) 12,000 12,000 (3) 1,800 CR DR 720,000 CR DR DR CR 480,000 710,000 800,000 30,000 13,800 13,800 360,000 360,000 360,000 200,000 200,000 200,000 160,000 160,000 160,000 26,693,000 CR 26,693,000 Raw materials inventory, 12.31.08 Goods in process inventory, 12.31.08 Finished goods inventory, 12.31.08 Bad debts expense Interest receivable Insurance expense Depreciation expense – Buildings Depreciation expense – Machinery and equipment 1,900,000 1,900,000 1,200,000 1,200,000 1,560,000 (2) (3) (4) Trial Balance 55,800 1,800 14,400 55,800 1,800 14,400 7,200 7,200 (5) 480,000 480,000 240,000 240,000 (5) 195,000 195,000 195,000 Adjustments Adjusted Trial Balance 1,560,000 55,800 1,800 Cost of Goods Manufactured Income Statement Balance Sheet 16 Chapter 14 DR Depreciation expense – Office furniture and fixtures Tools expense Depreciation expense – Store furniture and fixtures Patent amortization Interest payable Salaries payable Unused manufacturing supplies Prepaid advertising CR DR CR DR CR DR (5) (5) 45,000 34,000 45,000 34,000 34,000 (5) (6) 36,000 30,000 36,000 30,000 30,000 (7) (8) 12,000 80,000 DR CR DR CR 45,000 36,000 12,000 80,000 12,000 80,000 (9) 24,000 (10) 120,000 13,567,200 13,567,200 Net income CR 3,580,000 9,987,200 13,567,200 4,637,000 9,987,200 629,600 15,253,800 15,253,800 24,000 120,000 14,225,400 13,595,800 15,253,800 14,225,400 629,600 14,225,400 Basic Accounting for Manufacturing Operations 17 Requirement (2) Bea Manufacturing Co Statement of Cost of Goods Manufactured For the Year Ended December 31, 2008 Raw materials used: Raw materials inventory, January 1, 2008 Add Net material purchases Purchases P4,400,000 Add: Freight-in 540,000 Total P4,940,000 Less: Purchase allowances and discount (480,000) Raw materials available for use Less: Raw materials inventory, December 31, 2008 Raw materials used Direct labor Factory overhead costs: Indirect labor P 870,000 Indirect materials used 720,000 Manufacturing supplies expenses 216,000 Superintendence 460,000 Miscellaneous factory overhead 260,000 Insurance expense 7,200 Depreciation expense - buildings 240,000 Depreciation expense – machinery and equipment 195,000 Tools expense 34,000 Patent amortization 30,000 Total manufacturing costs Add: Goods in process inventory, January 1, 2008 Total cost of goods placed in process Less: Goods in process inventory, December 31, 2008 Cost of goods manufactured P 1,260,000 4,460,000 P 5,720,000 (1,900,000) P 3,820,000 2,940,000 3,032,200 P 9,792,200 1,395,000 P11,187,200 (1,200,000) P 9,987,200 18 Chapter 14 Requirement (3) Bea Manufacturing Co Income Statement For the Year Ended December 31, 2008 Sales Less: Sales discounts and allowances Net sales Less: Cost of goods sold: Finished goods inventory, January 1, 2008 Add: Cost of goods manufactured Total available for sale Less: Finished goods inventory, December 31, 2008 Cost of goods sold Gross profit Less: Selling and administrative expenses Selling expenses Insurance expense Advertising Sales salaries Freight-out Miscellaneous selling expenses Depreciation expense – building Depreciation expense – store furniture and fixtures Administrative expenses Office salaries Bad debt expense Depreciation expense – office furniture and fixtures Depreciation expense – building Insurance expense Miscellaneous general expenses Total Operating income Add (Deduct) Other Income (Expense) Interest income Interest expense Net income P13,680,000 (408,000) P13,272,000 P 1,105,000 9,987,200 11,092,200 (1,560,000) 9,532,200 P 3,739,800 P (3,600) (480,000) (710,000) (360,000) (200,000) (120,000) (36,000) (1,909,600) P (800,000) (55,800) (45,000) (120,000) (3,600) (160,000) P (1,184,400) (3,094,000) P 645,800 13,800 (30,000) P (16,200) 629,600 Basic Accounting for Manufacturing Operations 19 Requirement (4) Bea Manufacturing Co Balance Sheet December 31, 2008 ASSETS Current Assets Cash on hand and in banks Accounts receivable (net of Allowance for bad debts of P136,800) Notes receivable Interest receivable Raw materials inventory Goods in process inventory Finished goods inventory Prepaid insurance Unused manufacturing supplies Prepaid advertising Total current assets P 1,060,000 2,143,200 300,000 1,800 1,900,000 1,200,000 1,560,000 3,600 24,000 120,000 P 8,312,600 Non-current Assets Land Buildings (net of accumulated depreciation of P1,200,000) Machinery and equipment (net of accumulated depreciation of P467,000) Office furniture and equipment (net of accumulated depreciation of P72,000) Store furniture and fixtures (net of accumulated depreciation of P58,500) Tools Patent Total non-current assets P 1,500,000 Total assets P12,051,100 1,200,000 508,000 153,000 121,500 136,000 120,000 P 3,738,500 20 Chapter 14 LIABILITIES AND EQUITY Current Liabilities Vouchers payable Notes payable Interest payable Salaries payable Total current liabilities P 1,380,000 270,000 12,000 80,000 P 1,742,000 Non-current Liabilities Mortgage payable Total liabilities 800,000 P 2,542,000 Equity Contributed Capital Share capital, P200 par value Authorized, 50,000 shares Issued, 30,000 shares of which 1,000 shares are in treasury Premium on share capital Total contributed capital Retained Earnings Unappropriated Balance, January Add: Net income for 2008 Total Appropriated for sinking fund Total retained earnings Total contributed capital and retained earnings Less: Treasury shares (at cost) Total liabilities and equity P 6,000,000 600,000 P 6,600,000 P 2,419,500 629,600 P 3,049,100 100,000 P 3,149,100 P 9,749,100 (240,000) P 9,509,100 P12,051,100 Basic Accounting for Manufacturing Operations 21 Requirement (5) GENERAL JOURNAL Date 2008 Dec Account Titles and Explanation Closing Entries 31 31 31 Post Ref Debit Cost of Goods Manufactured Raw Materials Inventory, December 31, 2008 Work in Process Inventory, December 31, 2008 Purchase Allowances and Discount Raw Materials Inventory, January 1, 2008 Work in Process Inventory, January 1, 2008 Raw Materials Purchases Freight-In Direct Labor Indirect Materials Indirect Labor Manufacturing supplies expenses Superintendence Miscellaneous factory overhead Insurance expense Depreciation expense - buildings Depreciation expense – machinery and equipment Tools expense Patent amortization 9,987,200 Cost of Sales Finished Goods Inventory, December 31, 2008 Cost of Goods Manufactured Finished Goods Inventory, January 1, 2008 9,532,200 Income Summary Cost of Sales 9,532,200 Credit 1,900,000 1,200,000 480,000 1,260,000 1,395,000 4,400,000 540,000 2,940,000 720,000 870,000 216,000 460,000 260,000 7,200 240,000 195,000 34,000 30,000 1,560,000 9,987,200 1,105,000 9,532,200 22 Chapter 14 Date 2008 Dec Account Titles and Explanation Closing Entries 31 Sales Interest Income Insurance expense Advertising Sales salaries Freight-out Miscellaneous selling expenses Depreciation expense – building Depreciation expense – store furniture and fixtures Office salaries Bad debt expense Depreciation expense – office furniture and fixtures Depreciation expense – building Insurance expense Miscellaneous general expenses Interest Expense Income Summary Post Ref Debit Credit 13,680,000 13,800 3,600 480,000 710,000 360,000 200,000 120,000 36,000 800,000 55,800 45,000 120,000 3,600 160,000 30,000 10,569,800 ... equipment (net of accumulated depreciation of P467,000) Office furniture and equipment (net of accumulated depreciation of P72,000) Store furniture and fixtures (net of accumulated depreciation of P58,500)... 24,000 120,000 14, 225,400 13,595,800 15,253,800 14, 225,400 629,600 14, 225,400 Basic Accounting for Manufacturing Operations 17 Requirement (2) Bea Manufacturing Co Statement of Cost of Goods Manufactured... Adjusted Trial Balance 467,000 Cost of Goods Manufactured Income Statement Balance Sheet 14 Chapter 14 DR Accumulated depreciation – Buildings Accumulated depreciation – Office furniture and fixtures