Problem AP6-4

1.
SYARIKAT HARUM SEMERBAK
STATEMENT OF COSTS OF GOODS MANUFACTURED
FOR THE YEAR ENDED 31 DECEMBER 2006
Direct materials
Beginning direct material $ 180,000
Direct material purchased 450,000
Ending direct material (210,000)

$ 420,000
Direct labor
600,000
PRIME COST
1,020,000

Factory overhead
Indirect materials $ 90,000
Factory supervisor’s salaries 360,000
Factory insurance expense (60%x $144,000/4) 21,600
Utilities expense (66% x $75,000) 49,500
Depreciation – Equipment (65% x $75,000) 48,750
Factory maintenance expense 45,000

615,300
Total current manufacturing cost $
1,635,300
Beginning work in process inventories
360,000
Ending work in process inventories
(345,000)
Cost of Goods Manufactured $
1,650,300
2. Income Statement

SYARIKAT HARUM SEMERBAK

INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
Revenue
Sales $
2,850,000
Sales returns and allowance
(72,000)
Net sales
2,778,000
Cost of sales
Beginning finished goods inventories $ 450,000
Cost of goods manufactured 1,650,300
2,100,000
Ending finished goods inventories (495,000)
(
1,605,000)
Gross profit $
1,173,000

Expenses
Administrative expense $
(64,000)
Administrative staff salaries
(240,000)
Insurance expense (40% x $144,000/4)
(14,400)
Utilities expense (34% x $75,000)
(25,500)
Depreciation - equipment (35% x $75,000)
(26,250)
Office rental
(36,000)
Profit for the period
$ 766,850

3. 2 differences between manufacturing operation and

merchandising
operation are:

Manufacturing
1. Organization that process raw
materials into finished goods
before being sold.

Merchandising
Organization that purchases and
sells finished goods to
consumers or retailers.

Manufacturing
2. Product cost involved direct
materials, direct labors and
overhead costs. Need to
calculate the cost of the goods
manufactured in order to get the
cost of the goods sold in
preparing the income statement.

Merchandising
No need to calculate the cost of
the goods manufactured in order
to get the cost of the goods sold
in preparing the income Statement.

Problem AP6-8

1. Adjusting entries
No. Particulars Debit
Credit
1. Depreciation expense – Vehicles 2,800
 Accumulated depr. – Vehicles
2,800
10% x 28,000 =2,800

Depreciation expense – Machineries 6,000

Accumulated depr. – Machineries
6,000
5% x 120,000 =6,000

2. Factory supplies expense 5,170

Factory supplies
5,170
(6,750-1,580)

Office supplies expense 2,560

Office supplies
2,560

3. Interest expense 3,000

Interest payable
3,000
1/10 – 31/12 = 3 months, 15% x 80,000 x 3/12

4. Advertising expense 1,500

Advertising payable
1,500

2. Statement of cost of goods manufactured

YUMMY FROZEN FOOD ENTERPRISE

STATEMENT OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED 31 DECEMBER 2006
Direct material
Beginning inventory $ 10,220
Purchases of direct material 35,980
Freight inwards 1,400
 47,600
Ending inventory (12,200)
Direct material consumed $
35,400
Direct labor
11,150

Factory overhead
Indirect material $ 8,580
Indirect labor 6,420
Rental expense ($24,800 x 55%) 13,640
Utility expense ($4,500 x 70%) 3,150
Managers’ salary exp. ($21,000 x 20%) 4,200
Factory supervisor’s salary 5,500
Miscellaneous expense ($6,600 x 45%) 2,970
Factory insurance expense 2,400
Maintenance expense – Machineries 2,500
Depreciation expense – Machineries 6,000
Factory supplies expense 5,170
60
,530
Total current manufacturing cost $
107,080
Beginning work in progress
9,300
116,
380
Ending work in progress
(12,100)
Cost of goods manufactured $
104,280
3. Income Statement
YUMMY FROZEN FOOD ENTERPRISE
INCOME STATEMENT
FOR THE YEAR ENDED 31DECEMBER 2006
Revenue
Sales revenue $
225,350
Sales return
(6,800)
Sales discount
(5,600)
Net sales
212,950

Cost of sales
Beginning inventory – Finished goods $ 14,550
Cost of goods manufactured 104,280
118,830
Ending inventory – Finished goods (12,500)
1
06,330
Gross profit $
106,620

Expenses
Freight out $
(1,600)
Rental expense ($24,800 x 45%)
(11,160)
Utility expense ($4,500 x 30%)
(1,350)
Managers’ salary exp. ($21,000 x 80%)
(16,800)
Miscellaneous expense ($6,600 x 55%)
(3,630)
Salesmen’s commission
(4,400)
Entertainment expense
(1,540)
Depreciation expense – vehicles
(2,800)
Office supplies expense
(2,560)
Interest expense
(3,000)
Advertising expense
(1,500)
Profit for the period $
56,280
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