Practice Problem Set 01 with Solution.pdf - Solutions to...

Solutions to Problem Set 1
1
Solutions to Practice Problem Set 1
Exercise 1
For each case below, find the missing amount:
Case 1 Case II Case III
Beginning inventory of finished goods ? $18,000 $3,500
Cost of goods manufactured during period $104,750 $142,500
Ending inventory of finished goods $24,500 $12,000 $10,500
Cost of goods sold $101,250 ? $152,000
The general formula for solving all three cases is as follows:
Beginning
inventory of
finished goods
+
Cost of goods
manufactured
during period
–
Ending
inventory of
finished goods
=
Cost-of-
goods sold
expense
Using this formula, we can find the missing amounts as follows:
Case
I II III
Beginning inventory of finished goods .................. $ 21,000 $ 18,000 $ 3,500
Add: Cost of goods manufactured ......................... 104,750 142,500 159,000
Subtract: Ending inventory of finished goods ....... 24,500 12,000 10,500
Cost of goods sold .................................................. $101,250 $148,500 $152,000
?

Solutions to Problem Set 1
Exercise 2
Alhambra Aluminum Company, a manufacturer of recyclable soda cans, had the following
inventory balances at the beginning and end of 20X1.
January 1, 20X1 ($) December 31, 20X1 ($)
Raw material 55,000 75,000
Work in process 110,000 125,000
Finished Goods 160,000 155,000
During 20X1, the company purchased $240,000 of raw material and spent $420,000 for direct
labor. Manufacturing overhead costs were as follows:
$
Indirect material 12,000
Indirect labor 22,000
Depreciation on plant and equipment 110,000
Utilities 23,000
Other 35,000
Sales revenue was $1,210,000 for the year. Selling and administrative expenses for the year
amounted to $105,000. The firm’s tax rate is 35%
Required (use the following tables to prepare full schedules if they help you):
2.1 What is the cost of goods manufactured?
2.2 What is the cost of goods sold?
2.3 What is the net income reported by the company?
2.1 A
LHAMBRA
A
LUMINUM
C
OMPANY
S
CHEDULE OF
C
OST OF
G
OODS
M
ANUFACTURED
F
OR THE
Y
EAR
E
NDED
D
ECEMBER
31, 20
Direct material:
Raw-material inventory, January 1 ........................................... $ 55,000
Add: Purchases of raw material ................................................ 240,000
Raw material available for use .................................................. $295,000
Deduct: Raw-material inventory, December 31 ....................... 75,000
Raw material used ..................................................................... $220,000
Direct labor ..................................................................................... 420,000
Manufacturing overhead:
Indirect material ........................................................................ $ 12,000
Indirect labor ............................................................................. 22,000
Depreciation on plant and equipment ....................................... 110,000
Utilities ...................................................................................... 23,000
Other ......................................................................................... 35,000
X
1
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