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26

Manufacturing Accounting

DEMONSTRATION PROBLEM
The columns below are taken from the work sheet of the Lakewood Tub and Tile Company,
Inc. The January 1 inventory of work-in-process is $101,360.
Lakewood Tub and Tile Company, Inc.
Work Sheet
For Year Ended December 31, 20
STATEMENT OF COST OF
ACCOUNT NAME

GOODS MANUFACTURED
DEBIT

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Sales
Sales Returns and Allowances
Sales Discounts
Selling Expenses (control)
General Expenses (control)
Raw Materials Purchases
Direct Labor
Indirect Labor
Heat, Light, and Power
Factory Supervision
Rent, Factory
Machinery Repairs
Depreciation Expense,
Machinery
Factory Supplies Used
Factory Insurance Expired
Small Tools Expense
Miscellaneous Factory Costs
Loss on Disposal of
Equipment
Interest Expense
Income Tax Expense
Manufacturing Summary

24
25

29

CREDIT

1,206,592.00 1

305,600.00
389,520.00
88,672.00
22,096.00
21,544.00
14,400.00
14,336.00

2
3
4
5
6
7
8
9
10
11
12
13

13,904.00
3,920.00
2,880.00
992.00
520.00

14
15
16
17
18
19

6,400.00
6,080.00
36,640.00
57,168.00
101,360.00

59,056.00
106,272.00

1,036,912.00
1,036,912.00
Net Income

30
31

Copyright Houghton Mifflin Company. All rights reserved.

165,328.00
871,584.00
1,036,912.00

20
21
22
23
24

147,680.00

Cost of Goods Manufactured

28

INCOME STATEMENT
DEBIT

10,080.00
9,600.00
149,560.00
58,888.00

Income Summary

26
27

CREDIT

154,240.00 25
26

871,584.00
1,296,512.00
64,320.00
1,360,832.00

27

1,360,832.00 28
29

1,360,832.00 30
31

1
2

SOLUTION
Lakewood Tub and Tile Company, Inc.
Statement of Cost of Goods Manufactured
For Year Ended December 31, 20
Work-in-Process Inventory, January 1, 20
Raw Materials:
Raw Materials Inventory, January 1, 20
Raw Materials Purchases
Cost of Raw Materials Available for Use
Less Raw Materials Inventory,
December 31, 20
Cost of Raw Materials Used
Direct Labor
Factory Overhead:
Indirect Labor
Heat, Light, and Power
Factory Supervision
Rent, Factory
Machinery Repairs
Depreciation Expense, Machinery
Factory Supplies Used
Factory Insurance Expired
Small Tools Expense
Miscellaneous Factory Costs
Total Factory Overhead
Total Manufacturing Costs
Total Cost of Work-in-Process During
Period
Less Work-in-Process Inventory,
December 31, 20
Cost of Goods Manufactured

$101,360.00
$

57,168.00
305,600.00
$ 362,768.00
59,056.00
$303,712.00
389,520.00
$

88,672.00
22,096.00
21,544.00
14,400.00
14,336.00
13,904.00
3,920.00
2,880.00
992.00
520.00
183,264.00
876,496.00
$977,856.00
106,272.00
$871,584.00

SOLUTION (concluded)
Lakewood Tub and Tile Company, Inc.
Income Statement
For Year Ended December 31, 20
Revenue from Sales:
Sales
Less: Sales Returns and Allowances
Sales Discounts
Net Sales
Cost of Goods Sold:
Finished Goods Inventory, January 1, 20
Cost of Goods Manufactured
Cost of Goods Available for Sale
Less Finished Goods Inventory, December 31, 20
Cost of Goods Sold
Gross Profit
Operating Expenses:
Selling Expenses (control)
General Expenses (control)
Total Operating Expenses
Income from Operations
Other Expenses:
Loss on Disposal of Equipment
Interest Expense
Total Other Expenses
Income Before Income Tax
Income Tax Expense
Net Income

$ 1,206,592.00
$

10,080.00
9,600.00

19,680.00
$ 1,186,912.00

147,680.00
871,584.00
$ 1,019,264.00
154,240.00

865,024.00
321,888.00

208,448.00
113,440.00

149,560.00
58,888.00

6,400.00
6,080.00
$
$

12,480.00
100,960.00
36,640.00
64,320.00

Cost Allocation to Completed Units and Units in Process


The cost per equivalent unit calculations are used to allocate cost
incurred between a departments completed production and the
units in ending work in process. Carefully examine the following schedule to see that the
cost assigned to completed units totals $8,027,500. The ending work in process is
$1,460,000, determined as 125,000 equivalent units at $9.00 each, plus 100,000 equivalent
units of conversion at $3.35 each.
Note that a check mark is placed beside the total cost allocation ($9,487,500
= $8,027,500 + $1,460,000) as a reminder that this schedule must allocate
the entire cost incurred within the Melting Department.

Simpson Manufacturing Company, Inc.


Statement of Cost of Goods Manufactured
For Year Ended December 31, 20
Work-in-Process Inventory, January 1, 20
$ 140,000.00
Raw Materials:
Raw Materials Inventory, January 1, 20
$ 90,000.00
Raw Materials Purchases (net)
230,000.00
Cost of Raw Materials Available for Use
$ 320,000.00
Less Raw Materials Inventory, December 31, 20
100,000.00
Cost of Raw Materials Used
$ 220,000.00
Direct Labor
565,000.00
Factory Overhead:
Indirect Labor
$ 120,000.00
Supervisory Sales
110,000.00
Heat, Light, and Power
42,000.00
Depreciation Expense, Factory Equipment
32,000.00
Depreciation Expense, Factory Building
25,000.00
Repairs and Maintenance
24,000.00
Factory Insurance Expired
22,000.00
Factory Supplies Used
14,000.00
Miscellaneous Factory Costs
16,000.00
Total Factory Overhead
405,000.00
Total Manufacturing Costs
1,190,000.00
Total Cost of Work-in-Process During Period
$ 1,330,000.00
Less Work-in-Process Inventory, December 31, 20
130,000.00
Cost of Goods Manufactured
$ 1,200,000.00

General Journal
Date
20
Dec.

Description
Adjusting Entries
31 Manufacturing Summary
Raw Materials Inventory

Page 11
Post.
Ref.

Debit

Credit

90,000.00
90,000.00

31 Raw Materials Inventory


Manufacturing Summary

100,000.00

31 Manufacturing Summary
Work-in-Process Inventory

140,000.00

31 Work-in-Process Inventory
Manufacturing Summary

130,000.00

100,000.00

140,000.00

130,000.00

General Journal
Date
Description
20
Dec. 31 Manufacturing Summary
Raw Materials Purchases
Direct Labor
Indirect Labor
Supervisory Sales
Heat, Light, and Power
Depreciation Expense, Factory Equipment
Depreciation Expense, Factory Building
Repairs and Maintenance
Factory Insurance Expired
Factory Supplies Used
Miscellaneous Factory Costs
31

Income Summary
Manufacturing Summary

Page 12
Post.
Ref.

Debit

Credit

1,200,000.00
230,000.00
565,000.00
120,000.00
110,000.00
42,000.00
32,000.00
25,000.00
24,000.00
22,000.00
14,000.00
16,000.00
1,200,000.00
1,200,000.00

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