Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Chapter 18, Problem 9E
To determine

Concept Introduction- Income statement-

Income statement refers to the financial statement that evaluates the financial performance of the company. It shows the expenses, revenues and net income of a firm over specific period of time. Therefore evaluation of financial performance can be undertaken by identifying the revenues and expenses incurred by the business through both non-operating and operating activities.

Requirement-1:

To Prepare To prepare an income statement.

Expert Solution
Check Mark

Answer to Problem 9E

Income statements are prepared as follows-

    Income statement
    Garcon Co.
    ParticularsAmount ($)
    Sales
    195,030
    Cost of goods sold
    91,030
    Gross profit
    104,000
    Operating expenses

    General and administrative expense
    21,000
    Selling expense
    50,000
    Total operating expenses
    71,000
    Income before tax33,000
    Income statement
    Pepper Co.
    ParticularsAmount ($)
    Sales
    290,010
    Cost of goods sold
    143,010
    Gross profit
    147,000
    Operating expenses

    General and administrative expense
    43,000
    Selling expense
    46,000
    Total operating expenses
    89,000
    Income before tax58,000

Explanation of Solution

Garcon Co.

Given,

  • Sales-$195,030
  • General and administrative expenses -$21,000
  • Selling expenses- $50,000
  • Cost of goods sold is calculated as follows-
    Cost of goods sold
    ParticularsAmount ($)Amount ($)
    Beginning raw material inventory
    7,250

    Add: Raw materials
    33,000

    Raw material available for use
    40,250

    Less: Raw material ending balance
    5,300

    Direct material used

    34,950
    Direct labor

    19,000
    Factory overheads:


    Rental cost on factory equipment
    27,000

    Factory utilities
    9,000

    Factory supplies used
    8,200

    Indirect labor used
    1,250

    Repair factory equipment
    4,780

    Total factory overhead

    50,230
    Total manufacturing costs

    104,180
    Add: Work in process, beginning balance

    14,500
    Total cost of work in process

    118,680
    Less: Work in process, ending balance

    22,000
    Cost of goods manufactured

    96,680
    Add: Finished goods inventory, beginning balance
    12,000
    Goods available for sale
    108,680
    Less: Finished goods inventory, ending balance
    17,650
    Cost of goods sold91,030

Gross profit is calculated as follows-

  Gross profit = SalesCost of goods soldGross profit =$195,030$91,030Gross profit =$104,000

Income before tax is calculated as follows-

  Income before tax=Gross profit  Total operating expensesIncome before tax= Gross profitGeneral and administrative expense+Selling expensesIncome before tax=$104,000$21,000+$50,000Income before tax=$104,00071,000Income before tax=$33,000

Pepper Co.

Given,

  • Sales-$290,010
  • General and administrative expenses -$43,000
  • Selling expenses- $46,000
  • Cost of goods sold is calculated as follows-
    Cost of goods sold
    ParticularsAmount ($)Amount ($)
    Beginning raw material inventory
    9,000

    Add: Raw materials
    52,000

    Raw material available for use
    61,000

    Less: Raw material ending balance
    7,200

    Direct material used

    53,800
    Direct labor

    35,000
    Factory overheads:


    Rental cost on factory equipment
    22,750

    Factory utilities
    12,000

    Factory supplies used
    3,200

    Indirect labor used
    7,660

    Repair factory equipment
    1,500

    Total factory overhead

    47,110
    Total manufacturing costs

    135,910
    Add: Work in process, beginning balance

    19,950
    Total cost of work in process

    155,860
    Less: Work in process, ending balance

    16,000
    Cost of goods manufactured
    139,860
    Add: Finished goods inventory, beginning balance
    16,450
    Goods available for sale
    156,310
    Less: Finished goods inventory, ending balance
    13,300
    Cost of goods sold143,010

Gross profit is calculated as follows-

  Gross profit = SalesCost of goods soldGross profit =$290,010$143,010Gross profit =$147,000

Income before tax is calculated as follows-

  Income before tax=Gross profit  Total operating expensesIncome before tax= Gross profitGeneral and administrative expense+Selling expensesIncome before tax=$147,000$43,000+$46,000Income before tax=$147,000789000Income before tax=$58,000

Conclusion:

Thus, income statements are prepared.

To determine

Concept Introduction-Current assets-

Current assets are balance sheet items which represents all the assets which are expected to convert into cash within a period of 12 months i.e. within 1 year.

Current assets section is part of balance sheet.

Requirement-2:

To prepare:

To prepare current asests section of the balance sheet.

Expert Solution
Check Mark

Answer to Problem 9E

    Partial Balance sheet
    Garcon Co.
    ParticularsAmount ($)Amount ($)
    Cash
    20,000
    Accounts receivable, net
    13,200
    Inventories-
    Ending raw materials inventory
    5,300
    Ending work in process inventory
    22,000
    Ending finished goods inventory
    17,650
    44,950
    Total current assets78,150
    Partial Balance sheet
    Pepper Co.
    ParticularsAmount ($)Amount ($)
    Cash
    15,700
    Accounts receivable, net
    19,450
    Inventories-
    Ending raw materials inventory
    7,200
    Ending work in process inventory
    16,000
    Ending finished goods inventory
    13,300
    36,500
    Total current assets71,650

Explanation of Solution

Garcon Co.

Given,

  • Cash= $20,000
  • Accounts receivable, net = $13,200
  • Ending raw materials inventory = $5,300
  • Ending work in process inventory = $22,000
  • Ending finished goods inventory = $17,650
  • Total current assets are calculated as follows-

       Total current assets=Cash+ Accounts receivable, net+ Ending raw materials inventory + Ending work in process inventory+ Ending finished goods inventory Total current assets=$20,000+$13,200+$5,300+$22,000+$17,650Total current assets=$78,150

Pepper Co.

Given,

  • Cash= $15,700
  • Accounts receivable, net = $19,450
  • Ending raw materials inventory = $7,200
  • Ending work in process inventory = $16,000
  • Ending finished goods inventory = $13,300
  • Total current assets are calculated as follows-

       Total current assets=Cash+ Accounts receivable, net+ Ending raw materials inventory + Ending work in process inventory+ Ending finished goods inventory Total current assets=$15,700+$19,450+$7,200+$16,000+$13,300Total current assets=$71,650

Conclusion:

Thus, current assets section of balance sheeti prepared.

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Chapter 18 Solutions

Fundamental Accounting Principles

Ch. 18 - Prob. 11DQCh. 18 - Prob. 12DQCh. 18 - Prob. 13DQCh. 18 - Prob. 14DQCh. 18 - Prob. 15DQCh. 18 - Prob. 16DQCh. 18 - Prob. 17DQCh. 18 - Prob. 18DQCh. 18 - Prob. 19DQCh. 18 - List the four components of a schedule of cost of...Ch. 18 - Prepare a proper title for the annual schedule of...Ch. 18 - Prob. 22DQCh. 18 - Prob. 23DQCh. 18 - Prob. 24DQCh. 18 - Prob. 25DQCh. 18 - Prob. 1QSCh. 18 - Prob. 2QSCh. 18 - Fixed and variable costs C2 Listed below are...Ch. 18 - Prob. 4QSCh. 18 - Prob. 5QSCh. 18 - Prob. 6QSCh. 18 - Prob. 7QSCh. 18 - Prob. 8QSCh. 18 - Prob. 9QSCh. 18 - Prob. 10QSCh. 18 - Prob. 11QSCh. 18 - Prob. 12QSCh. 18 - Prob. 13QSCh. 18 - Prob. 14QSCh. 18 - Prob. 15QSCh. 18 - Prob. 16QSCh. 18 - Prob. 17QSCh. 18 - Prob. 1ECh. 18 - Prob. 2ECh. 18 - Prob. 3ECh. 18 - Prob. 4ECh. 18 - Prob. 5ECh. 18 - Prob. 6ECh. 18 - Prob. 7ECh. 18 - Prob. 8ECh. 18 - Prob. 9ECh. 18 - Prob. 10ECh. 18 - Prob. 11ECh. 18 - Exercise 18-12 Components of accounting reports P2...Ch. 18 - Prob. 13ECh. 18 - Prob. 14ECh. 18 - Prob. 15ECh. 18 - Prob. 16ECh. 18 - Prob. 17ECh. 18 - Prob. 18ECh. 18 - Prob. 19ECh. 18 - Prob. 1APSACh. 18 - Prob. 2APSACh. 18 - Prob. 3APSACh. 18 - Prob. 4APSACh. 18 - Problem 18-5A Inventory computation and reporting...Ch. 18 - Prob. 1BPSBCh. 18 - Prob. 2BPSBCh. 18 - Prob. 3BPSBCh. 18 - Prob. 4BPSBCh. 18 - Prob. 5BPSBCh. 18 - Prob. 18SPCh. 18 - Prob. 1AACh. 18 - Prob. 2AACh. 18 - Prob. 3AACh. 18 - Prob. 1BTNCh. 18 - Prob. 2BTNCh. 18 - Prob. 3BTNCh. 18 - Prob. 4BTNCh. 18 - Prob. 5BTNCh. 18 - Prob. 6BTN
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