Question

Waterways Corporation is a private corporation formed for the purpose of providing the products and the services needed to irrigate farms, parks, commercial projects, and private lawns. It has a centrally located factory in a U.S. city that manufactures the products it markets to retail outlets across the nation. It also maintains a division that performs installation and warranty servicing in six metropolitan areas.

The mission of Waterways is to manufacture quality parts that can be used for effective irrigation projects that also conserve water. By that effort, the company hopes to satisfy its customers, perform rapid and responsible service, and serve the community and the employees who represent them in each community.

The company has been growing rapidly, so management is considering new ideas to help the company continue its growth and maintain the high quality of its products.

Waterways was founded by Will Winkman who is the company president and chief executive officer (CEO). Working with him from the company’s inception is Will’s brother, Ben, whose sprinkler designs and ideas about the installation of proper systems have been a major basis of the company’s success. Ben is the vice president who oversees all aspects of design and production in the company.

The factory itself is managed by Todd Senter who hires his line managers to supervise the factory employees. The factory makes all of the parts for the irrigation systems. The purchasing department is managed by Helen Hines.

The installation and training division is overseen by vice president Henry Writer, who supervises the managers of the six local installation operations. Each of these local managers hires his or her own local service people. These service employees are trained by the home office under Henry Writer’s direction because of the uniqueness of the company’s products.

There is a small human resources department under the direction of Sally Fenton, a vice president who handles the employee paperwork, though hiring is actually performed by the separate departments. Teresa Totter is the vice president who heads the sales and marketing area; she oversees 10 well-trained salespeople.

The accounting and finance division of the company is headed by Ann Headman, who is the chief financial officer (CFO) and a company vice president; she is a member of the Institute of Management Accountants and holds a certificate in management accounting. She has a small staff of accountants, including a controller and a treasurer, and a staff of accounting input operators who maintain the financial records.

A partial list of Waterways’ accounts and their balances for the month of November follows.

Accounts Receivable		$275,000
Advertising Expenses		54,000
Cash		260,000
Depreciation—Factory Equipment		16,800
Depreciation—Office Equipment		2,400
Direct Labor		42,000
Factory Supplies Used		16,800
Factory Utilities		10,200
Finished Goods Inventory, November 30		68,800
Finished Goods Inventory, October 31		72,550
Indirect Labor		48,000
Office Supplies Expense		1,600
Other Administrative Expenses		72,000
Prepaid Expenses		41,250
Raw Materials Inventory, November 30		52,700
Raw Materials Inventory, October 31		38,000
Raw Materials Purchases		184,500
Rent—Factory Equipment		47,000
Repairs—Factory Equipment		4,500
Salaries		325,000
Sales Revenue		1,350,000
Sales Commissions		40,500
Work In Process Inventory October 31		52,700
Work In Process Inventory, November 30		42,000

Answer 1

	Trading Account and profit and loss account
		Amount			Amount
to	Opening stock	38000	By	Sales revenue	1350000
to	Purchases	184500	By	Closing stock
to	Factory supplies used	16800	By	Material	52700
to	Direct labor	42000	By	WIP	42000
to	repair factory equipment	4500
to	Rent factory equipment	47000
to	Gross profit	1111900
		1444700			1444700
to	Indirect labor	42000	By	Gross profit b/d	1111900
to	Depreciation office equipment	2400
to	Advertising exp	54000
to	Office supplies exp	1600
to	salaries	325000
to	sales commissions	40500
to	Net profit	646400
		1111900			1111900