Question

Darcy Hill is the controller for Spry Manufacturing Ltd. in London, Ontario. Darcy just finished a phone call with the chief financial officer (CFO) of the company, who is attending a meeting with executive management at a Toronto convention center. He asked that Randy plan to come to Toronto that evening and attend a meeting early the following morning. The CFO also asked him to bring with him all of the financial data required to generate T-accounts (for raw materials inventory, factory overhead, work-in-process inventory, and finished goods inventory), a schedule of cost of goods manufactured, a statement of cost of goods sold, and an income statement for the just-completed month of January. This information would be needed in the meeting. Darcy quickly ran a report with all of the information he felt was necessary to create the reports his boss had requested. He put the financial information in his briefcase and left for Toronto immediately to avoid the poor weather that was on its way. Darcy was sure he would have lots of time in his hotel room in the evening to generate the required reports. However, when he arrived in his hotel room and pulled out the information, he was alarmed to find that some important pieces of information were missing. Darcy made a list of all the data he had plus what he needed. For those categories with missing data, the number field has a question mark. The following is the list that Darcy generated:

Balances and Transactions

Direct Materials Used $172,455

Direct Labour 226, 120

Factory Rent 5,265

Repairs & Maintenance 420

Production Mnger Salary 6,250

Indirect Materials Used 3,350

Beginning Raw Materials 16, 100

Ending Raw Materials 15, 200

Beginning Work in Process 28, 100

Ending Work in Process ?

Beginning Finished Goods ?

Ending Finished Goods 49, 120

Sales 1, 140, 000

Sales Returns and Allowance 143, 800

Net Sales ?

Cost of Goods Manufactured 439, 550

Goods Available for Sale 494, 695

Cost of Goods Sold ?

Gross Margin 550, 625

Indirect Labour 5, 650

Depreciation Production Equipment 16, 900

Selling Expenses 170, 975

Administrative Expenses 110, 730

Raw Materials Purchased ?

Estimated Annual Overhead 39, 100

Estimated Annual Direct Labour 230, 000

Predetermined Overhead Rate ?

Spry Manufacturing uses normal costing and applies overhead on the basis of direct labor dollars.

Required:

Prepare the data required by the CFO and calculate the missing data while preparing the T- accounts and the required schedule and statements. Show all work.

Answer 1

1. Calculate net sales?

Net sales = gross sales - Sales returns and allowance

Net sales = 1140000- 143800 = 996,200 (Answer)

2. Calculate gross profit?

Gross profit = Net sales – cost of goods sold

Cost of goods sold = Net sales – gross profit

Cost of goods sold = 996,200-550,625 = $445,575 (answer)

3. Calculate beginning finished good?

Closing finished goods = beginning finished goods + cost of goods manufactured – cost of goods sold

So Beginning finished goods = closing finished goods – cost of goods manufactured + cost of goods sold

Beginning finished goods = 49,120 – 439,550 +445,575 = 55,145 (answer)