Problem 9-1

Karla Company
Income Statement
For the year ended December 31, 2021
Note
Net sales (1) 7,700,000.00
Cost of Goods Sold (2) 5,000,000.00
Gross Income 2,700,000.00
Other income (3) 400,000.00
Total income 3,100,000.00

Expenses:
Distribution costs (4) 950,000.00
Administrative expenses (5) 800,000.00
Other expenses (6) 100,000.00 1,850,000.00
Income before tax 1,250,000.00
Income tax 250,000.00
Net income 1,000,000.00

FUNCTIONAL PRESENTATION

Note 1 - Net Sales

Sales 7,850,000.00
Sales Returns and Allowances 140,000.00
Sales Discounts 10,000.00
Net Sales 7,700,000.00

Note 2 - Cost of Goods Sold

Merchandise Inventory, Jan 1 1,000,000.00
Purchases 5,250,000.00
Freight in 500,000.00
Total 5,750,000.00
Purchase Discounts 100,000.00
Purchase returns and allowances 150,000.00 5,500,000.00
Goods Available for sale 6,500,000.00
Merchandise Inventory, Dec 31 1,500,000.00
Cost of Sales 5,000,000.00

Note 3 - Other income

Rental Income 250,000.00
Dividend Revenue 150,000.00
Total 400,000.00

Note 4 - Distribution Costs

 Freight out 175,000.00
Salesmen's Commission 650,000.00
Depreciation - store equipment 125,000.00
Total Distribution costs 950,000.00

Note 5 - Administrative expenses

Officers' Salaries 500,000.00
Depreciation - office equipment 300,000.00
Total Administrative expenses 800,000.00

Note 6 - Other Expenses

Loss on sale of equipment 50,000.00
Loss on sale of investment 50,000.00
Total 100,000.00
 Karla Company
Income Statement
For the year ended December 31, 2021
Note
Net Sales (1) 7,700,000.00
Other Income (2) 400,000.00
Total income 8,100,000.00

Expenses:
Increase in Inventory (3) 500,000.00
Net Purchases (4) 5,500,000.00
Employee Benefit costs (5) 500,000.00
Salesmen's commission 650,000.00
Freight out 175,000.00
Depreciation (6) 425,000.00
Other expenses (7) 100,000.00 6,850,000.00
Income before tax 1,250,000.00
Income tax 250,000.00
Net income 1,000,000.00

NATURAL PRESENTATION

Note 1 - Net Sales

Sales 7,850,000.00
Sales returns and allowances 140,000.00
Sales Discounts 10,000.00
Net Sales 7,700,000.00

Note 2 - Other Income

Rental Income 250,000.00
Dividend Revenue 150,000.00
Total 400,000.00

Note 3 - Increase in Inventory

Merchandise Inventory, Dec 31 1,500,000.00
Merchandise Inventory, Jan 1 1,000,000.00
Increase in inventory 500,000.00

Note 4 - Net Purchases

Purchases 5,250,000.00
Freight in 500,000.00
Purchase Discounts 100,000.00
Purchase returns and allowances 150,000.00
 Net Purchases 5,500,000.00

Note 5 - Employee Benefit costs

Officer's Salaries 500,000.00
Total employee costs 500,000.00

Note 6 - Depreciation
Depreciation - Store equipment 125,000.00
Depreciation - Office equipment 300,000.00
Total Depreciation 425,000.00

Note 7 - Other expenses

Loss on sale of equipment 50,000.00
Loss on sale of investment 50,000.00
Total 100,000.00
A. Statement of cost of goods manufactured
Masay Company
Cost of Goods Manufactured
For the year ended December 31, 2021
Raw Material used:
Raw Materials Inventory, Jan 1, 2021 200,000.00
Add:Purchases 3,000,000.00
Raw Materials Available for use 3,200,000.00
Less: Raw Materials Inventory, Dec 31, 2021 280,000.00
Raw Materials Used 2,920,000.00
Direct Labor 950,000.00
Manufacturing Overhead 1,120,000.00
Total Manufacturing Costs 4,990,000.00
add: Goods in Process Inventory, Jan 1, 2021 240,000.00
Total 5,230,000.00
Less: Goods in Process Inventory, Dec 31, 2021 170,000.00
Cost of Goods Manufactured 5,060,000.00

B. Income Statement using the "cost of goods sold" method

Masay Company
Income Statement
For the year ended December 31, 2021
Note
Net sales (1) 7,450,000.00
Cost of Goods Sold (2) 5,120,000.00
Gross Income 2,330,000.00
Other income (3) 210,000.00
Total income 2,540,000.00

Expenses:
Distribution costs (4) 830,000.00
Administrative expenses (5) 590,000.00
Other expenses (6) 300,000.00 1,720,000.00
Income before tax 820,000.00
Income tax 320,000.00
Net income 500,000.00

Cost of goods sold method

Note 1 - Net Sales

Sales 7,500,000.00
Sales Returns and Allowances 50,000.00
Net Sales 7,450,000.00
Note 2 - Cost of Goods Sold
Cost of goods manufactured 5,060,000.00
add: Finished goods, Jan 1 360,000.00
Goods Available for sale 5,420,000.00
less: Finished goods, Dec 31 300,000.00
Cost of goods sold 5,120,000.00

Note 3 - Other income

Gain on sale of equipment 100,000.00
Gain from expropriation of asset 100,000.00
Interest income 10,000.00
Total 210,000.00

Note 4 - Distribution Costs

Sales Salaries 400,000.00
advertising 160,000.00
Depreciation - store equipment 70,000.00
delivery expenses 200,000.00
Total Distribution costs 830,000.00

Note 5 - Administrative expenses

Officers' Salaries 150,000.00
Depreciation - office equipment 40,000.00
Accounting and legal fees 150,000.00
Office expensed 250,000.00
Total Administrative expenses 590,000.00

Note 6 - Other Expenses

Earthquake loss 300,000.00
 Masay Company
Schedule of Manufacturing Overhead
For the year ended December 31, 2021

Indirect Labor 250,000.00

Superintendence 210,000.00
Light, Heat and Power 320,000.00
Rent - Factory Building 120,000.00
Repair and maintenance - machinery 50,000.00
Factory supplies used 110,000.00
Depreciation - machinery 60,000.00
Total Manufacturing Costs 1,120,000.00

C. Income statement using the "nature of expense" method

Masay Company
Income Statement
For the year ended December 31, 2021
Note
Net Sales (1) 7,450,000.00
Other Income (2) 210,000.00
Total income 7,660,000.00

Expenses:
Decrease in Finished Goods and Goods in Process (3) 130,000.00
Raw Materials Used (4) 2,920,000.00
Direct Labor 950,000.00
Manufacturing Costs (5) 1,120,000.00
Salaries (6) 550,000.00
Advertising 160,000.00
Depreciation (7) 110,000.00
delivery expenses 200,000.00
Accounting and legal fees 150,000.00
Office Expenses 250,000.00
Other Expenses (8) 300,000.00 6,840,000.00
Income before tax 820,000.00
Income tax 320,000.00
Net income 500,000.00

nature of expense method

Note 1 - Net Sales
Sales 7,500,000.00
Sales Returns and Allowances 50,000.00
Net Sales 7,450,000.00

Note 2 - Other Income

Gain on sale of equipment 100,000.00
Gain from expropriation of asset 100,000.00
Interest income 10,000.00
Total 210,000.00

Note 3 - Decrease in Finished Goods and Goods in Process

finished goods, Jan 1 360,000.00
finished goods, Dec 31 300,000.00
decrease in Finished goods 60,000.00

Goods in Process, Jan 1 240,000.00

goods in Process, Dec 31 170,000.00
decrease in goods in Process 70,000.00
total 130,000.00

Note 4 - Raw Materials Used

Raw Material used:
Raw Materials Inventory, Jan 1, 2021 200,000.00
Add:Purchases 3,000,000.00
Raw Materials Available for use 3,200,000.00
Less: Raw Materials Inventory, Dec 31, 2021 280,000.00
Raw Materials Used 2,920,000.00

Note 5 - Manufacturing Costs

Indirect Labor 250,000.00
Superintendence 210,000.00
Light, Heat and Power 320,000.00
Rent - Factory Building 120,000.00
Repair and maintenance - machinery 50,000.00
Factory supplies used 110,000.00
Depreciation - machinery 60,000.00
Total Manufacturing Costs 1,120,000.00

Note 6 - Salaries
Sales Salaries 400,000.00
Office Salaries 150,000.00
Total Salaries 550,000.00
Note 7 - Depreciation
Depreciation - Store 70,000.00
Depreciation - office 40,000.00
Total 110,000.00

Note 8 - other expenses

Earthquake loss 300,000.00
 Christian Company Christian Com
Cost of Goods Manufactured Income Statem
For the year ended December 31, 2021 For the year ended Dece
Purchases 1,600,000.00
Freight in 80,000.00 Net sales
Total 1,680,000.00 Cost of Goods Sold
Increase in Raw Material 100,000.00 Gross Income
Raw Material used 1,580,000.00 Expenses:
Direct Labor 1,480,000.00
Manufacturing Overhead
Indirect Labor 600,000.00 Income before tax
Depreciation - machinery 50,000.00 Income tax
Factory taxes 130,000.00 Net income
Factory supplies expense 120,000.00
Factory superintendence 480,000.00
Factory maintenance 150,000.00
Factory heat, light and Power 220,000.00 1,750,000.00
Total Manufacturing Costs 4,810,000.00
Decrease in goods in process 90,000.00
Cost of Goods Manufactured 4,900,000.00
 Christian Company Note 1 - Cost of Goods Sold
Income Statement Cost of Goods Manufactured
For the year ended December 31, 2021 Decrease in goods in process
Note Cost of Goods Sold
Net sales 8,000,000.00
Cost of Goods Sold (1) 5,100,000.00 Note 2 - Distribution costs
Gross Income 2,900,000.00 Sales salaries
Expenses: Advertising
Distribution costs (2) 800,000.00 Delivery expense
Administrative expenses (3) 930,000.00 1,730,000.00
Income before tax 1,170,000.00
Income tax 170,000.00 Note 3 - Administrative expenses
Net income 1,000,000.00 Office supplies expense
office Salaries
Doubtful accounts
ost of Goods Sold
ds Manufactured 4,900,000.00
n goods in process 200,000.00
5,100,000.00

stribution costs
520,000.00
120,000.00
160,000.00
800,000.00

dministrative expenses
lies expense 30,000.00
800,000.00
100,000.00
930,000.00
 Ronald Company
Income Statement
For the year ended December 31, 2021
Note
Net sales (1) 6,980,000.00
Cost of Goods Sold (2) 5,400,000.00
Gross Income 1,580,000.00
Other Income (3)
total Income
Expenses
Distribution Costs
Administrative expenses
Income before tax
Income tax
Net income

P10
Note 1 - Net sales
Sales 7,120,000.00
Sales Returns and Allowances 140,000.00
Net sales 6,980,000.00

Note 2 - Cost of Goods Sold

Finished goods - Jan 1 420,000.00
Cost of Goods manufactuured 5,500,000.00
Goods Available for sale 5,920,000.00
Finished goods -Dec 31 520,000.00
Cost of Goods Sold 5,400,000.00

Note 3 - other income

Interest Revenue 160,000.00