Prepare the company’s 2011 income statement that reports separate categories for (a) selling…

The following calendar year-end information is taken from the December 31, 2011, adjusted trial balance and other records of Firethorn Furniture.

Advertising expense

$ 22,250

Direct labor

$ 564,500

Depreciation expense—Office equipment

10,440

Income taxes expense

138,700

Depreciation expense—Selling equipment

12,125

Indirect labor

61,000

Depreciation expense—Factory equipment

37,400

Miscellaneous production costs

10,440

Factory supervision

123,500

Office salaries expense

72,875

Factory supplies used

8,060

Raw materials purchases

896,375

Factory utilities

39,500

Rent expense — Office space

25,625

Inventories

Rent expense — Selling space

29,000

Raw materials, December 31, 2010

42,375

Rent expense — Factory building

95,500

Raw materials, December 31, 2011

72,430

Maintenance expense — Factory equipment

32,375

Goods in process, December 31, 2010

14,500

Sales

5,002,000

Goods in process, December 31, 2011

16,100

Sales discounts

59,375

Finished goods, December 31, 2010

179,200

Sales salaries expense

297,300

Finished goods, December 31, 2011

143,750

Required

1. Prepare the company’s 2011 manufacturing statement.

2. Prepare the company’s 2011 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.

Analysis Component

3. Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and

(b) days’ sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory. (To compute turnover and days’ sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for differences between these ratios for the two types of inventories. Round answers to one decimal place.

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