Question

Calculate the cost of goods sold during June. Calculate the difference between cost of goods manufactured and cost of goods sold. How will this amount be reported in the financial statements? Prepare a traditional (absorption) income statement for Maryville for the month of June. Assume that sales for the month was $2,448,000 and the company's effective income tax rate was 30%.

Answer 1

To calculate the cost of goods sold and the difference between the cost of goods manufactured and the cost of goods sold, you can use the formulas provided. The difference between the cost of goods manufactured and the cost of goods sold will be reported as an adjustment to inventory on the balance sheet. To prepare a traditional (absorption) income statement, you need to calculate various components such as sales, cost of goods sold, gross profit, operating expenses, operating income, income tax expense, and net income.

Step-by-step explanation:

The cost of goods sold can be calculated using the formula:

Cost of Goods Sold = Beginning Inventory + Cost of Goods Manufactured - Ending Inventory

The difference between cost of goods manufactured and cost of goods sold represents the change in inventory. If the cost of goods manufactured is greater than the cost of goods sold, it means that inventory has increased. If the cost of goods manufactured is less than the cost of goods sold, it means that inventory has decreased.

In the financial statements, the difference between cost of goods manufactured and cost of goods sold is reported as an adjustment to inventory on the balance sheet.

To prepare a traditional (absorption) income statement, you will need to calculate the following:

1. Sales
2. Cost of Goods Sold
3. Gross Profit (Sales - Cost of Goods Sold)
4. Operating Expenses
5. Operating Income (Gross Profit - Operating Expenses)
6. Income Tax Expense
7. Net Income (Operating Income - Income Tax Expense)

Using the given information:

• Sales = $2,448,000
• Cost of Goods Sold = ?
• Effective Income Tax Rate = 30%

Assuming that the cost of goods sold is 60% of sales:

• Cost of Goods Sold = 0.6 * $2,448,000 = $1,468,800

Using the income tax rate:

• Income Tax Expense = 0.3 * Net Income
• Net Income = Operating Income - Income Tax Expense
• Operating Income = Gross Profit - Operating Expenses
• Gross Profit = Sales - Cost of Goods Sold

Calculate each component to prepare the traditional (absorption) income statement for Maryville for the month of June.