The following calendar year end information is taken from the December 31, 2013, adjusted trial balance and other records of Elegant Furniture.
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,250
Depreciation expense Office equipment . . . . . . . . . . 8,440
Depreciation expense Selling equipment . . . . . . . . . 10,125
Depreciation expense Factory equipment . . . . . . . . 35,400
Factory supervision . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,500
Factory supplies used . . . . . . . . . . . . . . . . . . . . . . . . . . 6,060
Factory utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500
Inventories Raw materials, December 31, 2012 . . . . . . . 40,375
Raw materials, December 31, 2013 . . . . . . . . . . . . . 70,430
Goods in process, December 31, 2012 . . . . . . . . . . 12,500
Goods in process, December 31, 2013 . . . . . . . . . . 14,100
Finished goods, December 31, 2012 . . . . . . . . . . . . . 177,200
Finished goods, December 31, 2013 . . . . . . . . . . . . . 141,750
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 562,500
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . 136,700
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,000
Miscellaneous production costs . . . . . . . . . . . . . . . . . . 8,440
Office salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . 70,875
Raw materials purchases . . . . . . . . . . . . . . . . . . . . . . . . 894,375
Rent expense Office space . . . . . . . . . . . . . . . . . . . . 23,625
Rent expense Selling space . . . . . . . . . . . . . . . . . . . . 27,000
Rent expense Factory building . . . . . . . . . . . . . . . . . 93,500
Maintenance expenseFactory equipment . . . . . . . . 30,375
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000
Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,375
Sales salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . 295,300
Required:
1. Prepare the company's 2013 manufacturing statement.
2. Prepare the company's 2013 income statement that reports separate categories for
(a) Selling expenses
(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.