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Financial Statements for Manufacturing & Merchandising Companies

Base One Equipment (BOE) and Camping Supplies International (CSI) both sell tents. BOE purchases its
tents from a manufacturer for $96 each and then sells them for $180. It purchased 10,000 tents in 20X4.
CSI produces its own tents. In 20X4 CSI produced 10,000 tents. Costs were as follows:
Direct materials purchased $570,000
Direct materials used $520,000
Direct labor 290,000
Indirect manufacturing:
Depreciation $50,000
Indirect labor 60,000
Other 40,000 150,000
Total cost of production $960,000
Assume that CSI had no beginning inventory of direct materials. There was no beginning inventory of
finished tents, but ending inventory consisted of 1,000 finished tents. Ending work-in-process inventory
was negligible.
Each company sold 9,000 tents for $1,620,000 in 20X4 and incurred the following selling and
administrative costs:
Sales salaries and commissions $105,000
Depreciation on retail store 40,000
Advertising 25,000
Other 15,000
Total selling and administrative cost $185,000
ISBN: 0-536-47129-0
Introduction to Management Accounting: Chapters 1-17, Fourteenth Edition, by Charles T. Horngren, Gary L. Sundem, William O. Stratton,
David Burgstahler, and Jeff Schatzberg. Published by Prentice Hall. Copyright © 2008 by Pearson Education, Inc.
174 Part 1: Focus on Decision Making
1. Prepare the inventories section of the balance sheet for December 31, 20X4, for BOE.
2. Prepare the inventories section of the balance sheet for December 31, 20X4, for CSI.
3. Using the cost of goods sold format on page 149 as a model, prepare an income statement for the
year 20X4 for BOE.
4. Using the cost of goods sold format on page 149 as a model, prepare an income statement for the
year 20X4 for CSI.
5. Summarize the differences between the financial statements of BOE, a merchandiser, and CSI, a
manufacturer.
6. What purpose of a cost management system is being served by reporting the items in requirements
1 through 4?

Solution Summary

The solution helps provide financial statements for manufacturing and merchandising companies.

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