Instructions
The leasehold was purchased for a lump sum with provision for the payment of a small annual rental in addition. The rent item on the books covers this charge. $1,000 a year is the amortization charge on the leasehold.
Insurance on buildings and equipment covers buildings, machinery, tools, patterns, and office, salesroom, and factory furniture and fixtures. Be careful to distribute this among the manufacturing, selling, and office sections of the profit and loss summary. Separate the asset values of these items, which show investment in the factory, the selling section, and the office section of the plant, and distribute the insurance on the basis of the investment shown.
Depreciation on buildings will be distributed also on the same basis as rent.
Dividends 25 and 37 have evidently been paid but not yet charged against Surplus. This is sometimes done when it is desired to charge an interim dividend against profits of the current year. In drawing up the balance sheet take cognizance of the fact that dividends 26 and 38 have also been declared and paid though not yet booked.
Support the balance sheet and profit and loss statement with the customary schedules. The “Cost of Goods Sold” schedule must in turn be supported by a schedule showing the “Cost to Manufacture.” As explained in Chapter III, in the cost of goods sold schedule the cost of goods manufactured—shown by the cost to manufacture schedule—takes the place of the item “Net Purchases” in a trading business. A typical form of manufacturing statement is shown below.
Exhibit B—Schedule 1
Cogswell & Sons, Manufacturers
Cost to Manufacture, for the Year Ending December 31, 1917
| Fireless Cookers: | |||
| Raw Materials: | |||
| Inventory, January 1, 1917 | $25,000.00 | ||
| Purchases, Net | $125,000.00 | ||
| In-Freight and Cartage | 5,000.00 | 130,000.00 | |
| $155,000.00 | |||
| Less Inventory, December 31, 1917 | 28,100.00 | ||
| Cost of Raw Materials Used in Manufacture | $126,900.00 | ||
| Direct Labor | 178,600.00 | ||
| Prime Cost | $305,500.00 | ||
| Factory Expenses: | |||
| Indirect Labor | $30,000.00 | ||
| Light, Heat, and Power | 20,000.00 | ||
| Factory Supplies | 5,000.00 | ||
| Sundry Factory Expense | 1,500.00 | ||
| Machinery Repairs | 750.00 | ||
| Building Maintenance and Repairs | 1,225.00 | ||
| Depreciation | 6,210.00 | ||
| Insurance | 850.00 | ||
| Taxes | 2,195.00 | ||
| Royalties | 15,276.00 | 83,006.00 | |
| $388,506.00 | |||
| Deduct, excess of: | |||
| Goods in Process, December 31, 1917 over | $40,210.00 | ||
| Goods in Process, January 1, 1917 | 32,794.00 | 7,416.00 | |
| Cost of Finished Cookers (carried to Schedule 2) | $381,090.00 | ||
As stated above, this “Cost of Finished Cookers” is carried to Schedule 2, “Cost of Goods Sold,” where it is combined with its initial and final inventories to develop the cost of the cookers sold during the period. With the exception noted, this schedule, for a departmental business, follows the forms already shown and will not be repeated here. The same thing is true of the other supporting schedules.
XXIV