The Jacobson Manufacturing Company Was Started at the Beginning of the Current

question 47

Essay

The Jacobson Manufacturing Company was started at the beginning of the current year when it acquired $200,000 from its owners. During the year, the company incurred the following costs, all for cash: $$\begin{array} { | l| r | } \hline \text { Direct material costs } & \$ 80,000 \\\hline \text { Direct labor costs } & 100,000 \\\hline \text { Overhead costs } & 40,000 \\\hline \text { Selling and administrative costs } & 60,000\\\hline\end{array}$$
The company produced 10,000 units of product and sold 8,000 units. The average selling price was $34 per unit; all sales were for cash. The accountant who prepared the firm's financial statements misclassified the selling and administrative costs as product costs.
Required:
Demonstrate the impact of the error on the company's income statement and balance sheet by completing the following schedule: $$\begin{array} { | l | l | l | } \hline & \text { Scenario 1: With the error } & \text { Soenario 2: Without the error } \\\hline \text { Income statement: } & & \\\hline \text { Revenue } & & \\\hline \text { Less: Cost of goods sold } & & \\\hline \text { Oross margin } & & \\\hline \begin{array} { c } \text { Less: Selling, general, and } \\\text { administrative expenses }\end{array} & & \\\hline \text { Net income } & & \\\hline & & \\\hline \text { Balance sheet: } & & \\\hline \text { Assets } & & \\\hline \text { Cash } & & \\\hline \text { Inventory } & & \\\hline \text { Total assets } & & \\\hline \text { Equity } & & \\\hline \text { Common stock } & & \\\hline \text { Retsined earnings } & & \\\hline \text { Total equity } & & \\\hline\end{array}$$

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Definitions:

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