P1-5B Cinta Company is a manufacturer of toys. Its controller resigned in August 2011. An inexperienced assistant accountant has prepared the following income statement for the month of August 2011.
CINTA COMPANY
Income Statement
For the Month Ended August 31, 2011
Sales (net) $675,000
Less: Operating expenses
Raw materials purchases $220,000
Direct labor cost 160,000
Advertising expense 75,000
Selling and administrative salaries 70,000
Rent on factory facilities 60,000
Depreciation on sales equipment 50,000
Depreciation on factory equipment 35,000
Indirect labor cost 20,000
Utilities expense 10,000
Insurance expense 5,000 705,000
Net loss $ (30,000)