Other Subsidiary Records

Just as it does for manufacturing payroll, Robinson maintains employee labor records in subsidiary ledgers for marketing and customer-service payroll as well as records for different types of advertising costs (print, television, and radio). An accounts receivable subsidiary ledger is also used to record the February 2020 amounts due from each customer, including the $15,000 due from the sale of Job WPP 298.

At this point, pause and review the nine entries in this example. Exhibit 4-7 is a handy summary of all nine general-ledger entries presented in the form of T-accounts. Be sure to trace each journal entry, step by step, to T-accounts in the general ledger presented in Exhibit 4-7. Robinson’s managers will use this information to evaluate how Robinson has performed on the WPP job.

Exhibit 4-10 provides Robinson’s income statement for February 2020 using information from entries 7, 8, and 9. Managers could further subdivide the cost of goods sold calculations and present them in the format of Exhibit 2-8 (page 42). The benefit of using the subdivided format is that it allows managers to discern detailed performance trends that can help them improve the efficiency on future jobs.

Exhibit 4-10

Robinson Company Income Statement for the Month Ending February 2020

Table shows the income statement of Robinson Company for the month ending February 2020.

The details of the table are as follows:

Revenues: 270,000 dollars

Cost of goods sold (180,000 dollars in addition to 14,000 dollars): 194,000 dollars

Gross margin: 76,000 dollars

Operating costs include the marketing and customer-service costs.

Marketing costs: 45,000 dollars

Customer-service costs: 15,000 dollars

Total operating costs: 60,000 dollars

Operating income: 16,000 dollars

Cost of goods sold has been increased by 14,000 dollars, the difference between the Manufacturing overhead control account (94,000 dollars) and the Manufacturing overhead allocated (80,000 dollars). In a later section of this chapter, we discuss this adjustment, which represents the amount by which actual manufacturing overhead cost exceeds the manufacturing overhead allocated to jobs during February 2020.