Question

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $668,000; Raw Materials Inventory, $55,000; Work in Process Inventory, $19,000; Finished Goods Inventory, $57,000; Common Stock, $603,000; and Retained Earnings, $196,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions. Paid $25,000 of research and development costs. Paid $63,000 for raw materials that will be used to make eBook readers. Placed $92,000 of the raw materials cost into the process of manufacturing eBook readers. Paid $66,000 for salaries of selling and administrative employees. Paid $94,000 for wages of production workers. Paid $64,000 to purchase equipment used in selling and administrative offices. Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $14,000 salvage value and a five-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($64,000 – $14,000) ÷ 5 = $10,000. Paid $97,000 to purchase manufacturing equipment. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $27,000 salvage value and a seven-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($97,000 – $27,000) ÷ 7 = $10,000. Paid $62,000 for rent and utility costs on the manufacturing facility. Paid $77,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost). Completed and transferred eBook readers that had total cost of $254,000 from work in process inventory to finished goods. Sold 830 eBook readers for $429,000. It cost Antioch $182,600 to make the eBook readers sold in Event 13.

1. c-1. Prepare a schedule of cost of goods manufactured and sold for the year. (Amounts to be deducted should be indicated with a minus sign.)

1. c-2. Prepare a formal income statement for the year.

1. c-3. Prepare a balance sheet for the year.

Answer 1

Financial Statement Model										All Amnt-$
Asset						Equity		Income Statement				Nature
Cash	Raw Material	Work In process Inventory	Finished Goods	Office Furniture	Manufacturing Equipment	Common Stock	Retained Earnings	Revenue	Expenses	Net Income	Statement Cash flow
6,68,000	55,000	19,000	57,000			6,03,000	1,96,000
-25,000							-25,000		25,000	-25,000	-25,000	Operating Activity
-63,000	63,000										-63,000	Operating Activity
	-92,000	92,000
-66,000							-66,000		66,000	-66,000	-66,000	Operating Activity
-94,000		94,000									-94,000	Operating Activity
-64,000				64,000							-64,000	Investment Activity
				-10,000			-10,000		10,000	-10,000
-97,000					97,000						-97,000	Investment Activity
					-10,000		-10,000		10,000	-10,000
-62,000		62,000									-62,000	Operating Activity
-77,000							-77,000		77,000	-77,000	-77,000	Operating Activity
		-2,54,000	2,54,000
4,29,000							4,29,000	4,29,000		4,29,000	4,29,000	Operating Activity
			-1,82,600				-1,82,600		1,82,600	-1,82,600
5,49,000	26,000	13,000	1,28,400	54,000	87,000	6,03,000	2,54,400	4,29,000	3,70,600	58,400	-1,19,000	Net Working Capital

Schedule for cost of goods manufactured + Sold
			Amnt($)
Opening Raw Material Inventory			55,000
Purchase			63,000
Raw Material Available			1,18,000
Closing Inventory			26,000	( Balancing Number )
Raw material used			92,000
Labour			94,000
Overhead			62,000
Total Manufacturing cost			2,48,000
Opening Work In Process			19,000
Total Work in process			2,67,000
Ending Work In Process			13,000	( Balancing Number )
Cost of goods manufactured			2,54,000
Opening Finished goods			57,000
Goods Available			3,11,000
Ending Finished goods			1,28,400	( Balancing Number )
Cost of goods sold			1,82,600

Balance Sheet
As at Dec
Asset	Amnt($)
Cash	5,49,000
Raw Material	26,000
Work in process of Inventory	13,000
Finished goods	1,28,400
Office Furniture	54,000
Manufacture Equipment	87,000
Total Assets	8,57,400
Common Stock	6,03,000
Retained Earnings	2,54,400
Total Equity	8,57,400

Income Statement
For the Year Ended Dec ..	Amnt($)
Revenue	4,29,000
Cost of goods sold	-1,82,600
Gross Margin	2,46,400
Selling and Admin Expenses	1,88,000
( $370600-$182600)
Net Income	58,400