Question

Perez Manufacturing Company was started on January 1, 2018, when it acquired $79,000 cash by issuing common stock. Perez immediately purchased office furniture and manufacturing equipment costing $8,400 and $25,300, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $4,000 salvage value and an expected useful life of three years. The company paid $11,300 for salaries of administrative personnel and $15,100 for wages to production personnel. Finally, the company paid $14,760 for raw materials that were used to make inventory. All inventory was started and completed during the year. Perez completed production on 4,400 units of product and sold 3,490 units at a price of $16 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.) Required a. Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.) b. Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.) c. Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round Intermediate calculations.) d. Determine the amount of net income that would appear on the 2018 Income statement. (Round your answer to the nearest dollar amount.) e. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.) 1. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.) a. Total product cost Average cost per unit b. Cost of goods sold

Answer 1

ANSWER:

a.	Total product cost	$ 36,960.00
	Average cost per unit	$ 8.40
b.	Cost of goods sold	$       29,316
c.	Ending inventory	$         7,644
d.	Net income	$       14,174
e.	Retained earnings	$       14,174
f.	Total assets	$       93,174

Working:

a.

Total product cost:
Direct materials	14760
Direct labor	15100
Manufacturing overhead:
Depreciation on manufacturing equipment [($25300 - $4000)/3]	7100
Total product cost $	36960
Number of units produced	4400
Average cost per unit	8.4

b. Cost of goods sold = 3490 x $8.4= $29316

c. Ending inventory = (4400 - 3490) x $8.4 = 910 x $8.4 = $7644

d.

Net income:
Sales (3490 x $16)	55840
Cost of goods sold	29316
Gross profit	26524
Salaries of administrative personnel	11300
Depreciation on office furniture ($8400/8)	1050
Net income $	14174

e. Retained earnings is equal to the net income $14174, it being the first year of operations.

f. Total assets = Liabilities + Equity = $0 + ($79000 + $14174) = $93174

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