Question

Baird Manufacturing Company was started on January 1, 2018, when it acquired $89,000 cash by issuing common stock. Baird immediately purchased office furniture and manufacturing equipment costing $8,400 and $26,500, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,400 salvage value and an expected useful life of three years. The company paid $11,400 for salaries of administrative personnel and $15,500 for wages to production personnel. Finally, the company paid $13,760 for raw materials that were used to make inventory. All inventory was started and completed during the year. Baird completed production on 4,800 units of product and sold 3,900 units at a price of $15 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.) f. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.) Total product cost Average cost per unit Cost of goods sold

Answer 1

a. Total product cost:

Raw materials	$13,760
Wages to production personnel	15,500
Depreciation on manufacturing equipment ($26,500-3,400/3)	7,700
Total product cost	$36,960
Average cost per unit ($36,960/4,800)	$7.7

b.

Cost of goods sold = 3,900*$7.7 = $30,030

c.

Ending inventory balance = (4,800-3,900) * $7.7 = $6,930

d. Net income:

Sales (3,900*$15)	$58,500
Cost of goods sold	(30,030)
Gross profit	28,470
Selling and administrative costs:
Depreciation on office furniture ($8,400/8)	1,050
Salaries of administrative personnel	11,400
Net income	$16,020

e.

Retained earnings = $16,020 (Net income)

f.

Total assets as on December 31, 2018:

Cash	$71,940
Office furniture ($8,400-1,050)	7,350
Manufacturing equipment ($26,500-7,700)	18,800
Total assets	$98,090

Cash as on December 31, 2018
Receipts:
Issue of common stock	$89,000
Sales	58,500
Total cash receipts (A)	147,500
Payments:
Purchase of office furniture	8,400
Purchase of manufacturing equipment	26,500
Salaries of administrative personnel	11,400
Wages of production personnel	15,500
Raw materials paid	13,760
Total cash payments (B)	75,560
Ending cash balance (A) - (B)	$71,940