Question

Finch Manufacturing Company was started on January 1, 2018, when it acquired $76,000 cash by issuing common stock. Finch immediately purchased office furniture and manufacturing equipment costing $7,000 and $33,100, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,500 salvage value and an expected useful life of four years. The company paid $11,500 for salaries of administrative personnel and $15,100 for wages to production personnel. Finally, the company paid $14,460 for raw materials that were used to make inventory. All inventory was started and completed during the year. Finch completed production on 4,800 units of product and sold 3,850 units at a price of $14 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 a. Average cost per unit b. Cost of goods sold c. Ending inventory d. Net income Retained earnings e. f. Total assets

Answer 1

a.	Total product cost:
						$
	Raw materials used					14460
	Wages					15100
	Depreciation on office furniture
	(33100-3500)/4					7400
	Total					36960
	Average cost per unit=Total product cost/Units produced=36960/4800=$ 7.7
b.	Cost of goods sold=Units sold*Average cost per unit=3850*7.7=$ 29645
c.	Ending inventory=(Units produced-Units sold)*Average cost per unit=(4800-3850)*7.7=950*7.7=$ 7315
d.	Net income:
					$	$
	Sales revenue			(3850*14)		53900
	Less: Cost of goods sold					29645
	Gross profit					24255
	Less:
	Salaries of admin personnel				11500
	Depreciation on office furniture
	(7000-0)/8				875	12375
	Net income					11880
e.	Retained earnings=Net income=$ 11880
f.	Total assets:
					$	$
	Cash			(Note:1)		48740
	Office furniture				7000
	Less: Depreciation				875	6125
	Manufacturing equipment				33100
	Less: Depreciation				7400	25700
	Inventory					7315
	Total					87880
	Note:1
		Cash
					$	$
	Common stock issued					76000
	Sales revenue					53900
	Total cash available					129900
	Less:
	Office furniture				7000
	Manufacturing equipment				33100
	Salaries of admin personnel				11500
	Wages				15100
	Raw materials used				14460	81160
	Ending balance					48740