Question

The following transactions pertain to 2018, the first-year operations of Fanning Company. All inventory was started and completed during 2018. Assume that all transactions are cash transactions.

1. Acquired $4,200 cash by issuing common stock.

2. Paid $710 for materials used to produce inventory.

3. Paid $1,970 to production workers.

4. Paid $792 rental fee for production equipment.

5. Paid $90 to administrative employees.

6. Paid $120 rental fee for administrative office equipment.

7. Produced 310 units of inventory of which 200 units were sold at a price of $14 each.

Required Prepare an income statement and a balance sheet in accordance with GAAP.

Answer 1

Solution: Income statement for the yr ended 2018

Sales revenue	$2,800
Less: COGS;
Material used ($710×200/310) $ 458.06
Production Wages($1,970 ×200/310) 1,270.97
Manufacturing OH ($792×200/310)    510.97	2,240
Gross Profit	$ 560
Less: Operating costs:
Administration Exp. ($90 + 120)	210
Operating income or Net income	$ 350

  

Balance sheet as on Dec. 31,2018

Assets:
Current assets:
Cash ($4,200 + 2,800 -3,682 )	$ 3,318
Inventory ($2,240*110/200)	1,232
Total current assets	$ 4,550
Non-current assets	0
Total assets	$ 4,550
Liabilities & Equity:
Current liabilities	$ 0
Non-current liabilities	0
Total liabilities	$ 0
Stockholders' equity:
Common stock	$ 4,200
Retained Earnings	350
Total liabilities & stockholders' equity	$ 4,550

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