Question

Problem 10-27 Schedule of cost of goods manufactured and sold LO 10-3 The following information applies to the questions displayed below Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $674,000; Raw Materials Inventory, $67,000: Work in Process Inventory. $23,000; Finished Goods Inventory. $62,000; Common Stock, $595,000; and Retained Earnings, $231,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions. 2 1. Paid $25,000 of research and development costs. 2. Paid $58,000 for raw materials that will be used to make eBook readers. 3. Placed $96,000 of the raw materials cost into the process of manufacturing eBook readers. 4. Paid $62,000 for salaries of selling and administrative employees. 5. Paid $98,000 for wages of production workers. 6. Paid $65,000 to purchase equipment used in selling and administrative offices. 7. Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $15,000 salvage value and a five-year life. The amount of depreciation is computed as (cost-salvage) ÷ useful life). Specifically, ($65,000-$15,000)+5 $10,000 8. Paid $119,000 to purchase manufacturing equipment. 9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $21,000 salvage value and a seven-year life. The amount of depreciation is computed as (Cost- salvage) useful life). Specifically, ($119,000-$21,000) ÷ 7= $14,000. 10. Paid $63,000 for rent and utility costs on the manufacturing facility 11. Paid $77,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost). 12. Completed and transferred eBook readers that had total cost of $240,000 from work in process inventory to finished goods 13. Sold 990 eBook readers for $422,000. 14. It cost Antioch $158,400 to make the eBook readers sold in Event 13.

Answer 1

ANTIOCH COMPANY

Income Statement

For the year ended December 31,2018

PARTICULAR	AMOUNT (IN $)
Revenue from sale of e book	422000
Other Income	-
TOTAL (A)	422000
Expenses:
Cost of goods sold	145000
Salary of selling & administration employee	62000
Depreciation on office equipment	10000
Depreciation on manufacturing equipment	14000
Rent and Utilities	63000
Research & development cost	25000
TOTAL (B)	319000
NET PROFIT (A-B)	103000

Notes:- Research and development Accounting Treatment:-The basic problem with research and development expenditures is that the future benefits associated with these expenditures are sufficiently uncertain that it is difficult to record the expenditures as an asset. Given these uncertainties, GAAP mandates that all research and development expenditures be charged to expense as incurred. The chief variance from this guidance is in a business combination, where the acquirer can recognize the fair value of research