Question

Problem 10-27 Schedule of cost of goods manufactured and sold LO 10-3

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Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $665,000; Raw Materials Inventory, $57,000; Work in Process Inventory, $28,000; Finished Goods Inventory, $55,000; Common Stock, $589,000; and Retained Earnings, $216,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

1. Paid $27,000 of research and development costs.

2. Paid $52,000 for raw materials that will be used to make eBook readers.

3. Placed $90,000 of the raw materials cost into the process of manufacturing eBook readers.

4. Paid $73,000 for salaries of selling and administrative employees.

5. Paid $105,000 for wages of production workers.

6. Paid $70,000 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 $10,000 salvage value and a six-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($70,000 – $10,000) ÷ 6 = $10,000.

8. Paid $158,000 to purchase manufacturing equipment.

9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $25,000 salvage value and a seven-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($158,000 – $25,000) ÷ 7 = $19,000.

10. Paid $56,000 for rent and utility costs on the manufacturing facility.

11. Paid $71,000 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 $251,000 from work in process inventory to finished goods.

13. Sold 920 eBook readers for $437,000.

14. It cost Antioch $138,000 to make the eBook readers sold in Event 13.

Problem 10-27 Part a

Required

1. Show how these events affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model. (Enter any decreases to account balances and cash outflows with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA), or NA for not affected.)

Answer 1

Event no	cash	+	Raw materials	+	Work in process inventory	+	Finished Goods	+	Office Furniture	+	Manufacturing Equipment		=	Common Stock	+	Retained Earning	Revenue	-	Expense	=	Net Income	Statement of Cash Flow
	665,000	+	57,000	+	28,000	+	55,000	+	0	+	0		=	589,000	+	216,000	0	-	0	=	0	0
1	-27,000	+	0	+	0	+	0	+	0	+	0		=	0	+	-27,000	0	-	27,000	=	-27,000	-27,000	OA
2	-52,000	+	52,000	+	0	+	0	+	0	+	0		=	0	+	0	0	-	0	=	0	-52,000	OA
3	0	+	-90,000	+	90,000	+	0	+	0	+	0		=	0	+	0	0	-	0	=	0	0	None
4	-73,000	+	0	+	0	+	0	+	0	+	0		=	0	+	-73,000	0	-	73,000	=	-73,000	-73,000	OA
5	-105,000	+	0	+	105,000	+	0	+	0	+	0		=	0	+	0	0	-	0	=	0	-105,000	OA
6	-70,000	+	0	+	0	+	0	+	70,000	+	0		=	0	+	0	0	-	0	=	0	-70,000	IA
7	0	+	0	+	0	+	0	+	-10,000	+	0		=	0	+	0	0	-	10,000	=	-10,000	0
8	-158,000	+	0	+	0	+	0	+	0	+	158,000		=	0	+	0	0	-	0	=	0	-158,000	IA
9	0	+	0	+	19,000	+	0	+	0	+	-20,000		=	0	+	0	0	-	0	=	0	0
10	-56,000	+	0	+	56,000	+	0	+	0	+	0		=	0	+	0	0	-	0	=	0	-56,000	OA
11	-71,000	+	0	+	0	+	0	+	0	+	0		=	0	+	-71,000	0	-	71,000	=	-71,000	-71,000	OA
12	0	+	0	+	-251,000	+	251,000	+	0	+	0		=	0	+	0	0	-	0	=	0	0
13	437,000	+	0	+	0	+	0	+	0	+	0		=	0	+	437,000	437,000	-	0	=	437,000	437,000	OA
14	0	+	0	+	0	+	-138,000	+	0	+	0		=	0	+	-138,000	0	-	138,000	=	-138,000	0
Total	490,000	+	19,000	+	47,000	+	168,000	+	60,000	+	138,000		+	589,000	+	344,00	437,000	-	319,000	+	118,000