Question

Vernon Manufacturing Company was started on January 1 2018, when it acquired 575,000 cash by issuing common stock. Vemon immediately purchased office furniture and manufacturing equipment Costing $9.100 and $32000, respectivelyThe office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3200 salvage value and an expected useful We of four years. The company paid $11.400 for salaries of administrative personnel and $15.900 for wages to production personnel. Finally, the company paid $17.400 for raw materials that were used to make inventory A inventory was started and completed during the year. Vernon completed production on 5.000 units of product and sold 4.050 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 o. 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.) Answer is complete but not entirely correct. Total product cost Average cost per $ S 24.238 485 19.681 4557 Cost of goods sold Ending inventory $ $ Ratinadamnings 5 28 602 Total

Answer 1

a.

Total product cost:
Direct materials	$ 17,400
Direct labor	$ 15,900
Manufacturing overhead:
Depreciation on manufacturing equipment [($32,000 - $3200)/4]	$ 7,200
Total product cost	$ 40,500
Number of units produced	5000
Average cost per unit	$ 8.10

b. Cost of goods sold = 4,060 * 8.10 = $ 32,886

c. Ending Inventory = (5000-4060) * 8.10 = $ 7,614

d.

Net income:
Sales (4060 x $15)	$ 60,900
Cost of goods sold	32,886
Gross profit	28,014
Less : Salaries of administrative personnel	(11,400)
Depreciation on office furniture ($9100/8)	(1137.5)
Net income	$ 15477

e. Retained earnings shall be equal to $ 15,477 as the business is in the first year of its operations

f. Total assets = Liabilities + Equity = $0 + (75,000 + 15477) = $ 90,477

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