Question

Exercise 11-14A Product cost flow and financial statements D Loveland Manufacturing Company was started on January 1, Year 1. The company was affected by the following events during its first year of operation 1. Acquired $2,400 cash from the issue of common stock. 2. Paid $720 cash for direct raw materials. 3. Transferred $480 of direct raw materials to work in process. 4. Paid production employees $720 cash. 5. Paid $360 cash for manufacturing overhead costs. 6. Applied $294 of manufacturing overhead costs to work in process. 7. Completed work on products that cost $ 1,200. 8. Sold products that cost $960 for $1,680 cash. 9. Paid $480 cash for selling and administrative expenses. 10. Made a $60 cash distribution to the owners. 11. Closed the Manufacturing Overhead account. Required a. Record these events in a horizontal statements model. The first event is shown as an example. Balance Sheet Income Statement Assets Equity

Please use excel for answering the questions a-b. You will need to make a horizontal statements model, as pictured in the text, for this problem.

Answer 1

a. Following is the recording of events in given excel format. totaling is done just to verify accuracy.

Event No. Balance heet Income Statement Assets Equity Finished Common Retained Net Raw Mat WIP Goods Stock Earnings Revenue Expense Income 2400 720 -480 480 720 Cash MOH 2400 -720 1 2 3 4 -720 -360 5 360 -294 6 294 7 - 1200 1200 8 1680 -960 1680 -960 9 -480 -480 10 -60 180 -240 11 -66 66 1740 0 240 360 240 1680) - 1440 240 Total Assets 2400 180 Total Equity 2580 2580

b) Following are the schedules of Cost of Goods manufactured and cost of goods sold. (These may also be prepared as single clubbed schedule)

Schedule of Cost of goods Manufactured Direct Materials: Beginning Raw Material Inventory ol Add: Purchase of Raw Material 720 Total Raw Material Available 7201 Less: Ending Raw Material inventory -240 Raw Material used in Production 480 480 720 360 Direct Labour Manufacturing overhead applied to WIP Total Manufacturing Cost Add: Beginning Work in Progress Inventory 1560 0 1560 Less: Ending work in progress inventory Cost of Goods Manufactured -360 1200 Schedule of Cost of goods Sold Beginning Finished goods Inventory Add: Cost of Goods manufactured Total Finished Goods Available for sale Less: Ending finished goods inventory ol 1200 1200 -240 960 0 Add: Underapplied Overhead Cost of Goods Sold 960

Cost of Goods sold= 960