Question

1. Financial Statements of a Manufacturing Firm

   The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:

   1. Purchased $48,300 of materials.
   2. Used $37,200 of direct materials in production.
   3. Incurred $55,500 of direct labor wages.
   4. Incurred $78,200 of factory overhead.
   5. Transferred $129,900 of work in process to finished goods.
   6. Sold goods for $232,300.
   7. Sold goods with a cost of $103,400.
   8. Incurred $59,400 of selling expense.
   9. Incurred $26,100 of administrative expense.

   Using the information given, complete the following:

   a. Prepare the January income statement for Sorensen Manufacturing Company.

   Sorensen Manufacturing Company
   Income Statement
   For the Month Ended January 31
   		$
   		$
   Operating expenses:
   	$
   Total operating expenses
   		$

   b. Determine the inventory balances at the end of the first month of operations.

   Sorensen Manufacturing Company
   Inventory Balances
   For the Month Ended January 31
   Inventory balances on January 31:
   Materials	$
   Work in process
   Finished goods

Answer 1

1. a. Prepare the January income statement for Sorensen Manufacturing Company.

   Sorensen Manufacturing Company
   Income Statement
   For the Month Ended January 31
   Sales revenue		$232300
   Cost of goods sold		103400
   Gross profit		$128900
   Operating expenses:
   Selling expense	$59400
   Administrative expense	26100
   Total operating expenses		85500
   Operating income		$43400

   b. Determine the inventory balances at the end of the first month of operations.

   Sorensen Manufacturing Company
   Inventory Balances
   For the Month Ended January 31
   Inventory balances on January 31:
   Materials (48300-37200)	$11100
   Work in process (37200+55500+78200-129900)	41000
   Finished goods (129900-103400)	26500