Question

Gelinas Computer Company was organized on May 1. On that date, the company purchased 32,000 USB flash drives to be sold with personal computers, each pre- loaded with the company's product information brochures. The front of the USB flash drives displays the company's name and an attractive corporate logo. Each USB flash drive cost Gelinas $6. During May, 25,500 USB flash drives were drawn from the raw materials inventory account. Of these, 500 were taken by the sales manager to an important sales meeting with prospective customers and handed out as advertising. The remaining USB flash drives drawn from inventory were sold by bundling them with units of the company's product that were being manufactured during May. Of the units of product that were bundled with the USB flash drive during May, 90% were completed and transferred from work in process to finished goods. Of the units completed during the month, 70% were sold and shipped to customers. Required: 1. Determine the cost of flash drives that would be in each of the following accounts at May 31: Cost of Flash Drives a. Raw materials b. Work in process c. Finished goods d. Cost of goods sold e. Advertising expense

Answer 1

Solution

Name of account
Raw material	$             39,000
Work in process	$             15,000
Finished goods	$             40,500
Cost of goods sold	$             94,500
Advertising expenses	$               3,000

.

Raw material	Balance sheet
Work in process	Balance sheet
Finished goods	Balance sheet
Cost of goods sold	Income statement
Advertising expenses	Income statement

Working

		Raw material	Work in process	Finished goods	Cost of goods sold	Selling expenses
USB Flash Drives purchased		32000
Transferred to production and sales department		-25500	25000			500
Balance		6500	25000	0	0	500
Transferred to finished goods			-22500	22500
Balance		6500	2500	22500	0	500
Transferred to cost of goods sold				-15750	15750
Final Balance		6500	2500	6750	15750	500
Cost per flash drive		$                  6.00	$            6.00	$                 6.00	$                   6.00	$            6.00
Total cost assigned		$       39,000.00	$ 15,000.00	$      40,500.00	$         94,500.00	$    3,000.00