Question

Jordan Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash.

1. Acquired $840,000 of cash from the owners.
2. Purchased $315,000 of manufacturing equipment. The equipment has a $39,000 salvage value and a four-year useful life. Label the purchase of the equipment as Event 2a and the recognition of depreciation as Event 2b.
3. The company started and completed 5,900 modems. Direct materials purchased and used amounted to $49 per unit.
4. Direct labor costs amounted to $34 per unit.
5. The cost of manufacturing supplies purchased and used amounted to $13 per unit.
6. The company paid $59,000 to rent the manufacturing facility.
7. Jordan sold all 5,900 units at a cash price of $165 per unit. Label the recognition of the sale as Event 7a and the cost of goods sold as Event 7b. (Hint: It will be necessary to determine the manufacturing costs in order to record the cost of goods sold.)
8. The sales staff was paid a $10.50 per unit sales commission.
9. Paid $48,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,900 salvage value and a three-year useful life. Label the purchase of the equipment as Event 9a and the recognition of depreciation as Event 9b.
10. Administrative expenses consisting of office rental and salaries amounted to $76,450.

Required

1. a. Record the transaction data for Jordan Modems, Inc. in the financial statements like the one shown as follows. The first transaction is recorded as an example.

2. b-1. Prepare an income statement.

3. b-2. Prepare a balance sheet.

Answer 1

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Part a
				Manu	Off	Common	Retained
Event No		Cash	Inventory	Equipment	Equipment	Stock	Earnings	Rev	Exp	Net Inc
1		$     840,000				$     840,000
2a		$   (315,000)		$         315,000
2b	($315,000-$39,000)/4 Years		$        69,000	$         (69,000)
3	5,900*$49	$   (289,100)	$     289,100
4	5,900*$34	$   (200,600)	$     200,600
5	5,900*$13	$     (76,700)	$        76,700
6		$     (59,000)	$        59,000
7a	5,900*$165	$     973,500					$     973,500	$   973,500		$     973,500
7b	Total Of Inventory till date		$   (694,400)				$   (694,400)		$   694,400	$   (694,400)
8	5,900*$10.50	$     (61,950)					$     (61,950)		$      61,950	$     (61,950)
9a		$     (48,000)			$           48,000
9b	($48,000-$3,900)/3				$         (14,700)		$     (14,700)		$      14,700	$     (14,700)
10		$     (76,450)					$     (76,450)		$      76,450	$     (76,450)
Total		$     686,700	$                 -	$         246,000	$           33,300	$     840,000	$     126,000	$   973,500	$   847,500	$     126,000
Part b-1
	Sales Revenue		$     973,500
	Less: Cost of Goods Sold		$   (694,400)
	Gross Margin		$     279,100
	Sales Commission		$     (61,950)
	Depreciation Expense		$     (14,700)
	Administrative Expense		$     (76,450)
	Net Income		$     126,000
Part b-2
	Assets:
	Cash		$     686,700
	Manufacturing Equipment, net		$     246,000
	Office Equipment, net		$        33,300
	Total Assets		$     966,000
	Equity:
	Common Stock		$     840,000
	Retained Earning		$     126,000
	Total Equity		$     966,000