Question

Munoz Manufacturing Company was started on January 1, year 1, when it acquired $82,000 cash by issuing common stock. Munoz immediately purchased office furniture and manufacturing equipment costing $8,400 and $27,100, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,400 salvage value and an expected useful life of three years. The company paid $11,100 for salaries of administrative personnel and $15,100 for wages to production personnel. Finally, the company paid $10,750 for raw materials that were used to make inventory. All inventory was started and completed during the year. Munoz completed production on 4,500 units of product and sold 3,560 units at a price of $15 each in year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

a. Determine the total product cost and the average cost per unit of the inventory produced in year 1. (Round "Average cost per unit" to 2 decimal places.)

b. Determine the amount of cost of goods sold that would appear on the year 1 income statement. (Do not round intermediate calculations.)

c. Determine the amount of the ending inventory balance that would appear on the December 31, year 1, balance sheet. (Do not round intermediate calculations.)

d. Determine the amount of net income that would appear on the year 1 income statement. (Round your final answer value to the nearest whole dollar.)

e. Determine the amount of retained earnings that would appear on the December 31, year 1, balance sheet. (Round your final answer value to the nearest whole dollar.)

f. Determine the amount of total assets that would appear on the December 31, year 1, balance sheet. (Round your final answer value to the nearest whole dollar.)

Answer 1

a. Total product cost : $ 33,750

Average cost per unit = $ 7.50

b. Cost of goods sold for Year 1 income statement : $ 26,700

c. Ending inventory balance for December 31, Year 1 : $ 7,050

d. Net income for Year 1 : $ 14,550

e. Retained earnings that would appear on the December 31, Year 1 balance sheet : $ 14,550.

f. Total assets that would appear on the December 31, Year 1 balance sheet : $ 96,550

Computations:

a.

Direct Materials	$ 10,750
Direct Labor	15,100
Depreciation on manufacturing equipment ( 27,100 - 3,400) / 3	7,900
Total product cost	$ 33,750

Average cost per unit = $ 33,750 / 4,500 units = $ 7.50

b. Cost of goods sold for Year 1 : $ 7.50 x 3,560 units = $ 26,700.

c. Ending inventory balance as on December 31, Year 1 = ( 4,500 - 3,560) x $ 7.50 = $ 7,050

d.

Sales ( 3,560 x $ 15)	53,400
Less: Cost of Goods Sold	26,700
Gross Profit	26,700
Salaries Expense	(11,100)
Depreciation Expense ( Office Equipment ) ( 8,400 / 8 )	(1,050)
Net Income	$ 14,550

f. Assets as on December 31, Year 1:

Cash	$ 62,950
Inventory	7,050
Office Furniture	7,350
Manufacturing Equipment	19,200
Total Assets	$ 96,550