Question

The following trial balance was taken from the records of Fairport Manufacturing Company at the beginning of Year 3.

The following trial balance was taken from the records of Fairport Manufacturing Company at the beginning of Year 3. Cash Raw materials inventory Work in process inventory Finished goods inventory Property, plant, and equipment Accumulated depreciation Common stock Retained earnings Total $20,000 1,800 2,400 4,200 15,000 $ 6,000 16,800 20,600 $43,400 $43,400 Transactions for the Accounting Period 1. Fairport purchased $11,400 of direct raw materials and $600 of indirect raw materials on account. The indirect materials are capitalized in the Production Supplies account. Materials requisitions showed that $10,800 of direct raw materials had been used for production during the period. The use of indirect materials is determined at the end of the year by physically counting the supplies on hand. 2. By the end of the year, $10,500 of the accounts payable had been paid in cash. 3. During the year, direct labor amounted to 950 hours recorded in the Wages Payable account at $21 per hour. 4. By the end of the year, $18,000 of wages payable had been paid in cash. 5. At the beginning of the year, the company expected overhead cost for the period to be $12,600 and 1,000 direct labor hours to be worked. Overhead is allocated based on direct labor hours, which, as indicated in Event 3, amounted to 950 for the year. 6. Selling and administrative expenses for the year amounted to $1,800 paid in cash. 7. Utilities and rent for production facilities amounted to $9,300 paid in cash. the plant and equipment used in production amounted to $3.000. 9. There was $24,000 of goods completed during the year. 10. There was $25,500 of finished goods inventory sold for $36,000 cash. 11. A count of the production supplies revealed a balance of $178 on hand at the end of the year. 12. Any over- or underapplied overhead is considered to be insignificant.

Answer 1

A.

Cash					Accounts Payable
Beg. Bal.	20000				Beg. Bal.		0
10	36000	10500	2		2	10500	11400	1
		18000	4				600	1
		1800	6		End. Bal.		1500
		9300	7
End. Bal.	16400
Raw Materials					Wages Payable
Beg. Bal.	1800				Beg. Bal.		0
1	11400	10800	1		4	18000	19950	3
					End. Bal.		1950
End. Bal.	2400
Manufacturing Overhead					Common Stock
7	9300	11970	5		Beg. Bal.		16800
8	3000	752	12
11	422				End. Bal.		16800
End. Bal.	0
Work in Process Inventory					Retained Earnings
Beg. Bal.	2400				Beg. Bal.		20600
1	10800	24000	9		(Cl)	26252	36000	(Cl)
3	19950				(Cl)	1800
5	11970				End. Bal.		28548
End. Bal.	21120
Finished Goods					Sales Revenue
Beg. Bal.	4200				(Cl)	36000	36000	10
9	24000	25500	10
					End. Bal.		0
End. Bal.	2700
Production Supplies					Cost of Goods Sold
1	600	422	11		10	25500	26252	(Cl)
					12	752
End. Bal.	178				End. Bal.	0
Property, Plant, and Equipment					Selling and Administrative Expenses
Beg. Bal.	15000				6	1800	1800	(Cl)
End. Bal.	15000				End. Bal.	0
Accumulated Depreciation
Beg. Bal.		6000
		3000	8
End. Bal.		9000

Note: Underapplied overheads being insignificant, are adjusted to the cost of goods sold.

B.

FAIRPORT MANUFACTURING COMPANY
Cost of Goods Manufactured and Sold
For the Year Ended December 31, Year 3
Beginning raw materials inventory	1800
Purchases	11400
Raw materials available	13200
Ending raw materials inventory	2400
Direct materials used		10800
Direct labor		19950
Manufacturing overhead (950 x $12600/1000)		11970
Total manufacturing costs		42720
Add: Beginning work in process		2400
Total work in process inventory		45120
Less: Ending work in process		21120
Cost of goods manufactured		24000
Add: Beginning finished goods inventory		4200
Goods available		28200
Less: Ending finished goods inventory		2700
Cost of goods sold $		25500

C.

FAIRPORT MANUFACTURING COMPANY
Income Statement
For the Year Ended December 31, Year 3
Sales revenue	36000
Cost of goods sold	26252
Gross margin	9748
Selling and administrative expenses	1800
Net income $	7948

D.

FAIRPORT MANUFACTURING COMPANY
Balance Sheet for Year 3
At December 31, Year 3
Assets
Cash		16400
Production supplies		178
Raw materials inventory		2400
Work in process inventory		21120
Finished goods inventory		2700
Property, plant, and equipment	15000
Accumulated depreciation	-9000	6000
Total assets $		48798
Liabilities
Accounts payable		1500
Wages payable		1950
Equity
Common stock		16800
Retained earnings		28548
Total liabilities and equity		48798