Question

The following events took place for Digital Vibe Manufacturing Company during March, the first month of its operations as a producer of digital video monitors: A. Purchased $168,500 of materials. B. Used $149,250 of direct materials in production. C. Incurred $360,000 of direct labor wages. D. Incurred $120,000 of factory overhead. E. Transferred $600,000 of work in process to finished goods. F. Sold goods for $875,000. G. Sold goods with a cost of $525,000. H. Incurred $125,000 of selling expense. I. Incurred $80,000 of administrative expense. Using the information given, complete the following: A. Prepare the March income statement for Digital Vibe Manufacturing Company. B. Determine the inventory balances at the end of the first month of operations.

Answer 1

Answer:

Explanation:

a. In the income statement, the total revenues and the total expenses are recorded.  

If the total revenues are more than the total expenditure then the company earns net income

And, If the total revenues are less than the total expenditure then the company have a net loss

This net income or net loss would reflect in the statement of the retained earning account.  

Before preparing the income statement, first, we have to compute the net loss or net income which is shown below:

= Sales - cost of good sold - selling expenses - administrative expenses

= $875,000 - $525,000 - $125,000 - $80,000

= $145,000

b. The computation of the inventory balances are shown below:

Direct material = Purchased material - used material

                        = $168,500 - $149,250

                        = $19,250

Work in progress = Used material + direct labor wages + factory overhead - transferred units

= $149,250 + $360,000 + $120,000 - $600,000

= $29,250

Finished goods = Transferred units - cost of goods sold

                          = $600,000 - $525,000

                          = $75,000

The preparation of the income statement is presented in the spreadsheet. Kindly find the attachment below: