Stuart Manufacturing Company was started on January 1, year 1, when it acquired $89,000 cash by issuing common stock. Stuart immediately purchased office furniture and manufacturing equipment costing $32,000 and $40,000, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $4,000 salvage value and an expected useful life of six years. The company paid $12,000 for salaries of administrative personnel and $21,000 for wages to production personnel. Finally, the company paid $26,000 for raw materials that were used to make inventory. All inventory was started and completed during the year. Stuart completed production on 10,000 units of product and sold 8,000 units at a price of $9 each in year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

a. Determine the total product cost and the average cost per unit of the inventory produced in year 1.
b. Determine the amount of cost of goods sold that would appear on the year 1 income statement.
c. Determine the amount of the ending inventory balance that would appear on the December 31, year 1, balance sheet.
d. Determine the amount of net income that would appear on the year 1 income statement.
e. Determine the amount of retained earnings that would appear on the December 31, year 1, balance sheet.
f. Determine the amount of total assets that would appear on the December 31, year 1, balance sheet.

Question

01-02-2021
Business

contestada

Stuart Manufacturing Company was started on January 1, year 1, when it acquired $89,000 cash by issuing common stock. Stuart immediately purchased office furniture and manufacturing equipment costing $32,000 and $40,000, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $4,000 salvage value and an expected useful life of six years. The company paid $12,000 for salaries of administrative personnel and $21,000 for wages to production personnel. Finally, the company paid $26,000 for raw materials that were used to make inventory. All inventory was started and completed during the year. Stuart completed production on 10,000 units of product and sold 8,000 units at a price of $9 each in year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

a. Determine the total product cost and the average cost per unit of the inventory produced in year 1.
b. Determine the amount of cost of goods sold that would appear on the year 1 income statement.
c. Determine the amount of the ending inventory balance that would appear on the December 31, year 1, balance sheet.
d. Determine the amount of net income that would appear on the year 1 income statement.
e. Determine the amount of retained earnings that would appear on the December 31, year 1, balance sheet.
f. Determine the amount of total assets that would appear on the December 31, year 1, balance sheet.

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2021-02-02T01:53:06+01:00

LAnswer:

A. $ 5.3

B. $ 42,400

C. $ 10,600

D.$4,000

E. $13,600

F. $102,600

Explanation:

A. Calculation to Determine the total product cost and the average cost per unit of the inventory produced in year 1

First step

Total product cost= $ 6,000 + $21,000 + $26,000 = $ 53,000

Second step

Manufacturing equipment depreciation for 1 year = ($40,000 - $4,000)/6

(Manufacturing equipment depreciation for 1 year = $6,000

The average cost per unit = Total product cost / total products = $ 53,000 / 10,000 = $ 5.3

b. Calculation to Determine the amount of cost of goods sold that would appear on the 2018 income statement.

COGS= $ 5.3 * 8,000

COGS = $ 42,400

c. Calculation to Determine the amount of the ending inventory balance that would appear on the December 31, 2018,balance sheet.

The ending inventory balance = $ 5.3 * (10,000 - 8,000)

The ending inventory balance = $ 10,600

d. Calculation to Determine the amount of net income that would appear on the 2018 income statement.

STUART MANUFACTURING COMPANY

Income Statement

Sales (8000 * $9)$72,000

Cost of Goods sold ($42,400)

Gross Margin$29,600

Office furniture depreciation($4,000)

salaries of administrative personnel($12,000)

Net Income$ 13,600

Office furniture depreciation for 1 year =($32,000 - $0)/8

Office furniture depreciation for 1 year= $4,000

e. Calculation to Determine the amount of retained earnings that would appear on the December 31, 2018, balancesheet.

Retain Earnings = $0 + $ 13,600 = $13,600

f. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet.Total Assets = 30,000 + 10,600 + 28,000 + 34,000 = $102,600