Question

The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:

	a. Purchased $138,800 of materials.
	b. Used $94,780 of direct materials in production.
	c. Incurred $181,280 of direct labor wages.
	d. Incurred $213,200 of factory overhead.
	e. Transferred $428,060 of work in process to finished goods.
	f. Sold goods for $654,000.
	g. Sold goods with a cost of $360,750.
	h. Incurred $85,320 of selling expense.
	i. Incurred $70,650 of administrative expense.

Required:

Using the information given, complete the following: a. Prepare the January income statement for Sorensen Manufacturing Company. Be sure to complete the statement heading. Refer to the list of Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive. b. Determine the inventory balances at the end of the first month of operations.

Accounts
Administrative expenses
Cost of goods sold
Selling expenses
Revenues
Labels
For the Month Ended January 31
For the Year Ended January 31
Amount Descriptions
Gross profit
Net income
Net loss
Total operating expenses

a. Prepare the January income statement for Sorensen Manufacturing Company. Be sure to complete the statement heading. Refer to the list of Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive.

Sorensen Manufacturing Company

Income Statement

1
2
3
4	Operating expenses:
5
6
7
8

b. Using the information given, determine the inventory balances at the end of the first month of operations.

	Materials
	Work in process
	Finished goods

Answer 1

Journal Entries
Events	Particulars			Debit	Credit
a)	Materials			$ 1,38,800.00
	To Accounts Payable				$ 1,38,800.00
b)	Work in Process			$    94,780.00
	To Materials				$    94,780.00
c)	Work in Process			$ 1,81,280.00
	To Factory Payroll				$ 1,81,280.00
d)	Factory Overhead			$ 2,13,200.00
	To Accounts Payable				$ 2,13,200.00
e)	Finished Goods Inventory			$ 4,28,060.00
	To Work in Process				$ 4,28,060.00
f)	Accounts Receivable			$ 6,54,000.00
	To Sales				$ 6,54,000.00
g)	Cost of Goods sold			$ 3,60,750.00
	To Finished Goods Inventory				$ 3,60,750.00
h)	Selling Expenses			$    85,320.00
	To Accounts Payable				$    85,320.00
i)	Administrative Expense			$    70,650.00
	To Accounts Payable				$    70,650.00

	Income Statement
	Sales Revenue			$ 6,54,000.00
Less:	Cost of Goods Sold			$ 3,60,750.00
	Gross Profit				$ 2,93,250.00
Less:	Operating Expenses:
	Selling Expenses			$    85,320.00
	Administrative Expenses			$    70,650.00
	Total operating expenses				$ 1,55,970.00
	Net income				$ 1,37,280.00

	Materials:
	Purchased		$ 1,38,800.00
Less:	Used in production		$    94,780.00
	Ending balance		$    44,020.00
	Work in Process:
	Materials		$    94,780.00
Add:	Labor		$ 1,81,280.00
Add:	Factory OH		$ 2,13,200.00
Less:	Transferred to FG		$ 4,28,060.00
	Ending balance		$    61,200.00
	Finished Goods:
	Transferred from WIP		$ 4,28,060.00
Less:	Cost of Goods sold		$ 3,60,750.00
	Ending balance		$    67,310.00