Question

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $671,000; Raw Materials Inventory, $67,000; Work in Process Inventory, $24,000; Finished Goods Inventory, $61,000; Common Stock, $601,000; and Retained Earnings, $222,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

Paid $31,000 of research and development costs.

Paid $59,000 for raw materials that will be used to make eBook readers.

Placed $89,000 of the raw materials cost into the process of manufacturing eBook readers.

Paid $73,000 for salaries of selling and administrative employees.

Paid $101,000 for wages of production workers.

Paid $90,000 to purchase equipment used in selling and administrative offices.

Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $10,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($90,000 – $10,000) ÷ 8 = $10,000.

Paid $154,000 to purchase manufacturing equipment.

Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $26,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($154,000 – $26,000) ÷ 8 = $16,000.

Paid $49,000 for rent and utility costs on the manufacturing facility.

Paid $76,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

Completed and transferred eBook readers that had total cost of $245,000 from work in process inventory to finished goods.

Sold 830 eBook readers for $428,000.

It cost Antioch $132,800 to make the eBook readers sold in Event 13.

Prepare a schedule of cost of goods manufactured and sold for the year. (Amounts to be deducted should be indicated with a minus sign.)

Prepare a formal income statement for the year.

Prepare a balance sheet for the year.

Answer 1

Schedule of cost of goods manufactured
Description		Amount in $
Direct Material
Beginning direct material Inventory		67000
Purchases of direct materials		59000
Direct Material available for use		126000
Ending direct material inventory		37000
Direct Material consumed			89000
Direct Manufacturing Labor			101000
Manufacturing overhead costs
Rent & utility cost on manufacturing facility		49000
Depreciation on manufacturing Equipemnt		16000
Total manufacturing overhead costs			65000
Manufacturing costs incurred during 2018			255000
Beginning work In process Inventory			24000
Total manufacturing costs to account for			279000
Ending work In process inventory			34000
Cost of goods manufactured			245000
Schedule of cost of goods sold
Description		Amount in $
Beginning Finished goods inventory		61000
Add : cost of goods manufactured		245000
Inventory available for sale		306000
Less : Ending finished goods inventory		173200
Cost of goods sold			132800
Income statement
Description		Amount in $
Sales			428000
Cost of goods sold			132800
Gross Margin			295200
Operating Costs
Salaries of selling and administrative employees		73000
Research and development costs		31000
Depreciation on office equipment		10000
Inventory holding costs		76000
Total operating expenses			190000
Operating Income			105200
Balance Sheet for the year
	Amount in $
Asset
Current Asset
Cash		466000
Inventories
Raw materials	37000
Work In Process	34000
Finished goods	173200	244200
Total current asset			710200
Property, plant & equipment
Office equipment	90000
Accumulated depreciation	10000	80000
Manufacturing Equipment	154000
Accumulated depreciation	16000	138000
Total property plant & equipment			218000
Total asset			928200
Liabilities & stockholder's equity
Stockholder's equity
Common stock		601000
Retained earnings		327200
Total liabilities & stockholder's equity			928200