Question

The following transactions pertain to Year 1, the first-year operations of Baird Company. All inventory was started and completed during Year 1. Assume that all transactions are cash transactions.

1. Acquired $4,000 cash by issuing common stock.

2. Paid $700 for materials used to produce inventory.

3. Paid $1,830 to production workers.

4. Paid $862 rental fee for production equipment.

5. Paid $110 to administrative employees.

6. Paid $120 rental fee for administrative office equipment.

7. Produced 320 units of inventory of which 230 units were sold at a price of $13 each.

Required

Prepare an income statement and a balance sheet in accordance with GAAP

Answer 1

Income Statement

Particulars	Amount($)	Amount($)
Sales(230*13)		2990
Cost of Good Sold(Working Note 1)		2438
Gross Profit		552
Operating expense
Adminstrative Salary	110
Adminstrative Office Rent	120
Total Operating Expense		(230)
Income From Operation/Net Income		322

Working Note 1

COGS Statement

Particulars	Amount($)
Direct Material	700
Direct Wages	1830
Manufacturing Overhead	862
Cost of Good Manufactured	3392
Less:Ending Inventory(90*10.6)	(954)
COGS	2438

Unit Cost of One Unit=3392/320=10.6

Ending Inventory=320-230=90

Balance Sheet

	Amount($)
Assets
Current Asset
Cash	3368
Inventory	954
Total Asset	4322
Liabilities And Onwer's Equity
Total Liabilities	0
Stockholder's Fund
Common Stock	4000
Retained Earning	322
Total Liabilities and Onwer's Equity	4322

Workings

Cash=4000-700-1830-862-110-120+2990=3368

Retained Earning= Net Profit=322