Question

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $662,000; Raw Materials Inventory, $61,000; Work in Process Inventory, $27,000; Finished Goods Inventory, $61,000; Common Stock, $584,000; and Retained Earnings, $227,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

1. Paid $31,000 of research and development costs.

2. Paid $57,000 for raw materials that will be used to make eBook readers.

3. Placed $83,000 of the raw materials cost into the process of manufacturing eBook readers.

4. Paid $65,000 for salaries of selling and administrative employees.

5. Paid $99,000 for wages of production workers.

6. Paid $97,000 to purchase equipment used in selling and administrative offices.

7. Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $17,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($97,000 – $17,000) ÷ 8 = $10,000.

8. Paid $106,000 to purchase manufacturing equipment.

9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $22,000 salvage value and a seven-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($106,000 – $22,000) ÷ 7 = $12,000.

10. Paid $45,000 for rent and utility costs on the manufacturing facility.

11. Paid $72,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

12. Completed and transferred eBook readers that had total cost of $249,000 from work in process inventory to finished goods.

13. Sold 850 eBook readers for $430,000.

14. It cost Antioch $161,500 to make the eBook readers sold in Event 13.

Beginning raw materials Inventory
Purchases
Raw materials available
Ending raw materials inventory
Raw rate used
Labor
Overhead
Total manufacturing costs
Beginning work in process inventory
Total work in process inventory
Ending work in process inventory
Cost of goods manufactured
Beginning finished goods inventory
Goods available
Ending finished goods inventory
Cost of goods sold

c-2.	Prepare a formal income statement for the year.

	ANTIOCH COMPANY Income Statement For the Year Ended December 31, 2018 sales revenue cost of goods sold gross margin selling and administration expense net income

Prepare a balance sheet for the year.

ANTIOCH COMPANY
Balance Sheet
As of December 31, 2018
Assets
Total assets
Stockholders’ Equity
Total stockholders’ equity

Answer 1

Beginning raw materials Inventory	$61000
Purchases	57000
Raw materials available	118000
Ending raw materials inventory	(35000)
Raw rate used	83000
Labor	99000
Overhead	57000
Total manufacturing costs	239000
Beginning work in process inventory	27000
Total work in process inventory	266000
Ending work in process inventory	(17000)
Cost of goods manufactured	249000
Beginning finished goods inventory	61000
Goods available	310000
Ending finished goods inventory	(148500)
Cost of goods sold	$161500

Ending raw materials inventory= Beginning balance+Purchases-Transfer

= $61000+57000-83000= $35000

Overhead= Depreciation on manufacturing equipment+Rent and utilities costs

= $12000+45000= $57000

Ending work in process inventory= Beginning balance+Transfer from raw materials+Direct labor+Overhead-Completed and transferred

= $27000+83000+99000+57000-249000= $17000

Ending finished goods inventory= Beginning balance+Completed and transferred-Cost of goods sold

= $61000+249000-161500= $148500

Prepare a formal income statement for the year.

ANTIOCH COMPANY
Income Statement
For the Year Ended December 31, 2018
Sales revenue	$430000
Cost of goods sold	161500
Gross margin	268500
Selling and administration expense	(178000)
net income	$90500

Selling and administration expense= Research and development expenses+ Selling and administrative salary expenses+ Selling and administrative depreciation expenses+ Inventory holding expenses

= $31000+65000+10000+72000= $178000

Prepare a balance sheet for the year.

ANTIOCH COMPANY
Balance Sheet
As of December 31, 2018
Assets
Cash	$520000
Raw materials inventory	35000
Work in process inventory	17000
Finished goods inventory	148500
Office equipment	87000
Manufacturing equipment	94000
Total assets	$901500
Stockholders’ Equity
Common stock	$584000
Retained earnings	317500
Total stockholders’ equity	$901500

Cash= $662000-31000-57000-65000-99000-97000-106000-45000-72000+430000= $520000

Office equipment= Purchases-Depreciation

= $97000-10000= $87000

Manufacturing equipment= Purchases-Depreciation

= $106000-12000= $94000

Retained earnings= Beginning balance+Net income

= $227000+90500= $317500

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