Question

Vernon Manufacturing Company was started on January 1, 2018, when it acquired $83,000 cash by issuing common stock. Vernon immediately purchased office furniture and manufacturing equipment costing $9,100 and $24,700, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,400 salvage value and an expected useful life of three years. The company paid $11,500 for salaries of administrative personnel and $15,800 for wages to production personnel. Finally, the company paid $10,720 for raw materials that were used to make inventory. All inventory was started and completed during the year. Vernon completed production on 4,100 units of product and sold 3,190 units at a price of $15 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

1. Determine the amount of net income that would appear on the 2018 income statement. (Round your answer to the nearest dollar amount.)

2. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

3. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

Answer 1

Total Product cost
Raw material	10,720
Wages to production personnel	15,800
Depreciation on manufacturing equipment	7,100
Total Product cost	33,620
a. Total Product cost = 31,980
Depreciation on manufacturing equipment = (24700-3400)/3 = 7,100 per year
Average cost per unit = total cost / number of unit produced
=33620/4100
$8.2 per unit
b. Cost of goods sold = units sold x cost per unit
=3190*8.2
26158
c. Ending inventory = unit in inventory x cost per unit
=(4100-3190)*8.2
7462

d. Net income
Total sale (3190*15)	$   47,850
less: cost of goods sold (3,190 x 8.2)	$   26,158
Gross profit	$   21,692
less: salary of admin personnel	$   11,500
depreciation of office furniture (9100/8)	$     1,138
Net Income	$     9,055
e. Retained Earning :
Opening Retained Earnings =	$                -
Add: Net Income	$   9,055.00
Less" Dividends paid	$                -
Closing retained earnings	$   9,055.00
f. Total Assets
Cash (83000-9100-24700-47850-11500-15800-10720)	$ 59,030.00
Office Furniture	$   9,100.00
Less: Depreciation	$ -1,138.00
Manufacturing Equipment	$ 24,700.00
Less: Depreciation	$ -7,100.00
Inventory	$   7,462.00
Total Assets	$ 92,054.00