Question

Fanning Manufacturing Company was started on January 1, 2018, when it acquired $78,000 cash by issuing common stock. Fanning immediately purchased office furniture and manufacturing equipment costing $7,700 and $34,300, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,100 salvage value and an expected useful life of four years. The company paid $11,200 for salaries of administrative personnel and $15,700 for wages to production personnel. Finally, the company paid $12,020 for raw materials that were used to make inventory. All inventory was started and completed during the year. Fanning completed production on 4,800 units of product and sold 3,850 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.)

***Please show me step by step***

C. Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)

D. Determine the amount of net income that would appear on the 2018 income statement.

E. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet.

F. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet.

Answer 1

Solution:

Cost of Office furniture = $7,700

Salvage Value = Nil

Expected life = 8 years

Annual depreciation = 7700/8 = $962.50

Ending balance of Furniture = $7700 - $962.50 = $6,737.50

Cost of Manufacturing Equipment = $34,300

Salvage Value = $3,100

Expected life = 4 years

Annual depreciation = ($34,300 - $3,100)/4 = $7,800

Ending balance of Furniture = $34,300 - $7,800 = $26,500

Production Cost = Raw Material Cost + Production Wages + Depreciation on manufacturing equipment= $12,020 + $15,700 + $7,800 = $35,520

Units manufactured = 4800

Cost per unit of goods manufactured = $35,520/4800 = $7.40

Units Sold = 3850

Ending Inventory = 4800 – 3850 = 950 units

Amount of ending inventory balance = 950 * 7.40 = $7,030

Cost of Goods Sold = 3850 * 7.40 = $28,490

Selling price per unit = $15

Sale Value = 3850*15 = $57,750

Cash Account - Fanning Manufacturing Co - 2018
Receipt	Amount	Payments	Amount
Common Stock	$78,000.00	Office Furniture	$7,700.00
Sales	$57,750.00	Manufacturing Equipment	$34,300.00
		Salaries of Administrative Personnel	$11,200.00
		Wages to Production Personnel	$15,700.00
		Raw Material Purchased	$12,020.00
		Ending Cash Balance	$54,830.00
	$135,750.00		$135,750.00

Income Statement - Fanning Manufacturing Co - 2018
Particulars	Amount
Sales	$57,750.00
Cost of Goods Sold	$28,490.00
Gross Profit	$29,260.00
Salaries of Administrative Personnel	$11,200.00
Depreciation on Office Furniture	$962.50
Net Income	$17,097.50
Dividend paid	$0.00
Amount carreid to balance sheet as retained earnings	$17,097.50

Balance Sheet - Fanning Manufacturing Co - 2018
Liabilities	Amount	Assets	Amount
Common Stock	$78,000.00	Office Furniture ($7700 - 962.50)	$6,737.50
Retained Earnings	$17,097.50	Manufacturing Equipment (34300 - 7800)	$26,500.00
		Closing Stock	$7,030.00
		Cash	$54,830.00
	$95,097.50		$95,097.50

C: Ending Inventory Balance = $7,030

D. Net Income for 2018 = $17,097.50

E. Retained Earning to be shown in balance sheet = $17,097.50

F. Total Assets on Dec 31, 2018 = $95,097.50