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Keystone Manufacturing Company started operations on January 1, 2019. During 2019, the company engaged in the...

Keystone Manufacturing Company started operations on January 1, 2019. During 2019, the company engaged in the following transactions: Issued common stock for $40,000. Paid $10,000 cash to purchase raw materials used to make products. Transferred $9,000 of raw materials to the production department. Paid $12,000 cash for labor used to make products. Paid $18,000 cash for overhead costs (assume actual and estimated overhead are the same). Finished work on products that cost $35,000 to make. Sold products that cost $31,500 to make for $42,500 cash. Required Prepare the December 31, 2019, balance sheet. Prepare the December 31, 2019, income statement.

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Expert Solution

Keystone Manufacturing Company

Income Statement

31 December 2019.

Sales

$ 42,500.00

Cost of Goods Sold

$ 31,500.00

Gross profit

$ 11,000.00

Keystone Manufacturing Company

Balance Sheet

As at December 31 2019

Assets

Current Assets

Cash

$ 42,500.00

Inventory

$    8,500.00

Total Current Assets

$ 51,000.00

Total Assets

$ 51,000.00

Liabilities and Shareholder's Equity

Common Stock

$ 40,000.00

Retained Earnings

$ 11,000.00

Total Liabilities and Shareholder's Equity

$ 51,000.00

Working Note 1

Ketstone Manufacturing Company

Cost of Goods manufactured

31 December 2019.

Direct material

$    9,000.00

Direct Labor

$ 12,000.00

Manufacturing Overheads

$ 18,000.00

Total Production cost

$ 39,000.00

Add: Opening Work in Progress

$                 -  

Less: Closing Work in Progress

$    4,000.00

Total Cost of Goods manufactured

$ 35,000.00

Working Note 2

Cash balance

Issue of Common Stock

$ 40,000.00

Sales

$ 42,500.00

Total Cash Available

$ 82,500.00

Less: Disbursements

Payment for Raw material

$ 10,000.00

Payment for labor costs

$ 12,000.00

Payment for Manufacturing Overheads

$ 18,000.00

Ending Cash Balance

$ 42,500.00

Working Note 3

Raw Material Inventory

Raw material Purchased

$ 10,000.00

Raw material Used

$    9,000.00

Closing Raw Material

$    1,000.00

Working note 4

Total Inventory

Raw material Inventory

$ 1,000.00

WIP Inventory

$ 4,000.00

Finished Goods Inventory

$ 3,500.00

Total Inventory

$ 8,500.00


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