Question

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $667,000; Raw Materials Inventory, $62,000; Work in Process Inventory, $36,000; Finished Goods Inventory, $61,000; Common Stock, $603,000; and Retained Earnings, $223,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

Paid $26,000 of research and development costs.

Paid $61,000 for raw materials that will be used to make eBook readers.

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

Paid $63,000 for salaries of selling and administrative employees.

Paid $98,000 for wages of production workers.

Paid $139,000 to purchase equipment used in selling and administrative offices.

Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $19,000 salvage value and a six-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($139,000 – $19,000) ÷ 6 = $20,000.

Paid $118,000 to purchase manufacturing equipment.

Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $28,000 salvage value and a nine-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($118,000 – $28,000) ÷ 9 = $10,000.

Paid $58,000 for rent and utility costs on the manufacturing facility.

Paid $76,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

Completed and transferred eBook readers that had total cost of $244,000 from work in process inventory to finished goods.

Sold 1,000 eBook readers for $434,000.

It cost Antioch $170,000 to make the eBook readers sold in Event 13.

c-1. Prepare a schedule of cost of goods manufactured and sold for the year. (Amounts to be deducted should be indicated with a minus sign.)

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

c-3. Prepare a balance sheet for the year.

Answer 1

Initially let is make cash statement

opening cash	667000
Research and development cost	-26000
Raw materials	-61000
Salaries	-63000
wages	-98000
equipment	-139000
equipment	-28000
Rent	-58000
Imventory holding expenses	-76000
Sales	434000
Overheads	-170000
Closing cash	382000

c1- Cost of goods sold is $556000

Antioch Company
Trading Account
Particulars	Amount	Particulars	Amount
Opening Stock		Sales	434000
Raw materials	62000
Work in progress	36000
Finished Goods	61000
purchase raw materials	61000	Closing Stock
wages	98000	Raw materials	40000
Depreciation	10000	Work in progress	119000
Rent	58000	Finished Goods	244000
Overheads	170000
Gross Profit	281000
	837000		837000

c-2

Antioch Company
profit and loss Account
Particulars	Amount	Particulars	Amount
Research and development cost	26000	Gross Profit	281000
Salaries	63000
Depreciation	20000
Imventory holding expenses	76000
Net Profit	96000
	281000		281000

c-3

Antioch Company
Balance Sheet
Liabilities	Amount	Assets	Amount
Common Stock	603000	Cash	382000
Retained earnings	319000	Equipments	167000
Accumulated Depreciation	30000	Closing Stock
		Raw materials	40000
		Work in progress	119000
		Finished Goods	244000
	952000		952000