Question

The following transactions pertain to Year 1, the first-year operations of Rooney Company. All inventory was started and completed during Year 1. Assume that all transactions are cash transactions.

1. Acquired $4,600 cash by issuing common stock.

2. Paid $680 for materials used to produce inventory.

3. Paid $1,800 to production workers.

4. Paid $848 rental fee for production equipment.

5. Paid $100 to administrative employees.

6. Paid $117 rental fee for administrative office equipment.

7. Produced 320 units of inventory of which 220 units were sold at a price of $13 each.

Required

Prepare an income statement and a balance sheet in accordance with GAAP.

Answer 1

Answer
PREPARE INCOME STATEMENT :
Sales (220*13)		$     2,860
Less: Cost of goods sold
Material used	$        680
Direct labour	$     1,800
Manufacturing overhead	$        848
Total cost of goods manufactured	$     3,328
Less: Ending inventory (3328*100/320)	-$     1,040
Cost of goods sold		-$     2,288
Gross profit		$        572
Less: Operating expenses
Administrative salaries	-$        100
Rental fee for office equipemnt	-$        117	-$        217
Net income		$        355
BALANCE SHEET :
ASSETS
CURRENT ASSETS
Cash	$     3,915
Inventory	$     1,040	$     4,955
NON CURRENT ASSETS
TOTAL ASSETS		$     4,955
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
LONG TERM LIABILITIES
SHAREHOLDER'S EQUITY
Common stock	$     4,600
Net income	$        355
TOTAL SHAREHOLDER'S EQUITY		$     4,955
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY		$     4,955