Question

Baird Manufacturing Company was started on January 1, 2018, when it acquired $83,000 cash by issuing common stock. Baird immediately purchased office furniture and manufacturing equipment costing $9,100 and $35,900, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,900 salvage value and an expected useful life of four years. The company paid $11,500 for salaries of administrative personnel and $15,700 for wages to production personnel. Finally, the company paid $12,640 for raw materials that were used to make inventory. All inventory was started and completed during the year. Baird completed production on 4,600 units of product and sold 3,680 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.)

Required

1. Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.)

2. Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)

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

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

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

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

a.	Total product cost	not attempted
	Average cost per unit	not attempted
b.	Cost of goods sold	not attempted
c.	Ending inventory	not attempted
d.	Net income	not attempted
e.	Retained earnings	not attempted
f.	Total assets

Answer 1

Solution:

1)

Total product cost:

Raw materials	$12,640
Add: Wages to production personnel	$15,700
Add:Depreciation on manufacturing equipment ($35,900 -$3,900)/4	$8,000
Total prouct cost	$36,340

Average cost per unit = Total cost / Number of unit produced

=$36,340 /4,600

=$7.9

b)

Cots of goods sold = Units sold * average cost per unit

=3,680*$7.9

=$29,072

c)

Ending inventory = (unit produced - unit sold)* average cost per unit

=(4,600 -3,680)*$7.9

=$7,268

d)

Net income:

Sales(3,680*$15)	$55,200
Less: Cost of goods sold (3,680*$7.9)	($29,072)
Gross profit	$26,128
Less:Salaries and administartive personnel	($11,500)
Less: Depreciation of office furniture ($9,100/8)	($1,137.5)
Net income	$13,490.5

e)

Retained earnings:

Retained earnings beginning	$0
Add: Net income	$13,490.5
Less: dividend	$0
Retained earnings ending	$13,490.5

f)

Total asstes:

Particulars	Amount	Amount
Office furniture	$9,100
Less: Depreciation	($9,100/8) =($1,137.5)	$7,963.50
Manufacturing equipment	$35,900
Less: Depreciation	($35,900 -$3,900)/4 =($8,000)	$27,900
Ending inventory		$7,268
Cash		$53,360
Total assets		$96,490.5

Working:

Cash balance:

Particulars	Amount	Particulars	Amount
Common stock	$83,000	Office furniture	$9,100
Sales	$55,200	Manufacturing expense	$35,900
		Salaries	$11,500
		Wages	$15,700
		Raw materials	$12,640
		Balance figure	$53,360
	$138,200		$138,200

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