Question

The following transactions pertain to 2018, the first-year operations of Gibson Company. All inventory was started and completed during 2018. Assume that all transactions are cash transactions. Acquired $12,000 cash by issuing common stock. Paid $4,700 for materials used to produce inventory. Paid $2,400 to production workers. Paid $900 rental fee for production equipment. Paid $350 to administrative employees. Paid $400 rental fee for administrative office equipment. Produced 400 units of inventory of which 360 units were sold at a price of $25 each.

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

Answer 1

Gibson Company
Income Statement
For the Year ended December 31, 2018
Sales		9,000
COGS
Direct Materials	4700
Direct Labor	2400
Production Equipment Rent	900
Total cost of goods manufacturing (400 units)	8,000
Less: ending inventory (40 units)	800
Cost of goods sold		7,200
Gross Profit		1,800
Operating Expenses
Office equipment rent	400
Salaries	350
Total Expenses		750
EBIT		1,050
Interest		0
Taxes		0
Operating Income		1,050
Gibson Company
Balance Sheet
As of December 31, 2018
Assets
Cash	12250
Accounts receivable	0
Inventory	800
Net fixed assets
Total Assets	13050
Liabilities
Accounts payable	0
Notes payable	0
Total liabilities	0
Stockholders' Equity:
Common Stock	12000
Retained earnings	1050
Total shareholders' Equity	13050
Total liabilities and Shareholders' Equity	13050