Question

Walton Manufacturing Company was started on January 1, 2018, when it acquired $85,000 cash by issuing common stock. Walton immediately purchased office furniture and manufacturing equipment costing $9,100 and $26,400, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,000 salvage value and an expected useful life of three years. The company paid $11,800 for salaries of administrative personnel and $15,900 for wages to production personnel. Finally, the company paid $7,050 for raw materials that were used to make inventory. All inventory was started and completed during the year. Walton completed production on 4,100 units of product and sold 3,100 units at a price of $14 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

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.)

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

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

Determine the amount of net income that would appear on the 2018 income statement.

Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet.

Determine the amount of total assets that would appear on the December 31, 2018, balance sheet.

Answer 1

1

Depreciation on office furniture =( Cost of acquisition-Salvage Value)/ Useful life

=(9100-0)/8

1,137.50

Depreciation on Manufaturing Equipment =( Cost of acquisition-Salvage Value)/ Useful life

=(26400-3000)/3

7,800.00

	Total Product Cost
	Direct Material Cost	7,050.00
	Direct labour cost	15,900.00
	Depreciation on Manufaturing Equipment	7,800.00
	Cost of Production	30,750.00
	Add: Indirect expenses
	Depreciation on office furniture	1,137.50
	salaries of administrative personnel	11,800.00
	Total Product Cost	43,687.50
	Divide by number of units produced	4,100.00
	Average cost per unit of the inventory produced	10.66
2	Cost of goods produced/ production	30,750.00
	Divide by number of units produced	4,100.00
	Average cost per unit of the inventory produced	7.50
	Number of units sold	3,100.00
	Cost of goods sold =7.5*3100	23,250.00
3	Inventory Balance= 4100-3100	1,000.00
	Value of inventory= 1000*7.5	7,500.00
4	Income Statement
	Sales= 3100*14	43,400.00
	Less: Cost of goods sold	23,250.00
	Gross Profit	20,150.00
	Less: Indirect expenses
	Depreciation on office furniture	1,137.50
	salaries of administrative personnel	11,800.00
	Net Income	7,212.50
5	Retained Earnings will be equal to the amount of net income = 7212.5
6	Total assets as on December 31, 2018
	Office Furniture Cost of acquisition	9,100.00
	Less: Depreciation	1,137.50
	Net Value of office furniture		7,962.50
	Manufaturing Equipment Cost of acquisition	26,400.00
	Less: Depreciation	7,800.00
	Net Value of Manufaturing Equipment		18,600.00
	Total assets as on December 31, 2018		26,562.50