Question

Stuart Manufacturing Company started operations on January 1, Year 1. During Year 1, the company engaged in the following transactions.

1. Issued common stock for $84,000.

2. Paid $29,000 cash to purchase raw materials used to make products.

3. Transferred $21,000 of raw materials to the production department.

4. Paid $31,500 cash for labor used to make products.

5. Paid $51,000 cash for overhead costs (assume actual and estimated overhead are the same).

6. Finished work on products that cost $79,000 to make.

7. Sold products that cost $66,000 to make for $91,000 cash.

Required

1. Prepare the December 31, Year 1, balance sheet.

2. Prepare the December 31, Year 1, income statement.

Answer 1

	Income statement	$
	Revenue (A)
	Sale of goods	91,000
	Expenses(B)
	Cost of good sold	66,000
	Net Income(A-B)	25,000
	Balance sheet	$
	Non current assets
	Current assets
	Cash and bank balance	63,500
	Inventory-finished goods	13,000
	Inventory-Work in progress	24,500
	Inventory-Raw Material	8,000
	Total assets	109,000
	Equity
	Common Stock	84,000
	Profit for the current year	25,000
	Total liabilities	109,000
	Working notes
	Cash and bank A/c
	Particulars	Amount (Debit)	Particulars	Amount (Credit)
	To Common stock	84,000	By Inventory	29,000
	To Sales	91,000	By Labour	31,500
			By Overhead	51,000
			By Closing balance	63,500
		175,000		175,000
				-
	Inventory Raw Material A/c
	Particulars	Amount (Debit)	Particulars	Amount (Credit)
	To Cash (purchases)	29,000	By Inventory Finished	21,000
			By Closing stock (Raw Material)	8,000
		29,000		29,000
	Inventory work in progress A/c
	Particulars	Amount (Debit)	Particulars	Amount (Credit)
	To Inventory Raw Material	21000	By Finished goods	79,000
	To Cash (Labour)	31,500
	To Cash (Overhead)	51,000	By Closing stock (Work in progress)	24,500
		103,500		103,500
	Inventory Finished goods A/c
	Particulars	Amount (Debit)	Particulars	Amount (Credit)
	To Finished goods	79,000	By Cost of goods sold	66,000
			By Closing stock (Finished goods)	13,000
		79,000		79,000