Question

Solomon Manufacturing Company was started on January 1, 2018, when it acquired $81,000 cash by issuing common stock. Solomon immediately purchased office furniture and manufacturing equipment costing $7,700 and $25,800, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,900 salvage value and an expected useful life of three years. The company paid $11,200 for salaries of administrative personnel and $15,600 for wages to production personnel. Finally, the company paid $10,640 for raw materials that were used to make inventory. All inventory was started and completed during the year. Solomon completed production on 4,300 units of product and sold 3,340 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

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

Answer a. Calculation of Total product cost
		USD
	Raw materials Used	10,640
	Wages to production personnel	15,600
	Depreciation on Manufacturing Equipment	7,300
	Total Product Cost	33,540
	***Notes to considered below for Answer A.
	1. Since salvage value of purchasing furniture is zero. Depreciation on furniture is not considered
	2. Depreciation on Manufacturing equipment calculated as Total value minus Salvage value Then the balance divided by life of 3 years
	Calculation of Average cost
		USD
	Total Product Cost as per Answer part 1.	33540
	Total Units produced	4300
	Average cost per unit (Total product cost/total units)	7.8
Answer B. Calculation of Cost of goods sold = Cost of inventory per unit*Unit sold
	Cost of inventory per Unit (Total product cost from Answer 1 divided by total units completed (4,300)	7.8
	Unit sold	3340
	Cost of goods sold	26052
Answer C. Calculation of Ending Inventory balance
	Total Unit completed	4300
	Unit Sold	3340
	Remaining unit left	960
	Average Cost per Unit	7.8
	Total Ending Inventory balance	7488

Answer 4.

Calculation of Net income
		USD
Sales: Unit sold *price per unit (3340*15)		50100
COGS		26052
Gross profit(Sales- COGS)		24048
Less: Operating Expenses (Salaries of administrative personnel		11200
Less: Depreciation on furniture (7700/8 year life)		962.50
Net Income		11885.50

Answer 5. Retained Earnings= Beginning retained earnings + Net income during the period - Dividends paid equals ending retained earnings

Hence, Retained Earnings will be $11,885.50