Question

Adams Manufacturing started in 2018 with the following account balances:

Cash	$	5,300
Common stock		4,494
Retained earnings		5,000
Raw materials inventory		1,400
Work in process inventory		850
Finished goods inventory (360 units @ $5.40 each)		1,944

  

Transactions during 2018

1. Purchased $2,980 of raw materials with cash.

2. Transferred $3,780 of raw materials to the production department.

3. Incurred and paid cash for 180 hours of direct labor @ $15.40 per hour.

4. Applied overhead costs to the Work in Process Inventory account. The predetermined overhead rate is $16.50 per direct labor hour.

5. Incurred actual overhead costs of $3,100 cash.

6. Completed work on 1,300 units for $5.50 per unit.

7. Paid $1,160 in selling and administrative expenses in cash.

8. Sold 1,300 units for $9,800 cash revenue (assume FIFO cost flow).

9. Adams charges overapplied or underapplied overhead directly to Cost of Goods Sold.

Required

1. Record the preceding events in a horizontal statements model. The beginning balances are shown as an example.

2. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2018.

• Req A
• Req B CGM Sched
• Req B Inc Stmt
• Req B Bal Sheet

Record the preceding events in a horizontal statements model. The beginning balances are shown as an example. (Enter decreases to account balances with a minus sign.)

Assets = Equity Event No. Cash + Manufacturing Overhead + Raw Materials + Work in Process + Finished Goods = Common Stock + Retained Earnings Revenue – Expense = Net Income B.B. $5,300 + + $1,400 + $850 + $1,944 = $4,494 + $5,000 – = 1. + + + + = + – = 2. + + + + = + – = 3. + + + + = + – = 4. + + + + = + – = 5. + + + + = + – = 6. + + + + = + – = 7. + + + + = + – = 8a. + + + + = + – = 8b. + + + + = + – = 9. + + + + = + – = Total $5,300 + $0 + $1,400 + $850 + $1,944 = $4,494 + $5,000 $0 – $0 = $0

Answer 1

		Assets									=		Equity
	Event No.	Cash	+	Manufacturing Overhead	+	Raw Materials	+	Work in Process	+	Finished Goods	=	Total Assets	Common Stock	+	Retained Earnings	Total Equity	Revenue	–	Expense	=	Net Income
	B.B.	$         5,300	+		+	$         1,400	+	$            850	+	$         1,944	=	$         9,494	$      4,494	+	$      5,000	$         9,494		–		=	$                -
	1	$      (2,980)	+		+	$         2,980	+		+		=	$                -		+		$                -		–		=	$                -
	2		+		+	$      (3,780)	+	$         3,780	+		=	$                -		+		$                -		–		=	$                -
	3	$      (2,772)	+		+		+	$         2,772	+		=	$                -		+		$                -		–		=	$                -
	4	$      (3,100)	+	$         3,100	+		+		+		=	$                -		+		$                -		–		=	$                -
	5		+	$      (2,970)	+		+	$         2,970	+		=	$                -		+		$                -		–		=	$                -
	6		+		+		+	$      (7,150)	+	$         7,150	=	$                -		+		$                -		–		=	$                -
	7	$      (1,160)	+		+		+		+		=	$      (1,160)		+		$                -		–	$      1,160	=	$      (1,160)
	8a.	$         9,800	+		+		+		+		=	$         9,800		+		$                -	$      9,800	–		=	$         9,800
	8b.		+		+		+		+	$      (7,114)	=	$      (7,114)		+		$                -		–	$      7,114	=	$      (7,114)
	9		+	$          (130)	+		+		+		=	$          (130)		+		$                -		–	$          130	=	$          (130)
												$                -			$      1,396	$         1,396					$      (1,396)
	Total	$         5,088	+	$                -	+	$            600	+	$         3,222	+	$         1,980	=	$      10,890	$      4,494	$            -	$      6,396	$      10,890	$      9,800	$            -	$      8,404	$            -	$                -