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5 June, 09:16

Financial Statements of a Manufacturing Firm

The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:

Purchased $48,800 of materials.

Used $37,600 of direct materials in production.

Incurred $56,100 of direct labor wages.

Incurred $79,100 of factory overhead.

Transferred $131,300 of work in process to finished goods.

Sold goods for $234,700.

Sold goods with a cost of $104,400.

Incurred $60,000 of selling expense.

Incurred $26,400 of administrative expense.

Using the information given, complete the following: a. Prepare the January income statement for Sorensen Manufacturing Company.

A. Prepare the January income statement for Sorensen Manufacturing Company.

B. Determine the inventory balances at the end of the first month of operations.

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Answers (1)
  1. 5 June, 12:28
    0
    A. income statement for Sorensen Manufacturing Company.

    Sales $234,700

    Less Cost of Sales

    Opening Finished Goods Inventory 0

    Cost of Manufacture $131,300

    Less Finished Goods Inventory (131,300 - 104,400) ($26,900) ($104,400)

    Gross Profit $130,300

    Less Expenses

    Selling Expense ($60,000)

    Administrative Expense ($26,400)

    Net Income / (loss) $43,900

    B. inventory balances at the end of the first month

    Work In Process Inventory = $41,500

    Raw Materials Inventory = $11,200

    Finished Goods Inventory = $26,900

    Explanation:

    Calculation of Work in Process Inventory

    Direct Materials $37,600

    Direct Labor $56,100

    Factory Overhead $79,100

    Total Cost of Manufacture $172,800

    Less Closing Work in Process ($41,500)

    Cost of Manufacture $131,300

    Calculation of Raw Materials Inventory

    Opening Raw Materials Inventory $0

    Add Purchases $48,800

    Less Raw Materials Unsed In Manufacturing ($37,600)

    Closing Raw Materials Inventory $11,200

    Calculation of Finished Goods Inventory

    Opening Stock of Finished Goods $0

    Add Costs of Goods Manufactured $131,300

    Less Cost of Goods Sold ($104,400)

    Opening Stock of Finished Goods $26,900
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