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.

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