Solomon Manufacturing Company was started on January 1, year 1, when itacquired $83,000 cash by issuing common stock. Solomon immediatelypurchased office furniture and manufacturing equipment costing $7,000 and $27,600, respectively. The office furniture had an eight-year useful life and azero salvage value. The manufacturing equipment had a $3,900 salvage valueand an expected useful life of three years. The company paid $11, 100 forsalaries of administrative personnel and $15, 600 for wages to productionpersonnel. Finally, the company paid $10, 380 for raw materials that were usedto make inventory. All inventory was started and completed during the year.Solomon completed production on 4, 400 units of product and sold 3,490 unitsat a price of $15 each in year 1. (Assume that all transactions are cashtransactions and that product costs are computed in accordance with GAAP.) a. Total product costa. Average cost per unitb. Cost of good soldc. Ending inventoryd. Net incomee. Retained earningsf. Total assets

Working note:Calculation of depreciation on manufacturing equipment:Depreciation = (cost - salvage…

a. Total product cost a. Average cost per unit b. Cost of good sold c. Ending inventory d. Net income e. Retained earnings f. Total assets ANCA HUSN FORE 174 SREDS PAPERIN Ra vages Rece Say DROGA 15 20 RUSTEEN EN S Ethn

a. Total product cost a. Average cost per unit b. Cost of good sold c. Ending inventory d. Net income e. Retained earnings f. Total assets ANCA HUSN FORE 174 SREDS PAPERIN Ra vages Rece Say DROGA 15 20 RUSTEEN EN S Ethn

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

Solomon Manufacturing Company was started on January 1, year 1, when it
acquired $83,000 cash by issuing common stock. Solomon immediately
purchased office furniture and manufacturing equipment costing $7,000 and $
27,600, respectively. The office furniture had an eight-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, 100 for
salaries of administrative personnel and $15, 600 for wages to production
personnel. Finally, the company paid $10, 380 for raw materials that were used
to make inventory. All inventory was started and completed during the year.
Solomon completed production on 4, 400 units of product and sold 3,490 units
at a price of $15 each in year 1. (Assume that all transactions are cash
transactions and that product costs are computed in accordance with GAAP.)

a. Total product cost
a. Average cost per unit
b. Cost of good sold
c. Ending inventory
d. Net income
e. Retained earnings
f. Total assets

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Step 1: Calculate Depreciation for Manufacturing Equipment and Office Furniture

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Step 2: Calculating total production cost, average cost per unit and net income

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Step 3: Calculating retained earnings and net assets

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