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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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Question

Can I please get help with this practice question? for parts d e f

Stuart Manufacturing Company was started on January 1, year 1, when it acquired $89,000 cash by issuing common stock. Stuart immediately purchased office furniture and manufacturing equipment costing $32,000 and $40,000, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $4,000 salvage value and an expected useful life of six years. The company paid $12,000 for salaries of administrative personnel and $21,000 for wages to production personnel. Finally, the company paid $26,000 for raw materials that were used to make inventory. All inventory was started and completed during the year. Stuart completed production on 10,000 units of product and sold 8,000 units at a price of $9 each in year 1. (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 year 1.

Note: Round "Average cost per unit" to 2 decimal places.
Determine the amount of cost of goods sold that would appear on the year 1 income statement.

Note: Do not round intermediate calculations.
Determine the amount of the ending inventory balance that would appear on the December 31, year 1, balance sheet.

Note: Do not round intermediate calculations.
Determine the amount of net income that would appear on the year 1 income statement.
Determine the amount of retained earnings that would appear on the December 31, year 1, balance sheet.
Determine the amount of total assets that would appear on the December 31, year 1, balance sheet.

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

Expert Solution

Step 1: Introduce Income Statement

INCOME STATEMENT

Income Statement is one of the Important Financial Statements of the Company. Income Statement Show's the profitability of the Company. Income Statement includes Total Revenue From Operations and Total Expenses related to Business Operation.

Gain & Loss under Income Statement is Computed :—

= Total Revenue From Operation - Total Expenses related to Business Operation.