Stuart Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactionsduring year 1. All purchases and sales were made with cash.1. Acquired $900, 000 of cash from the owners.2. Purchased $345, 000 of manufacturing equipment. The equipment has a $45,000 salvage value and a four-year usefullife. Label the purchase of the equipment as Event 2a and the recognition of depreciation as Event 2b.3. The company started and completed 6,500 modems. Direct materials purchased and used amounted to $55 per unit.4. Direct labor costs amounted to $40 per unit.5. The cost of manufacturing supplies purchased and used amounted to $19 per unit.The company paid $65,000 to rent the manufacturing facility.7.Stuart sold all 6,500 units at a cash price of $195 per unit. Label the recognition of the sale as Event 7a andthe cost of goods sold as Event 7b. (Hint: It will be necessary to determine the manufacturing costs in order torecord the cost of goods sold.)8. The sales staff was paid a $13.50 per unit sales commission.9. Paid $54,000 to purchase equipment for administrative offices. The equipment was expected to have a $4, 500 salvagevalue and a three-year useful life. Label the purchase of the equipment as Event 9a and the recognition ofdepreciation as Event 9b.10. Administrative expenses consisting of office rental and salaries amounted to $79,450.Requireda. Record the transaction data for Stuart Modems, Inc. in the financial statements like the one shown as follows. The first transactionis recorded as an example.b-1. Prepare an income statement.b-2. Prepare a balance sheet. STUART MODEMS, INC.Balance SheetIncome StatementEventAssetsEquityNo.+ Inventory +Manuf.OfficeCommonRetained+Cash+Rev.Exp.Net Inc.Equip.Equip.StockEarnings1.900,000 +900,000 +++2a.++++2b.+++3.++4.5.6.+7a.+7b.+8.+9a.9b.+++10.+++Total++++< Req AReq B1 >IL ||II ||IIII+ +++++++ + +

Name: Stuart Modems, Inc. makes modem cards that are used in notebook compu
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Description: Stuart Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactionsduring year 1. All purchases and sales were made with cash.1. Acquired $900, 000 of cash from the owners.2. Purchased $345, 00

Financial statements are written records that convey the business activities and also the financial…

Business

Accounting

Label the purchase of the equipment as Event 2a and the recognition of dep ompany started and completed 6,500 modems. Direct materials purchased and u t labor costs amounted to $40 per unit. ost of manufacturing supplies purchased and used amounted to $19 per unit. ompany paid $65, 000 to rent the manufacturing facility. t sold all 6,500 units at a cash price of $195 per unit. Label the recognit ost of goods sold as Event 7b. (Hint: It will be necessary to determine the d the cost of goods sold.) ales staff was paid a $13.50 per unit sales commission. $54,000 to purchase equipment for administrative offices. The equipment was and a three-year useful life. Label the purchase of the equipment as Event ciation as Event 9b. istrative expenses consisting of office rental and salaries amounted to $79

Label the purchase of the equipment as Event 2a and the recognition of dep ompany started and completed 6,500 modems. Direct materials purchased and u t labor costs amounted to $40 per unit. ost of manufacturing supplies purchased and used amounted to $19 per unit. ompany paid $65, 000 to rent the manufacturing facility. t sold all 6,500 units at a cash price of $195 per unit. Label the recognit ost of goods sold as Event 7b. (Hint: It will be necessary to determine the d the cost of goods sold.) ales staff was paid a $13.50 per unit sales commission. $54,000 to purchase equipment for administrative offices. The equipment was and a three-year useful life. Label the purchase of the equipment as Event ciation as Event 9b. istrative expenses consisting of office rental and salaries amounted to $79

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

Stuart Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions
during year 1. All purchases and sales were made with cash.
1. Acquired $900, 000 of cash from the owners.
2. Purchased $345, 000 of manufacturing equipment. The equipment has a $45,000 salvage value and a four-year useful
life. Label the purchase of the equipment as Event 2a and the recognition of depreciation as Event 2b.
3. The company started and completed 6,500 modems. Direct materials purchased and used amounted to $55 per unit.
4. Direct labor costs amounted to $40 per unit.
5. The cost of manufacturing supplies purchased and used amounted to $19 per unit.
The company paid $65,000 to rent the manufacturing facility.
7.
Stuart sold all 6,500 units at a cash price of $195 per unit. Label the recognition of the sale as Event 7a and
the cost of goods sold as Event 7b. (Hint: It will be necessary to determine the manufacturing costs in order to
record the cost of goods sold.)
8. The sales staff was paid a $13.50 per unit sales commission.
9. Paid $54,000 to purchase equipment for administrative offices. The equipment was expected to have a $4, 500 salvage
value and a three-year useful life. Label the purchase of the equipment as Event 9a and the recognition of
depreciation as Event 9b.
10. Administrative expenses consisting of office rental and salaries amounted to $79,450.
Required
a. Record the transaction data for Stuart Modems, Inc. in the financial statements like the one shown as follows. The first transaction
is recorded as an example.
b-1. Prepare an income statement.
b-2. Prepare a balance sheet.

STUART MODEMS, INC.
Balance Sheet
Income Statement
Event
Assets
Equity
No.
+ Inventory +
Manuf.
Office
Common
Retained
+
Cash
+
Rev.
Exp.
Net Inc.
Equip.
Equip.
Stock
Earnings
1.
900,000 +
900,000 +
+
+
2a.
+
+
+
+
2b.
+
+
+
3.
+
+
4.
5.
6.
+
7a.
+
7b.
+
8.
+
9a.
9b.
+
+
+
10.
+
+
+
Total
+
+
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+
< Req A
Req B1 >
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