Question

Franklin Manufacturing Company was started on January 1, 2018, when it acquired $90,000 cash by issuing common stock. Franklin immediately purchased office furniture and manufacturing equipment costing $9,800 and $31,400, respectively. The office furniture d an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,400 salvage value and an expected useful life of four years. The company paid $11,700 for salaries of administrative personnel and $15,900 for wages to production personnel. Finally, the company paid $11,540 for raw materials that were used to make inventory. All inventory was started and completed during the year. Franklin completed production on 4,200 units of product and sold 3,250 units at a price of $16 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP) Required a. Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit to 2 decimal places.) b. Determine the amount of cost of goods sold that would appear on the 2018Income statement. (Do not round intermediate calculations.) c. Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.) d. Determine the amount of net income that would appear on the 2018 income statement e. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet. f. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet Average cost per unit

Answer 1

Answer:

Depreciation of office furniture = $9,800/8 = $1,225 per year

Depreciation of Equipment = ($31,000 - $3,400) / 4 = $6,900 per year

a) total product cost and the average cost per unit of the inventory produced in 2018:
Raw Material	11,540
Wages	15,900
Depreciation- equipment	6,900
Total Product Cost	34,340
Number of units produced	4,200
Per unit product cost	8.18

b)  amount of cost of goods sold that would appear on the 2018 income statement:
Raw Material	11,540
Wages	15,900
Depreciation- equipment	6,900
Total Product Cost	34,340
Less: Cost of ending inventory(950 units @ 8.18 per unit)	7,771
Cost of Goods Sold	26,569

c)  amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet:
Raw Material	11,540
Wages	15,900
Depreciation- equipment	6,900
Total Product Cost	34,340
Number of units produced	4,200
Per unit product cost	8.18
Cost of ending inventory(950 units @ 8.18per unit)	7,771

d) amount of net income that would appear on the 2018 income statement:
Sales Revenue (3,250*$16)		52,000
Less: cost of goods sold		26,569
Gross Margin		25,431
Less: Operating costs
Administrative salary	11,700
Depreciation-office furniture	1,225
Total operating expense		12,925
Net Income		12,506

e) Amount of retained earnings that would appear on the December 31, 2018, balance sheet:

Retained Earnings = $12,506