Question

The following transactions pertain to 2018, the first-year operations of Rooney Company. All inventory was started and completed during 2018. Assume that all transactions are cash transactions.

1. Acquired $4,100 cash by issuing common stock.

2. Paid $630 for materials used to produce inventory.

3. Paid $1,860 to production workers.

4. Paid $1,185 rental fee for production equipment.

5. Paid $140 to administrative employees.

6. Paid $116 rental fee for administrative office equipment.

7. Produced 350 units of inventory of which 230 units were sold at a price of $13 each.

Required

Prepare an income statement and a balance sheet in accordance with GAAP.

• Income Statement
• Balance Sheet

Prepare an income statement. (Do not round your intermediate calculations.)

	ROONEY COMPANY Income Statement for 2018 Sales revenue Cost of goods sold Gross margin $0 Administrative expense Net income $0

• alance Sheet

Prepare a balance sheet. (Do not round your intermediate calculations.)

	ROONEY COMPANY Balance Sheet as of 12/31/2018 Assets Cash not attempted Finished goods inventory not attempted not attempted not attempted Total assets $0 Equity not attempted not attempted Retained earnings not attempted Common stock not attempted Total equity $0

Answer 1

Answers:

ROONEY COMPANY
Income Statement for 2018
Sales revenue (230*13)	$ 2,990
Cost of goods sold (230*10.5) (Note)	$ 2,415
Gross margin	$    575
Administrative expense (140+116)	$    256
Net income	$    319

Note:

Cost of goods sold = (630+1860+1185)/350 = $ 10.50

ROONEY COMPANY
Balance Sheet as of 12/31/2018
Assets
Cash (4,100-630-1,860-1,185-140-116+2,990)	$ 3,159
Finished goods inventory (120*10.5)	$ 1,260
Total assets	$ 4,419
Equity
Retained earnings	$    319
Common stock	$ 4,100
Total equity	$ 4,419

In case of any doubt, please comment.