Manufacturing cost flow for one-year period Piazza Manufacturing started 2006 with the following account balances.

Product Costing in Service and Manufacturing Entities 499 L.O. 2, 3, 4, 5, 6 CHECK FIGURE

b. NI: $538 Cash $1,000 Common Stock 2,000 Retained Earnings 3,000 Raw Materials Inventory 1,200 Work in Process Inventory 800 Finished Goods Inventory (320 units @$6.25) 2,000 Transactions during 2006 1. Purchased $2,880 of raw materials with cash.

2. Transferred $3,750 of raw materials to the production department.

3. Incurred and paid cash for 180 hours of direct labor @$16 per hour.

4. Applied overhead costs to the Work in Process Inventory account. The predetermined overhead rate is $16.50 per direct labor hour.

5. Incurred actual overhead costs of $3,000 cash.

6. Completed work on 1,200 units for $6.40 per unit.
7. Paid $1,400 in selling and administrative expenses in cash.
8. Sold 1,200 units for $9,600 cash revenue (assume FIFO cost flow).
Piazza charges overapplied or underapplied overhead directly to Cost of Goods Sold.
Required

a. Record the preceding events in a horizontal statements model. Also designate the classification of cash flows using the letters OA for operating activities, IA for investing activities, and FA for financing activities. The beginning balances are shown as an example.

b. Prepare a schedule of cost of goods manufactured and sold, an income statement, a balance sheet, and a statement of cash flows for 2006.