Question

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Posted on Sep 10, 2024

1. Problem 10-20 Effect of product versus period costs on financial statements LO 10-2 Gunn Manufacturing Company experienced the following accounting events during its first

Problem 10-20 Effect of product versus period costs on financial statements LO 10-2

Gunn Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions.

1.	Acquired $51,000 cash by issuing common stock.
2.	Paid $7,200 for the materials used to make its products, all of which were started and completed during the year.
3.	Paid salaries of $3,800 to selling and administrative employees.
4.	Paid wages of $6,200 to production workers.
5.	Paid $7,400 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,400 estimated salvage value and a four-year useful life.
6.	Paid $11,400 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,800 estimated salvage value and a three-year useful life.
7.	Sold inventory to customers for $25,800 that had cost $13,100 to make.

Required

Show how these events would affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model as indicated here. Also, in the Cash Flow column, indicate whether the cash flow is for operating activities (OA), investing activities (IA), or financing activities (FA). Use NA to indicate that an element is not affected by the event. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.)

GUNN MANUFACTURING COMPANY

Financial Statements Model

Event No.

Assets

Equity

Income Statement

Statement of Cash Flow

Cash

Inventory

Manufacturing Equipment

Office Furniture

Common stock

Retained Earnings

Revenue

Expense

Net Income

51,000

5a.

5b.

6a.

6b.

7a.

7b.

Total

51,000

During its first year of operations, Beta Company paid $27,640 for direct materials and $18,200 in wages for production workers. Lease payments and utilities on the production facilities amounted to $7,200. General, selling, and administrative expenses were $8,200. The company produced 5,200 units and sold 4,200 units for $15.20 a unit. The average cost to produce one unit is which of the following amounts? (Round your final answer to 2 decimal places.)

During its first year of operations, Silverman Company paid $11,360 for direct materials and $11,100 for production workers' wages. Lease payments and utilities on the production facilities amounted to $10,100 while general, selling, and administrative expenses totaled $3,400. The company produced 7,400 units and sold 4,600 units at a price of $6.90 a unit. What was Silverman's net income for the first year in operation? (Do not round intermediate calculations.)

Ken believes his company's overhead costs are driven (affected) by the number of direct labor hours because the production process is very labor intensive. During the period, the company produced 4,800 units of Product A requiring a total of 780 labor hours and 2,300 units of Product B requiring a total of 180 labor hours. What allocation rate should be used if the company incurs overhead costs of $17,280?

$18.00 per labor hour

$2.43 per unit

$22.15 per labor hour for Product A and $96 per labor hour for Product B

None of these.

The following information relates to Betty's Manufacturing for 2013:

Raw materials used	$	9,800
Direct labor wages		29,800
Sales salaries and commissions		24,800
Depreciation on production equipment		1,980
Rent on manufacturing facilities		14,800
Packaging and shipping supplies		2,980
Sales revenue		107,800
Units produced and sold		9,800
Selling price per unit	$	11.00

Based on this information, what is the company's cost of goods sold for 2013? (Do not round intermediate calculations.)

$65,220

$42,580

$59,360

$84,160

During its first year of operations, Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $17,000 while general, selling, and administrative expenses totaled $8,000. The company produced 5,000 units and sold 3,000 units at a price of $15.00 a unit. What is Silverman's cost of goods sold for the year?

$50,000

$24,600

$30,000

$41,000