25 points Problem 10-2 Fairmont Company makes eBook readers. The company had the following amounts at the beginning of 2021: $ $ Cash Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Common Stock Retained Earnings 690,000 53,000 20,000 45,000 606,000 202,000 $ 1. Paid $ 25,000 of research and development costs. 2. Paid $ 57,000 for raw materials that will be used to make eBook readers. 3. Placed $ 100,000 of the raw materials cost into the process of manufacturing eBook readers. 14. Paid $ 75,000 for salaries of selling and administrative employees. 5. Paid $ 120,000 for wages of production workers. 6. Paid $ 108,000 to purchase equipment used in selling and administrative offices. 7. Recognized depreciation on the office equipment. The equipment was acquired on January, 1, 2021. It has a $ 10,000 salvage value and a 10 year life 8. Paid $ 250,000 cash to purchase manufacturing equipment. 9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on Jan 1, 2021. It has a $0 salvage value and a 5 year life 10. Paid $ 25,000 for rent and utility costs on the manufacturing facility. 11. Paid $ 10,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost, this is not cost of goods). 12. Completed and transferred eBook readers that had total cost of $300,000 from work in process inventory to finished goods. 13. Sold 1,000 eBook readers for $500,000 cash 14. It cost Fairmont $275,000 to make the eBook readers sold in Event 13. REQUIRED All of these events are in 2021 and students need to produce financial statements as of 12/31/2021 a. Show how these events affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model. Hint: there are six asset accounts - you will need to adjust the template given and include more asset accounts. b. Explain in your own words why Fairmont's recognition of cost of goods sold had no impact on cash flow. c. Prepare a schedule of cost of goods manufactured and sold, a formal income statement, and a balance sheet for the year. On the Balance sheet, split out the 3 different inventory accounts. d. Distinguish between the product costs and the upstream costs that Fairmont incurred. 25 points Problem 10-2 Fairmont Company makes eBook readers. The company had the following amounts at the beginning of 2021: $ $ Cash Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Common Stock Retained Earnings 690,000 53,000 20,000 45,000 606,000 202,000 $ 1. Paid $ 25,000 of research and development costs. 2. Paid $ 57,000 for raw materials that will be used to make eBook readers. 3. Placed $ 100,000 of the raw materials cost into the process of manufacturing eBook readers. 14. Paid $ 75,000 for salaries of selling and administrative employees. 5. Paid $ 120,000 for wages of production workers. 6. Paid $ 108,000 to purchase equipment used in selling and administrative offices. 7. Recognized depreciation on the office equipment. The equipment was acquired on January, 1, 2021. It has a $ 10,000 salvage value and a 10 year life 8. Paid $ 250,000 cash to purchase manufacturing equipment. 9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on Jan 1, 2021. It has a $0 salvage value and a 5 year life 10. Paid $ 25,000 for rent and utility costs on the manufacturing facility. 11. Paid $ 10,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost, this is not cost of goods). 12. Completed and transferred eBook readers that had total cost of $300,000 from work in process inventory to finished goods. 13. Sold 1,000 eBook readers for $500,000 cash 14. It cost Fairmont $275,000 to make the eBook readers sold in Event 13. REQUIRED All of these events are in 2021 and students need to produce financial statements as of 12/31/2021 a. Show how these events affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model. Hint: there are six asset accounts - you will need to adjust the template given and include more asset accounts. b. Explain in your own words why Fairmont's recognition of cost of goods sold had no impact on cash flow. c. Prepare a schedule of cost of goods manufactured and sold, a formal income statement, and a balance sheet for the year. On the Balance sheet, split out the 3 different inventory accounts. d. Distinguish between the product costs and the upstream costs that Fairmont incurred