A company started its business in December. Data regarding its first month of operations until the year-end are as follows:

Materials and supplies purchasedfor $531,000 cash, 18% VAT included.

Materials and supplies used:In the factory:Raw materials: $350,000; fuel and oil $30,000. In the general headquarters:office and computer supplies: $20,000.  

Accrued gross wages and salaries:Factory workers: $150,000 (2/3 direct, 1/3 indirect); Administrative staff at general headquarters: $50,000; mobile sales people: $30,000.  

Depreciation:For factory building and machinery: $10,000; for fixtures and devices in the general headquarters $2,000.

December costs aretransferred(applied) to related accounts.

Of the 2,000 units started during the month 1,500 were completed. Total cost ofthese completed unitsis $450,000.

1,000 completed units were sold for$649,000 cash, including 18% VAT.

Total cost of units soldis transferred to related account.

Year-end closing entriesare made.  

REQUIRED:

a Show journal entriesaccording to 7/A.(Use general ledger accounts only.)

b Prepare an income statementand a statement of cost of goods sold.

c Show journal entries according to 7/B.

d Show journal entries 1 through 5, assuming this is a service firm.

Information :

7/A :Main choice (for all manufacturing firm). General ledges account from 700 to 789. General ledger account are based on functional classification of cost. Cost by type (by nature) are accumulated in subsidiary ledger account.

7/B: Optional choice (only for small firm). General ledger account from 790 to 799. General ledger account are based on natural classification of cost. Cost by function are obtained by various approaches.