Annandale, Inc., produces and sells wireless reading devices. A competitor, Danube Electronic Products, sells similar wireless reading devices that it purchases at wholesale from Sonex for $75 each. Both sell the devices for $180. In 20X9 Annandale produced 12,000 devices at the following costs:

Direct materials purchased		$530,000
Direct materials used		$490,000
Direct labor		200,000
Indirect production:
Depreciation	$ 35,000
Indirect labor	20,000
Other	155,000	210,000
Total cost of production		$900,000

Assume that Annandale had no beginning inventory of direct materials. Neither company had any beginning inventory of finished devices, but both had ending inventory of 2,500 finished devices. Ending work-in-process inventory for Annandale was negligible.

Each company sold 9,500 devices for $1

,710,000 in 20X9 and incurred the following selling and administrative costs:

Sales salaries and commissions	$110,000
Depreciation on retail store	45,000
Advertising	10,000
Other	5,000
Total selling and administrative cost	$170,000

1. Prepare the inventories section of the balance sheet for December 31, 20X9, for Danube.

2. Prepare the inventories section of the balance sheet for December 31, 20X9, for Annandale.

3. Using the cost of goods sold format on page 134 as a model, prepare an income statement for the year 20X9 for Danube.

4. Using the cost of goods sold format on page 134 as a model, prepare an income statement for the year 20X9 for Annandale.

5. Summarize the differences between the financial statements of Danube, a merchandiser, and Annandale, a manufacturer.

6. What purpose of a cost management system is being served by reporting the items in requirements 14?