Question
Antioch Company makes eBook readers. The company had the following amounts at the beginning of Year 2: Cash, $678,000; Raw Materials Inventory, $63,000; Work in
Antioch Company makes eBook readers. The company had the following amounts at the beginning of Year 2: Cash, $678,000; Raw Materials Inventory, $63,000; Work in Process Inventory, $24,000; Finished Goods Inventory, $48,000; Common Stock, $594,000; and Retained Earnings, $219,000. Antioch experienced the following accounting events during Year 2. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.
- Paid $27,000 of research and development costs.
- Paid $63,000 for raw materials that will be used to make eBook readers.
- Placed $84,000 of the raw materials cost into the process of manufacturing eBook readers.
- Paid $64,000 for salaries of selling and administrative employees.
- Paid $99,000 for wages of production workers.
- Paid $64,000 to purchase equipment used in selling and administrative offices.
- Recognized depreciation on the office equipment. The equipment was acquired on January 1, Year 2. It has a $14,000 salvage value and a five-year life. The amount of depreciation is computed as [(Cost salvage) useful life]. Specifically, ($64,000 $14,000) 5 = $10,000.
- Paid $184,000 to purchase manufacturing equipment.
- Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, Year 2. It has a $24,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost salvage) useful life]. Specifically, ($184,000 $24,000) 8 = $20,000.
- Paid $63,000 for rent and utility costs on the manufacturing facility.
- Paid $73,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).
- Completed and transferred eBook readers that had total cost of $253,000 from work in process inventory to finished goods.
- Sold 970 eBook readers for $422,000.
- It cost Antioch $174,600 to make the eBook readers sold in Event 13.
Required:
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.
c-1. Prepare a schedule of cost of goods manufactured and sold for the year.
c-2. Prepare a formal income statement for the year.
c-3. Prepare a balance sheet for the year.
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