Fanning Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash.

1. Acquired $800,000 of cash from the owners.
2. Purchased $295,000 of manufacturing equipment. The equipment has a $35,000 salvage value and a four-year useful life. Label the purchase of the equipment as Event 2a and the recognition of depreciation as Event 2b.
3. The company started and completed 5,500 modems. Direct materials purchased and used amounted to $45 per unit.
4. Direct labor costs amounted to $30 per unit.
5. The cost of manufacturing supplies purchased and used amounted to $9 per unit.
6. The company paid $55,000 to rent the manufacturing facility.
7. Fanning sold all 5,500 units at a cash price of $145 per unit. Label the recognition of the sale as Event 7a and the cost of goods sold as Event 7b. (Hint: It will be necessary to determine the manufacturing costs in order to record the cost of goods sold.)
8. The sales staff was paid a $8.50 per unit sales commission.
9. Paid $44,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,500 salvage value and a three-year useful life. Label the purchase of the equipment as Event 9a and the recognition of depreciation as Event 9b.
10. Administrative expenses consisting of office rental and salaries amounted to $74,450.

Prepare a balance sheet. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Required

a. Record the transaction data for Fanning Modems, Inc. in the financial statements like the one shown as follows. The first transaction is recorded as an example.

1. b-1. Prepare an income statement.

2. b-2. Prepare a balance sheet.

FANNING MODEMS, INC.
Balance Sheet
As of December 31, year 1
Assets:
Common stock
Retained earnings
Common stock
Manufacturing equipment, net of acc. depreciation
Total assets	$0
Equity:
Cash
Manufacturing equipment, net of acc. depreciation
Common stock
Total stockholders' equity	$0

Prepare an income statement. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

FANNING MODEMS, INC.
Income Statement
For the Period Ended December 31, year 1
Sales
Cost of goods sold
Gross margin	0
Administrative expense
Depreciation expense
Rent expense
Depreciation expense
Net income	$0