Franklin Corporation builds sailboats. On January 1, Year 3, the company had the following account balances: $85,000 for both cash and common stock. Boat 25 was started on February 10 and finished on May 31. To build the boat, Franklin had incurred cash costs of $5,100 for labor and $5,600 for materials. During the same period, Franklin paid $10,170 cash for actual manufacturing overhead costs. The company expects to incur $250,000 of indirect overhead cost during Year 3. The overhead is allocated to jobs based on direct labor cost. The expected total labor cost for the year is $125,000. Franklin uses a just-in-time inventory management system. Consequently, it does not have raw materials inventory. Raw materials purchases are recorded directly in the Work in Process Inventory account. Required

1. Use the horizontal financial statements model, to record Franklins business events. The first row shows beginning balances.

2. If Franklin desires to earn a profit equal to 20 percent of cost, for what price should it sell the boat?

3. If the boat is not sold by year-end, what amount would appear in the Work in Process Inventory and Finished Goods Inventory on the balance sheet for Boat 25?

4. Is the amount of inventory you calculated in Requirement c the actual or the estimated cost of the boat?

Use the horizontal financial statements model, to record Franklins business events. The first row shows beginning balances. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)

Balance Sheet

Income Statement

Assets

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Equity

Cash

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Work in Process

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Finished Goods

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Manufacturing Overhead

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Common Stock

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Retained earnings

Revenue

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Expense

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Net Income

85,000

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85,000

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-

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-

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-

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-

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-

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85,000

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-

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