Franklin Corporation builds sailboats. On January 1, Year 3, the company had the following account balances: $80,000 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 $5,200 for labor and $3,750 for materials. During the same period, Franklin paid $9,320 cash for actual manufacturing overhead costs. The company expects to incur $234,000 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 $130,000. 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

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

Balance Sheet

Income Statement

Assets

Equity

Cash

+

Work in Process

+

Finished Goods

+

Manufacturing Overhead

=

Common Stock

+

Retained Earnings

Revenue

-

Expense

=

Net Income

80,000

80,000

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

Desired Price

TASK 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?

Work in process inventory
Finished goods inventory