Magnificent Modems, Inc., makes modem cards that are used in notebook computers. The company completed the following transactions during 2014. All purchases and sales were made with cash.

1.	Acquired $830,000 of cash from the owners.
2.	Purchased $310,000 of manufacturing equipment. The equipment has a $38,000 salvage value and a four-year useful life.
3.	The company started and completed 5,800 modems. Direct materials purchased and used amounted to $48 per unit.
4.	Direct labor costs amounted to $33 per unit.
5.	The cost of manufacturing supplies used amounted to $12 per unit.
6.	The company paid $58,000 to rent the manufacturing facility.
7.	Magnificent sold all 5,800 units at a cash price of $160 per unit.
8.	The sales staff was paid a $10.0 per - unit sales commission.
9.	Paid $47,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,800 salvage value and a three-year useful life.
10.	Administrative expenses consisting of office rental and salaries amounted to $75,950.

$ 544,050

B) Financial Statement Preparation:

Magnificent Modems, Inc.

Magnificent Modems, Inc.

Income Statement

%

Balance Sheet

Sales Revenue

$ 600,000

100%

Assets:

Amount

%

Cost of Goods Sold

Cash (must agree to Stmt of Cash Flows below!)

Gross Margin

Manufacturing Equipment, Net of Accum Depr

Sales Commission

Office Equipment, Net of Accum Depr

Depreciation Expense

Total Assets ("check figure" is $781,050)

100%

Administrative Expense

Net Income

5%

Liabilities:

- 0 -

0%

(NI "check figure" is $31,050)

Equity:

Common Stock

Retained Earnings

4%

Total Liabilities & Equity

Magnificent Modems, Inc.

Statement of Cash Flows (Pg 54 Problem)

Event

Number

Cash Flows from Operating Activities

7A

Revenues Received

$ 600,000

Direct Materials Purchased

Direct Labor Paid

Mfg Supplies Purchased

Mfg Facility Rent Paid

Commissions Paid

Administrative Expenses Paid

Cash Flow from Operations:

Cash Flows from Investing Activities

Mfg Equipment Purchased

Admin Equipment Purchased

Cash Flow from Investments:

Cash Flows from Financing Activities

Common Stock Issued

Cash Flow from Financing:

Net Change in Cash for the Period

Beg Cash Balance

$ -

*Ending Cash Balance

*(Must agree to ending Cash balance on Balance Sheet)

F17