• Merck Manufacturing Company started operations on January 1, Year 1. During Year 1, the company engaged in the following transactions.
  1. Issued common stock for $85,000.
  2. Paid $28,000 cash to purchase raw materials used to make products.
  3. Transferred $23,000 of raw materials to the production department.
  4. Paid $34,000 cash for labor used to make products.
  5. Paid $40,000 cash for overhead costs (assume actual and estimated overhead are the same).
  6. Finished work on products that cost $95,000 to make.
  7. Sold products that cost $81,000 to make for $120,000 cash.

• Required:
  1. Prepare the December 31, Year 1, balance sheet.
  2. Prepare the December 31, Year 1, income statement.