Todd Motor Company manufactures automobiles. During September 2016, the company purchased 5,000 head lamps at a cost of $8 per lamp. There was no beginning inventory of lamps. Todd withdrew 4,650 lamps from the ware- house during the month of September. Fifty of these lamps were used to replace the head lamps in automobiles used by travelling sales staff. The remaining 4,600 lamps were put in automobiles manufactured during the month.
Of the autos put into production during September 2016, 90% were completed and transferred to the company's storage lot. Of the cars completed during the month, 75% were sold by September 30.
Instructions
(a) Determine the cost of head lamps that would appear in each of the following accounts at September 30, 2016: Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold, and Selling Expenses.
(b) Write a short memo to the chief accountant, indicating whether and where each of the accounts in part (a) would appear on the income statement or on the balance sheet at September 30, 2016.