Effect of product versus period costs on financial statementsCampbell Manufacturing Company experienced
2 answers
Question:
Effect of product versus period costs on financial statements Campbell Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared in accordance with GAAP.
Acquired $51,000 cash by issuing common stock.
Paid $7,500 for the materials used to make its products, all of which were started and completed during the year.
Paid salaries of $4,100 to selling and administrative employees.
Paid wages of $6,800 to production workers.
Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life.
Paid $11,600 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,100 estimated salvage value and a three-year useful life.
Sold inventory to customers for $26,800 that had cost $13,900 to make.
Required:
Explain how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here.
Financial Statements Model
Assets Equity
Event Manuf. Office Com. Ret Cash
No Cash + Inventory + Equip." + Furn.* = Stk. + Ear. Rev. - Exp. = Net Inc. Flow
1 68,000 68,000 68,000
Acquired $51,000 cash by issuing common stock.
Paid $7,500 for the materials used to make its products, all of which were started and completed during the year.
Paid salaries of $4,100 to selling and administrative employees.
Paid wages of $6,800 to production workers.
Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life.
Paid $11,600 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,100 estimated salvage value and a three-year useful life.
Sold inventory to customers for $26,800 that had cost $13,900 to make.
Required:
Explain how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here.
Financial Statements Model
Assets Equity
Event Manuf. Office Com. Ret Cash
No Cash + Inventory + Equip." + Furn.* = Stk. + Ear. Rev. - Exp. = Net Inc. Flow
1 68,000 68,000 68,000
Answers
Please see attachment
Explanation:
Please see attachment
[tex]Gunn manufacturing company experienced the following accounting events during its first year of oper[/tex]
Please see the attached image for the Horizontal Financial Statements of Sinclair Manufacturing Company.
Explanation:
5. FURNITURE - Straight Line Method
Book Value of Furniture = Cost of Acquisition - Residual Value
Cost of Acquisition = $9,600
Residual Value = $1,600
Book Value of Furniture = $9,600 - $1,600
Book Value of Furniture = $8,000
Useful Life = 4 years
Depreciation Expense = $8,000 / 4 years
Depreciation Expense = $2,000 per year
6. EQUIPMENT - Straight Line Method
Book Value of Equipment = Cost of Acquisition - Residual Value
Cost of Acquisition = $16,000
Residual Value = $1,000
Book Value of Furniture = $16,000 - $1,000
Book Value of Furniture = $15,000
Useful Life = 5 years
Depreciation Expense = $15,000 / 5 years
Depreciation Expense = $3,000 per year
[tex]Sinclair Manufacturing Company experienced the following accounting events during its first year of[/tex]
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