Question

The following transactions pertain to year 1, the first-year operations of Solomon Company. All inventory was started and completed during year 1. Assume that all transactions are cash transactions.

Acquired $4,800 cash by issuing common stock.
Paid $640 for materials used to produce inventory.
Paid $1,810 to production workers.
Paid $1,620 rental fee for production equipment.
Paid $80 to administrative employees.
Paid $113 rental fee for administrative office equipment.
Produced 370 units of inventory of which 250 units were sold at a price of $14 each.
Required:a) Prepare an income statement and a balance sheet in accordance with GAAP.

Answer 1

Step-by-step explanation:

Cost of sales 640+1810+1620=$4070

Operating Expenses 80+113=$193

Total Cost =4263

Unit produced =370

cost per unit =11.52

Sales revenue =250*14=$3500

Income statement

Revenue - 3500

Cost of sales 4070

Gross profit (570)

Operating Expenses (193)

Net loss (763)

Balance sheet

Inventory 1382.4

Equity 4800

Total asset 6182.4

Inventory is valued at $11.52 (lower of cost and net realizable value)