Question

Financial Statements of a Manufacturing Firm The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors: A. Purchased $68,500 of materials. B. Used $52,700 of direct materials in production. C. Incurred $78,800 of direct labor wages. D. Incurred $111,000 of factory overhead. E. Transferred $184,300 of work in process to finished goods. F. Sold goods for $329,500. G. Sold goods with a cost of $146,600. H. Incurred $84,300 of selling expense. I. Incurred $37,000 of administrative expense. Using the information given, complete the following: A. Prepare the January income statement for Sorensen Manufacturing Company.B. Determine the inventory balances at the end of the first month of operations.

Answer 1

A. income statement for Sorensen Manufacturing Company

Sales $329,500

Less Cost of Sales

Opening Finished Goods Inventory $0

Cost of Goods Manufactured $184,300

Less Finished Goods Inventory ($37,700) $146,600

Gross Profit $182,900

Less Expenses

selling expense ($84,300)

administrative expense ($37,000)

Net Income or Loss $61,600

B. inventory balances at the end of the first month of operations.

Raw Materials Inventory = $15,800

Work In Process Inventory = $58,200

Finished Goods Inventory = $37,700

Step-by-step explanation:

Raw Materials Inventory Calculation :

Open a Raw Materials T - Account

Debit :

Opening Balance $0

Purchases $68,500

Totals $68,500

Credit:

Used in Production $52,700

Closing Balance (Balancing figure) $15,800

Totals $68,500

Work In Process Inventory Calculation :

Make a Schedule of Manufacturing Cost

Raw Materials $52,700

direct labor wages $78,800

factory overhead $111,000

Total cost of Manufacture $242,500

Less Transfer to Finished Goods ( $184,300)

Work In Process Inventory $58,200

Finished Goods Inventory Calculation :

Transfer to Finished Goods $184,300

Less Cost of Sales ($146,600)

Finished Goods Inventory $37,700