Question

Rockeagle Corporation began fiscal year 2018 with the following balances in its inventory accounts:Raw Materials $ 30,000 Work in Process 45,000 Finished Goods 14,000 During the accounting period, Rockeagle purchased $125,000 of raw materials and issued $124,000 of materials to the production department. Direct labor costs for the period amounted to $162,000, and manufacturing overhead of $24,000 was applied to Work in Process Inventory. Assume that there was no over- or underapplied overhead. Goods costing $306,000 to produce were completed and transferred to Finished Goods Inventory. Goods costing $301,000 were sold for $400,000 during the period. Selling and administrative expenses amounted to $36,000.Required:1. Determine the ending balance of each of the three inventory accounts that would appear on the year-end balance sheet.2. Prepare a schedule of cost of goods manufactured and sold and an income statement.

Answer 1

Raw material Inventory

Beginning balance 30000

Add: Purchase 125000

Less: Issue to production -124000

Ending balance of RM 31000

WIP Inventory

Beginning Inventory of Wip 45000

Add: Current cost of manufacturing

Material issued 124000

Direct wages 162000

OH applied 24000

Total current cost of production 310000

Total cost of goods manufacturing 355000

Less: Cost of goods manufactured 306000

WIP ending inventory 49000

Finished Goods inventory

Beginning Inventory of FG 14000

Add: Cost of goods manufactured 306000

Cost of goods available for sale 320000

Less: Cost of good sold 301000

Ending inventory of FG 19000

Schedule of Cost of goods manufactured

Beginning Inventory of Rm 30000

AdD: Purchase 125000

RM available 155000

Less: Ending inventory -31000

Raw material issued 124000

Labour cost 162000

OH applied 24000

Total Manufacturing cost 310000

Add: Beginning inventory of Wip 45000

Total WIP inventory 355000

Less: Ending inventory of WIP 49000

Cost of goods manufactured 306000

Add: Beginning Inventory of FG 14000

Total cost of goods available for sale 320000

Less: Ending inventory of FG 19000

Cost of good sold 301000

Income Statement

Sales revenue 400000

Less: Cost of goods sold 301000

Gross Margin 99000

Less: Selling and admin expense 36000

Net Operating income 63000