Keystone Manufacturing Company started operations on January 1, 2019. During 201
ID: 2431858 • Letter: K
Question
Keystone Manufacturing Company started operations on January 1, 2019. During 2019, the company engaged in the following transactions: Issued common stock for $40,000. Paid $10,000 cash to purchase raw materials used to make products. Transferred $9,000 of raw materials to the production department. Paid $12,000 cash for labor used to make products. Paid $18,000 cash for overhead costs (assume actual and estimated overhead are the same). Finished work on products that cost $35,000 to make. Sold products that cost $31,500 to make for $42,500 cash. Required Prepare the December 31, 2019, balance sheet. Prepare the December 31, 2019, income statement.
Explanation / Answer
Keystone Manufacturing Company
Income Statement
31 December 2019.
Sales
$ 42,500.00
Cost of Goods Sold
$ 31,500.00
Gross profit
$ 11,000.00
Keystone Manufacturing Company
Balance Sheet
As at December 31 2019
Assets
Current Assets
Cash
$ 42,500.00
Inventory
$ 8,500.00
Total Current Assets
$ 51,000.00
Total Assets
$ 51,000.00
Liabilities and Shareholder's Equity
Common Stock
$ 40,000.00
Retained Earnings
$ 11,000.00
Total Liabilities and Shareholder's Equity
$ 51,000.00
Working Note 1
Ketstone Manufacturing Company
Cost of Goods manufactured
31 December 2019.
Direct material
$ 9,000.00
Direct Labor
$ 12,000.00
Manufacturing Overheads
$ 18,000.00
Total Production cost
$ 39,000.00
Add: Opening Work in Progress
$ -
Less: Closing Work in Progress
$ 4,000.00
Total Cost of Goods manufactured
$ 35,000.00
Working Note 2
Cash balance
Issue of Common Stock
$ 40,000.00
Sales
$ 42,500.00
Total Cash Available
$ 82,500.00
Less: Disbursements
Payment for Raw material
$ 10,000.00
Payment for labor costs
$ 12,000.00
Payment for Manufacturing Overheads
$ 18,000.00
Ending Cash Balance
$ 42,500.00
Working Note 3
Raw Material Inventory
Raw material Purchased
$ 10,000.00
Raw material Used
$ 9,000.00
Closing Raw Material
$ 1,000.00
Working note 4
Total Inventory
Raw material Inventory
$ 1,000.00
WIP Inventory
$ 4,000.00
Finished Goods Inventory
$ 3,500.00
Total Inventory
$ 8,500.00
Keystone Manufacturing Company
Income Statement
31 December 2019.
Sales
$ 42,500.00
Cost of Goods Sold
$ 31,500.00
Gross profit
$ 11,000.00
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