Wang Company began operations on January 1, 2018, by issuing common stock for $7
ID: 2544256 • Letter: W
Question
Wang Company began operations on January 1, 2018, by issuing common stock for $70,000 cash. During 2018, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments. Prepare a GAAP-based income statement and balance sheet for Wang Company for 2018, for the below scenario:
a. Wang is a promoter of rock concerts. The $65,000 was paid to provide a rock concert that produced the revenue.
b. Wang is in the car rental business. The $65,000 was paid to purchase automobiles. The automobiles were purchased on January 1, 2018, and have five-year useful lives, with no expected salvage value. Wang uses straight-line depreciation. The revenue was generated by leasing the automobiles.
c. Wang is a manufacturing company. The $65,000 was paid to purchase the following items:
(1) Paid $10,000 cash to purchase materials that were used to make products during the year.
(2) Paid $20,000 cash for wages of factory workers who made products during the year.
(3) Paid $5,000 cash for salaries of sales and administrative employees.
(4) Paid $30,000 cash to purchase manufacturing equipment. The equipment was used solely to make products. It had a three-year life and a $6,000 salvage value. The company uses straight-line depreciation.
(5) During 2018, Wang started and completed 2,000 units of product. The revenue was earned when Wang sold 1,500 units of product to its customers.
Explanation / Answer
WANG COMPANY
ANSWER (A)
INCOME STATMENT
BALANCE SHEET
ANSWER (B)
INCOME STATMENT
BALANCE SHEET
Depreciation on Automobiles = (65000 - 0) / 5 = 13000 for a year.
ANSWER (C)
INCOME STATMENT
BALANCE SHEET
Depreciation = (30000 - 6000) = 24000 / 3 = $8000 per year
Cost of goods sold = Direct material + Direct Labor + Dep on manufacturing Equipments
COSG = 10000 + 20000 + 8000 = 38000
Cost per unit = 38000 / 2000 = $19 per Unit
Cost of goods sold = 1500 Units x 19 = $28500
Ending Inventory = 500 Units x 19 = $9500
Revenue from rock concert 88000 Total Revenue 88000 Expenses Expenses on rock concert 65000 Total Expenses 65000 Net Income 23000Related Questions
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