The following events took place for Video Wave Manufacturing Company during Janu
ID: 2556977 • Letter: T
Question
The following events took place for Video Wave Manufacturing Company during January 2016, the first month of its operations as a producer of digital video monitors:
Amount Descriptions
Income Statement
Using the information given, prepare the January 2016 income statement for Video Wave Manufacturing Company. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
Video Wave Manufacturing Company
Income Statement
For the Month Ended January 31, 2016
1
2
3
4
Operating expenses:
5
6
7
Total operating expenses
8
Inventory Balances
Using the information given, determine the inventory balances at the end of the first month of operations.
a. Purchased $137,200 of materials. b. Used $94,320 of direct materials in production. c. Incurred $180,640 of direct labor wages. d. Incurred $212,320 of factory overhead. e. Transferred $427,800 of work in process to finished goods. f. Sold goods with a cost of $360,250. g. Earned revenues of $655,000. h. Incurred $86,160 of selling expense. i. Incurred $70,250 of administrative expense.Explanation / Answer
Solution (A):
Video Wave Manufacturing Company
Income Statement
For the Month Ended January 31, 2016
1
Sales
$655,000
2
Cost of goods sold
$360,250
3
Gross Profit
$ 294,750
4
Operating expenses:
5
Selling expenses
$86,160
6
Administrative expenses
$70,250
7
Total operating expenses
156,410
8
Net Income
138,340
Solution (B):
Inventory Balances at the end of the first month of operations
Materials
=Material purchased – Material used
= $137,200- $94,320
=$ 42,880 (Answer)
Work in process
= Beginning work in process inventory + Manufacturing cost - Transferred work in process to finished goods
= Beginning work in process inventory + (Direct Material + Direct labor + Factory overhead) - Transferred work in process to finished goods
= $ 0 + ($94,320 + $180,640 + $212,320) - $427,800
= $487,280 - $ 427,800
=$ 59,480 (Answer)
Finished goods
= Transferred work in process to finished goods – Cost of goods sold
=$427,800 -$360,250
= $ 67,550 (Answer)
Video Wave Manufacturing Company
Income Statement
For the Month Ended January 31, 2016
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