Question

Benson Manufacturing Company was started on January 1, 2018, when it acquired $81,000 cash by issuing common stock. Benson immediately purchased office furniture and manufacturing equipment costing $7,000 and $34,400, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,600 salvage value and an expected useful life of four years. The company paid $11,100 for salaries of administrative personnel and $15,700 for wages to production personnel. Finally, the company paid $7,800 for raw materials that were used to make inventory. All inventory was started and completed during the year. Benson completed production on 4,000 units of product and sold 3,050 units at a price of $15 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

1. Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.)

2. Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)

3. Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)

4. Determine the amount of net income that would appear on the 2018 income statement. (Round your answer to the nearest dollar amount.)

5. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

6. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

Answer 1

Issue common stock for cash	$                                                                81,000
Purchase of Office furniture	$                                                                   7,000
Life of Office furniture	8 Year
Salvage value Office furniture	$                                                                         -
Purchase of Manufacturing equipment	$                                                                34,400
Salvage value Manufacturing equipment	$                                                                   3,600
Life of Manufacturing equipment	4 Year
Salaries of administrative personnel	$                                                                11,100
Wages to production personnel	$                                                                15,700
Paid for raw material	$                                                                   7,800
Units produced	4000 units
Units sold	3050 units
Total product cost and the average cost per unit of the inventory produced in 2018
Wages to production personnel	$                                                                15,700
Paid for raw material	$                                                                   7,800
Total product costs	$                                                                23,500
Units produced	4000 units
Average cost per unit produced	$                                                                     5.88
The amount of cost of goods sold
Purchases	$                                                                   7,800
Add: Opening stock	$                                                                         -
Add: Direct expenses	$                                                                15,700
Less: Closing stock	$                                                                 -5,586	5.88*(4000-3050)
Cost of goods sold	$                                                                17,914
The amount of the ending inventory balance
Closing stock	$                                                                   5,586	5.88*(4000-3050)
The amount of net income
Sales	$                                                                45,750	3050*15
Less: Cost of Goods sold	$                                                                17,914
Gross Profit	$                                                                27,836
Depreciation expense
Manufacturing equipment	$                                                                   7,700	(34400-3600)/4
Office furniture	$                                                                      875	(7000-0)/8
Salaries of administrative personnel	$                                                                11,100
Net Income	$                                                                   8,161
The amount of retained earnings
Opening retained earnings	$                                                                         -
Net Income	$                                                                   8,161
Closing retained earnings	$                                                                   8,161
The amount of total assets
Manufacturing equipment	$                                                                34,400
Less: depreciation	$                                                                 -7,700	$              26,700
Office furniture	$                                                                   7,000
Less: depreciation	$                                                                    -875	$                6,125
Cash		$              50,750	(81000+3050*15-34400-7000-11100-15700-7800)
Closing stock		$                5,586
Total assets		$              89,161

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