XYZ Company recorded the following information related to their inventory accoun
ID: 2374295 • Letter: X
Question
XYZ Company recorded the following information related to their inventory accounts for January: January 1, 2003 January 31, 2003 Direct materials 15,000 ? Work in process 15,000 10,000 Finished goods ? 7,000 Additional information is as follows:
Cost of goods manufactured .......... $26,000 Direct labor ........................ 8,000 Applied overhead .................... 10,000 Net income .......................... 40,000 S&A expenses ........................ 20,000 Sales revenue ....................... 90,000 Calculate the finished goods inventory balance on January 1.
Explanation / Answer
Gross Profit = Net Income + S&A Expenses = 60,000
Cost of Good Sold = Revenue - Gross Profit = 30,000
Goods Ready for Sold
= Work in Process on Jan 1 + Cost of Goods Manufactured - Work in Process on Jan 31
= 15,000 + 26,000 - 10,000
= 31,000
Finish goods Inventory Balance on Jan 1
= Finished Goods Inventory Balance on Jan 31 + Cost of Goods Sold - Goods ready to Sold
= 7,000 + 30,000 - 31,000
= 6,000
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