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Runcke Motor Company manufactures automobiles. During September 2011 the company

ID: 2376612 • Letter: R

Question

Runcke Motor Company manufactures automobiles. During September 2011 the company purchased 5,000 head lamps at a cost of $9 per lamp. Runcke withdrew 4,650 lamps from the warehouse during the month. Fifty of these lamps were used to replace the head lamps in autos used by traveling sales staff. The remaining 4,600 lamps were put in autos manufactured during the month.

Of the autos put into production during September 2011, 90% were completed and transferred to the company%u2019s storage lot. Of the cars completed during the month, 75% were sold by September 30.

Determine the amount of cost to appear in various accounts, and indicate in which financial statements these accounts would appear.

Instructions

Runcke Motor Company manufactures automobiles. During September 2011 the company purchased 5,000 head lamps at a cost of $9 per lamp. Runcke withdrew 4,650 lamps from the warehouse during the month. Fifty of these lamps were used to replace the head lamps in autos used by traveling sales staff. The remaining 4,600 lamps were put in autos manufactured during the month. Of the autos put into production during September 2011, 90% were completed and transferred to the company%u2019s storage lot. Of the cars completed during the month, 75% were sold by September 30. Determine the amount of cost to appear in various accounts, and indicate in which financial statements these accounts would appear. 1.Determine the cost of head lamps that would appear in each of the following accounts at September 30, 2011: Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold, and Selling Expenses. Write a short memo to the chief accountant, indicating whether and where each of the accounts in (a) would appear on the income statement or on the balance sheet at September 30, 2011.

Explanation / Answer

E1-17 Runcke Motor Company manufactures automobiles. During September 2011 the company purchased 5,000 head lamps at a cost of $9 per lamp. Runcke withdrew 4,650 lamps from the warehouse during the month. Fifty of these lamps were used to replace the head lamps in autos used by traveling sales staff. The remaining 4,600 lamps were put in autos manufactured during the month.

Of the autos put into production during September 2011, 90% were completed and transferred to the company%u2019s storage lot. Of the cars completed during the month, 75% were sold by September 30.

Instructions

(a)          Determine the cost of head lamps that would appear in each of the following accounts at September 30, 2011: Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold, and Selling Expenses.

Head Lamps Purchased 5,000

Head Lamps removed from Inventory    4,650

Head Lamps remaining in inventory         350

Cost for each head lamp               $ 9.00

Cost in Raw Materials    $3,150.00

               

Lamps used in production            4,600

Autos completed and xferred to finished goods (90%)   4,140

Autos still in WIP on Sept 30            460

Cost for each head lamp               $ 9.00

Cost of WIP        $ 4,140.00

               

Autos Completed & Xferred to finished goods   4,140

Autos Sold in the month (75%) 3,105

Autos still in finished goods         1,035

Cost per lamp head         $   9.00

Cost in finished goods on Sept 30             $ 9,315

               

Autos sold during month              3,105

Cost of each lamp            $ 9.00

COGS for month               $ 27945.00

               

Head lamps for traveling staff    50

Cost for each lamp                          $ 9.00

Selling Expense $ 450.00

(b)          Write a short memo to the chief accountant, indicating whether and where each of the accounts in (a) would appear on the income statement or on the balance sheet at September 30, 2011

To:          Chief Accountant

From:    Todd Schweikert

Subject:               Inventory Accounts

The inventory accounts we have for the month will appear in the following financial statement:

%uF0D8             Raw Material Inventory:                              Balance Sheet

%uF0D8             Work In Process (WIP) Inventory:           Balance Sheet

%uF0D8             Finished Goods Inventory:                         Balance Sheet

%uF0D8             Cost of Goods Sold (COGS):                        Income Statement

%uF0D8             Selling Expense:                                                               Income Statement