Financial Statements of a Manufacturing Firm The following events took place for

Question

Financial Statements of a Manufacturing Firm

The following events took place for Air Temp Manufacturing Company during January, the first month of its operations as a producer of digital thermometers:

Purchased $47,300 of materials.

Used $36,400 of direct materials in production.

Incurred $54,400 of direct labor wages.

Incurred $76,600 of factory overhead.

Transferred $127,200 of work in process to finished goods.

Sold goods with a cost of $101,200.

Earned revenues of $227,500.

Incurred $58,200 of selling expense.

Incurred $25,500 of administrative expense.

b. Determine the inventory balances at the end of the first month of operations. (Show the transactions in T accounts for materials, work in process, and finished goods.)

Air Temp Manufacturing Company---Inventory Balances

Materials=

Work in process=

Finished goods=

Explanation / Answer

a)

Income Statement
LAE Manufacturing Company
For Month Ended March 31

Revenue: $227,500
Cost of Goods Sold: 101,200
Gross Profit: 127,200
LESS Selling Expenses: 58,200
LESS Admin Expenses: 25,500
Net Income: $43,500

(b)
Materials Inventory is $10,900 (47,300-36,400)
Beginning Materials + Purchased Materials - used materials = ending materials inventory

Work in Progress Inventory is $40,200 (36,400+54,400+76,600) - 127,200
Beginning WIP Inventory + Cost of Goods Manufactured - WIP Inventory transferred out = Ending WIP inventory

Finished Goods Inventory is $26,000 (127,200-101,200)
Beginning Finished Goods Inventory + WIP Inventory transferred in - Cost of Goods Sold = Finished Goods Inventory.

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