Keystone Manufacturing Company started operations on January 1, 2019. During 201
ID: 2527668 • Letter: K
Question
Keystone Manufacturing Company started operations on January 1, 2019. During 2019, the company engaged in the following transactions:
Issued common stock for $40,000.
Paid $10,000 cash to purchase raw materials used to make products.
Transferred $9,000 of raw materials to the production department.
Paid $12,000 cash for labor used to make products.
Paid $18,000 cash for overhead costs (assume actual and estimated overhead are the same).
Finished work on products that cost $35,000 to make.
Sold products that cost $31,500 to make for $42,500 cash.
Required
Prepare the December 31, 2019, balance sheet.
Prepare the December 31, 2019, income statement.
Explanation / Answer
Solution:
Total cost incurred in production = Direct material used + Direct labor + Overhead
= $9,000 + $12,000 + $18,000 = $39,000
Cost of finished goods produced = $35,000
Cost of ending WIP = $39,000 - $35,000 = $4,000
Cost fo goods sold = $31,500
Cost of ending inventory = $35,000 - $31,500 = $3,500
Cost of ending raw material inventory = $10,000 - $9,000 = $1,000
Cash Account Particulars Debit Particulars Credit To common stock $40,000.00 By Raw Material $10,000.00 To Sales Revenue $42,000.00 By labor $12,000.00 By overhead $18,000.00 By balance C/f $42,000.00 Total $82,000.00 Total $82,000.00Related Questions
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