Zachary Modems, Inc. acquired a subsidiary named Anywhere, Inc. (AI). AI manufac
ID: 2581047 • Letter: Z
Question
Zachary Modems, Inc. acquired a subsidiary named Anywhere, Inc. (AI). AI manufactures a wireless modem that enables users to access the Internet through cell phones. The following trial balance was drawn from the accounts of the subsidiary:
The subsidiary completed the following transactions during 2017:
1. Paid $55,380 cash for direct raw materials.
2. Transferred $46,160 of direct raw materials to work in process.
3. Paid production employees $73,860 cash.
4. Applied $48,910 of manufacturing overhead costs to work in process.
5. Completed work on products that cost $150,410.
6. Sold products that cost $131,950 for $167,950 cash. Record the recognition of revenue in a row labeled 6a and the cost of goods sold in a row labeled 6b.
7. Paid $18,450 cash for selling and administrative expenses.
8. Actual overhead costs paid in cash amounted to $50,710.
9. Closed the Manufacturing Overhead account. The amount of over- or underapplied overhead was insignificant (immaterial).
10. Made a $4,580 cash distribution to the owners.
REQUIRED
A1. Prepare an Income Statement.
A2. Prepare a Balance Sheet.
Cash $ 184,600 Raw materials inventory 3,680 Work in process inventory 5,530 Finished goods inventory 6,450 Common stock $ 119,060 Retained earnings 81,200 Totals $ 200,260 $ 200,260Explanation / Answer
1 Raw material inventory 55380 Cash 55380 2 Work in progress inventory 46160 Raw material inventory 46160 3 Work in progress inventory 73860 Cash 73860 4 Work in progress inventory 48910 Manufacturing overheads 48910 5 Finished goods inventory 150410 Work in progress inventory 150410 6a Cash 167950 Sales revenue 167950 6b Cost of goods sold 131950 Finished goods inventory 131950 7 Selling and admin expense 18450 Cash 18450 8 Manufacturing overheads 50710 Cash 50710 9 Cost of goods sold 1800 Manufacturing overheads 1800 10 Dividend 4580 Cash 4580 Income statement Sales revenue 167950 Cost of goods sold 133750 (131950+1800) Gross profit 34200 Selling and admin expense 18450 Net income 15750 Balance sheet Cash 149570 Finished goods inventory 24910 Raw material inventory 12900 Work in progress inventory 24050 Total assets 211430 Shareholders equity Common stock 119060 Retained earnings 92370 Total stockholders equity 211430
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