Survey Of Accounting
Survey Of Accounting
4th Edition
ISBN: 9780077862374
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 19P

a.

To determine

Compute the total product cost and average cost per unit.

a.

Expert Solution
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Explanation of Solution

Product cost:

It is the cost incurred by the company during the process of manufacturing the product.

Given information:

  • • The raw material is $26,000.
  • • The wages for production workers are $21,000.
  • • Manufacturing equipment is $49,000, its salvage value is $4,000, and an expected life is 6 years.
  • • The completed production of Company I is 8,000 units.

Calculation of total product cost for the year 2014 is as follows:

ParticularsAmount $
Direct materials$26,000
Direct labor21,000
Manufacturing overhead (1)9,000
Total product cost56,000

Table (1)

Hence, the total cost of the product for the year 2014 is $56,000.

Calculation of average cost per unit for the year 2014 is as follows:

Average cost per unit=Total cost of the productCompleted production units=$56,0008,000 units=$7.00

Hence, the average cost per unit for the year 2014 is $7.00.

Working note (1):

Calculate the  manufacturing overheads.

Manufacturing overheads=(Manufacturing equipmentsSalvage value)Number of years =($49,000$4,000)5=$45,0005=$9,000

Hence, the manufacturing overheads are $9,000.

b.

To determine

Compute the cost of goods sold that appears in 2014 income statement.

b.

Expert Solution
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Explanation of Solution

Cost of goods sold

The cost of goods sold is the accumulation of all the direct costs incurred in the process of producing a product. It excludes the indirect expenses.

Given information:

  • • The total number of units sold by Company I is 7,200 units.

The calculation of total cost of goods sold for the year 2014 is as follows:

Total cost of goods sold=Average cost per unit×Sold units=$7×7,200 units=$50,400

Hence, the total cost of goods sold is $50,400.

c.

To determine

Compute the cost of ending inventory that appears on 31st December 2014 balance sheet.

c.

Expert Solution
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Explanation of Solution

Inventory:

It is the term for products that are ready for sale and raw materials that are used in the making of the final product.

Given information:

  • • The total number of units sold by Company I is 7,200 units.
  • • The completed production of Company I is 8,000 units.

The calculation of ending inventory for the year 2014 is as follows:

Ending inventory=Average cost per unit×(Completed production unitsSold units)=$7×(8,000 units7,200 units)=$7×(800 units)=$5,600

Hence, the ending inventory for the year 2014 is $5,600.

d.

To determine

Compute the total amount of net income for the year 2014.

d.

Expert Solution
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Explanation of Solution

Financial statement:

The financial statement which reports the revenues and expenses from business operations and the result of those operations as the net income or net loss for a particular time period is referred to as an income statement.

The calculation of net income of Company I for the year 2014 is as follows:

Survey Of Accounting, Chapter 10, Problem 19P , additional homework tip  1

Table (2)

Hence, the net income of the Company for the year 2014 is $42,600.

Working note (2):

The calculation of depreciation value for furniture:

Depreciation value for furniture=Furniture costNumber of useful life=$21,0007=$3,000

Working note (3):

The calculation of depreciation value for manufacturing equipment’s:

Depreciation value for manufacturing equipments=(manufacturing equipmentsSalvage value)Number of useful life=$49,000$4,0005=$45,0006=$9,000

Working note (4):

The calculation of total units sold at the rate of $9 per unit.

Total units sold=Number of units sold×Per unit cost=$7,200 units×$15=$108,000

Working note (5):

The calculation of total inventory at the average cost per unit.

Total inventory cost=Number of units sold×Average cost per unit=$7,200 units×$7=$50,400

e.

To determine

Compute the total amount of retained earnings for the year 2014.

e.

Expert Solution
Check Mark

Explanation of Solution

Financial statement:

The financial statement which reports the revenues and expenses from the business operations and the result of those operations as net income or net loss for a particular time period is referred to as an income statement.

The calculation of retained earnings of the Company I for the year 2014 is as follows:

Survey Of Accounting, Chapter 10, Problem 19P , additional homework tip  2

Table (3)

Hence, the retained earnings of the Company for the year 2014 are $42,600.

f.

To determine

Compute the total assets that appear on the balance sheet.

f.

Expert Solution
Check Mark

Explanation of Solution

Financial statement:

The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as an income statement.

The table showing calculation of assets:

Event No.Assets
Cash+Investment+Office Furniture+Manufacturing Equipment
 
178,000+++
2a(21,000)++21,000+
2b (2)++(3,000)+
3a(49,000)+++49,000
3b (3)+9,000++(9,000)
4(12,000)+++
5(21,000)+21,000++
6(26,000)+26,000++
7a (4)108,000+++
7b (5)+(50,400)++
Total57,000+5,600+18,000+40,000

Table (4)

The calculation of total assets is as follows:

Total assets=Total cash+Total inventory+Total furniture+Total equipments=$57,000+$5,600+$18,000+$40,000=$120,600

Hence, the total amount of assets of the Company for the year 2014 is $120,600.

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Chapter 10 Solutions

Survey Of Accounting

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