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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Financial statements of a manufacturing firm

The following events took place for Digital Vibe Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:

a. Purchased $168,500 of materials.

b. Used $149,250 of direct materials in production.

c. Incurred $360,000 of direct labor wages.

d. Incurred $120,000 of factory overhead.

e. Transferred $600,000 of work in process to finished goods.

f. Sold goods for $875,000.

g. Sold goods with a cost of $525,000.

h. Incurred $125,000 of selling expense.

i. Incurred $80,000 of administrative expense.

Using the information given, complete the following:

a. Prepare the January income statement for Digital Vibe Manufacturing Company.

b. Determine the Materials Inventory, Work in Process Inventory, and Finished Goods Inventory balances at the end of the first month of operations.

(a)

To determine

Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

Material Inventory:

Material inventory comprises of the direct material costs, and indirect material costs that have not entered into the process of manufacturing.

Work in process Inventory:

Work in process inventory comprises of the direct material costs, direct labor costs, and factory overhead costs that have entered into the process of manufacturing, but are not yet completed.

Finished goods Inventory:

Finished goods inventory comprises of the finished products that are completed manufacturing, but have not been sold.

To prepare: The January income statement for the Company DVM.

Explanation

Prepare the January income statement for the Company DVM.

Company DVM
Income Statement
For the month ended January 31
Revenues $875,000
Cost of goods sold 525,000
Gross Profit $350,000
Less: Operati...

(b)

To determine
The materials inventory, work in process inventory, and finished goods inventory balances at the end of the first month of operations.

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