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Financial Statements of a Manufacturing Firm The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors: A. Purchased $68,500 of materials. B. Used $52,700 of direct materials in production. C. Incurred $78,800 of direct labor wages. D. Incurred $111,000 of factory overhead. E. Transferred $184,300 of work in process to finished goods. F. Sold goods for $329,500. G. Sold goods with a cost of $146,600. H. Incurred $84,300 of selling expense. I. Incurred $37,000 of administrative expense. Using the information given, complete the following: A. Prepare the January income statement for Sorensen Manufacturing Company.B. Determine the inventory balances at the end of the first month of operations.

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Answer:

A.  income statement for Sorensen Manufacturing Company

Sales                                                                            $329,500

Less Cost of Sales

Opening Finished Goods Inventory         $0

Cost of Goods Manufactured              $184,300

Less Finished Goods Inventory           ($37,700)      $146,600

Gross Profit                                                                  $182,900

Less Expenses

selling expense                                                           ($84,300)

administrative expense                                               ($37,000)

Net Income or Loss                                                       $61,600

B. inventory balances at the end of the first month of operations.

Raw Materials Inventory =     $15,800

Work In Process Inventory  = $58,200

Finished Goods Inventory  =  $37,700

Explanation:

Raw Materials Inventory Calculation :

Open a Raw Materials T - Account

Debit :

Opening Balance                                         $0

Purchases                                                $68,500

Totals                                                       $68,500

Credit:

Used in Production                                 $52,700

Closing Balance (Balancing figure)        $15,800

Totals                                                       $68,500

Work In Process Inventory Calculation :

Make a Schedule of Manufacturing Cost

Raw Materials                                        $52,700

direct labor wages                                 $78,800

factory overhead                                   $111,000

Total cost of Manufacture                   $242,500

Less Transfer to Finished Goods      ( $184,300)

Work In Process Inventory                    $58,200

Finished Goods Inventory Calculation :

Transfer to Finished Goods                 $184,300

Less Cost of Sales                               ($146,600)

Finished Goods Inventory                      $37,700

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