Wang Company began operations on January 1, 2018, by issuing common stock for $70,000 cash. During 2018, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments.
Prepare a GAAP-based income statement and balance sheet for Wang Company for 2018, for the below scenario:
Wang is a manufacturing company. The $65,000 was paid to purchase the following items:
(1) Paid $10,000 cash to purchase materials that were used to make products during the year.
(2) Paid $20,000 cash for wages of factory workers who made products during the year.
(3) Paid $5,000 cash for salaries of sales and administrative employees.
(4) Paid $30,000 cash to purchase manufacturing equipment. The equipment was used solely to make products. It had a three-year life and a $6,000 salvage value. The company uses straight-line depreciation.
(5) During 2018, Wang started and completed 2,000 units of product. The revenue was earned when Wang sold 1,500 units of product to its customers.
I am unable to determine the COGS on the Income Statement and the Finished Goods Inventory on the Balance Sheet. All the other answers are showing correct. Below is what I have worked out. Please help me determine what I did wrong.
⢠Depreciation: 30000-6000=24000/3 = 8000 a year (overhead)
⢠Product Cost: 10000 materials + 2000 labor + 8000 overhead = 20000
⢠Cost per a unit: 20000/2000 units = 10.00 ⢠Sold units: 1500 * 10.00 = 15000
⢠Unsold units: 500 * 10.00 = 5000
Income Staement Sales
Revenue 88,000
COGS I tried: -15,000 , 15000, 20000
Gross Margin
Administrative 5000
Total
Balance Sheet
ASSETS
Cash 93,000
Finished Goods Inventory I tried: 15,000 & 18,000
Manufacturing Equipment 30,000
Accumulated Depreciations (8,000)
Total Assets
EQUITY
Common Stock 70,000
Retained Earnings
Total Equity
Wang Company began operations on January 1, 2018, by issuing common stock for $70,000 cash. During 2018, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments.
Prepare a GAAP-based income statement and balance sheet for Wang Company for 2018, for the below scenario:
Wang is a manufacturing company. The $65,000 was paid to purchase the following items:
(1) Paid $10,000 cash to purchase materials that were used to make products during the year.
(2) Paid $20,000 cash for wages of factory workers who made products during the year.
(3) Paid $5,000 cash for salaries of sales and administrative employees.
(4) Paid $30,000 cash to purchase manufacturing equipment. The equipment was used solely to make products. It had a three-year life and a $6,000 salvage value. The company uses straight-line depreciation.
(5) During 2018, Wang started and completed 2,000 units of product. The revenue was earned when Wang sold 1,500 units of product to its customers.
I am unable to determine the COGS on the Income Statement and the Finished Goods Inventory on the Balance Sheet. All the other answers are showing correct. Below is what I have worked out. Please help me determine what I did wrong.
⢠Depreciation: 30000-6000=24000/3 = 8000 a year (overhead)
⢠Product Cost: 10000 materials + 2000 labor + 8000 overhead = 20000
⢠Cost per a unit: 20000/2000 units = 10.00 ⢠Sold units: 1500 * 10.00 = 15000
⢠Unsold units: 500 * 10.00 = 5000
Income Staement Sales
Revenue 88,000
COGS I tried: -15,000 , 15000, 20000
Gross Margin
Administrative 5000
Total
Balance Sheet
ASSETS
Cash 93,000
Finished Goods Inventory I tried: 15,000 & 18,000
Manufacturing Equipment 30,000
Accumulated Depreciations (8,000)
Total Assets
EQUITY
Common Stock 70,000
Retained Earnings
Total Equity
Related questions
Near the end of 2013, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013.
| DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2013 | |||||
| Assets | |||||
| Cash | $ | 36,000 | |||
| Accounts receivable | 520,000 | ||||
| Inventory | 105,000 | ||||
| Total current assets | 661,000 | ||||
| Equipment | $ | 539,000 | |||
| Less accumulated depreciation | 67,375 | ||||
| Equipment, net | 471,625 | ||||
| Total assets | $ | 1,132,625 | |||
| Liabilities and Equity | |||||
| Accounts payable | $ | 370,000 | |||
| Bank loan payable | 15,000 | ||||
| Taxes payable (due 3/15/2014) | 89,000 | ||||
| Total liabilities | $ | 474,000 | |||
| Common stock | 473,000 | ||||
| Retained earnings | 185,625 | ||||
| Total stockholdersâ equity | 658,625 | ||||
| Total liabilities and equity | $ | 1,132,625 | |||
| To prepare a master budget for January, February, and March of 2014, management gathers the following information. |
| a. | Dimsdale Sportsâ single product is purchased for $20 per unit and resold for $55 per unit. The expected inventory level of 5,250 units on December 31, 2013, is more than managementâs desired level for 2014, which is 20% of the next monthâs expected sales (in units). Expected sales are: January, 6,500 units; February, 9,100 units; March, 11,250 units; and April, 9,500 units. |
| b. | Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 57% is collected in the first month after the month of sale and 43% in the second month after the month of sale. For the December 31, 2013, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 is collected in February. |
| c. | Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2013, accounts payable balance, $80,000 is paid in January and the remaining $290,000 is paid in February. |
| d. | Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $90,000 per year. |
| e. | General and administrative salaries are $156,000 per year. Maintenance expense equals $2,000 per month and is paid in cash. |
| f. | Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $35,000; February, $97,000; and March, $29,000. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full monthâs depreciation is taken for the month in which equipment is purchased. |
| g. | The company plans to acquire land at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month. |
| h. | Dimsdale Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $8,350 in each month. |
| i. | The income tax rate for the company is 43%. Income taxes on the first quarterâs income will not be paid until April 15. |
| Required: | ||||||
| Prepare a master budget for each of the first three months of 2014; include component budgets for the following areas:
|
Excel Online Structured Activity: Statement of cash flows
You have just been hired as a financial analyst for BarringtonIndustries. Unfortunately, company headquarters (where all of thefirm's records are kept) has been destroyed by fire. So, your firstjob will be to recreate the firm's cash flow statement for the yearjust ended. The firm had $100,000 in the bank at the end of theprior year, and its working capital accounts except cash remainedconstant during the year. It earned $5 million in net income duringthe year but paid $700,000 in dividends to common shareholders.Throughout the year, the firm purchased $5.4 million of machinerythat was needed for a new project. You have just spoken to thefirm's accountants and learned that annual depreciation expense forthe year is $450,000; however, the purchase price for the machineryrepresents additions to property, plant, and equipment beforedepreciation. Finally, you have determined that the only financingdone by the firm was to issue long-term debt of $1 million at a 7%interest rate. The data has been collected in the Microsoft ExcelOnline file below. Open the spreadsheet and perform the requiredanalysis to answer the question below.
| Statement of cash flows | |||
| Cash at the Beginning of Year | $100,000.00 | ||
| Change in Net Operating Working Capital Except Cash | $0.00 | ||
| Net Income | $5,000,000.00 | ||
| Common Dividends | $700,000.00 | ||
| Machinery Equipment Purchases | $5,400,000.00 | ||
| Depreciation Expense | $450,000.00 | ||
| Long-Term Debt | $1,000,000.00 | ||
| Interest Rate on Long-Term Debt | 7.00% | ||
| Statement of Cash Flows | |||
| I. Operating Activities | Formulas | ||
| Net income | #N/A | ||
| Depreciation expense | #N/A | ||
| Change in net operating working capital exceptcash | $0.00 | ||
| Net cash provided by (used in) operations | #N/A | ||
| II. Long-Term Investing Activities | |||
| Additions to property, plant and equipment | #N/A | ||
| Net cash used in investing activities | #N/A | ||
| III. Financing Activities | |||
| Increase in long-term debt | #N/A | ||
| Payment of common dividends | #N/A | ||
| Net cash provided by financing activities | #N/A | ||
| IV. Summary | |||
| Net increase (decrease) in cash | #N/A | ||
| Cash at beginning of year | $100,000.00 | ||
| Cash at end of year | #N/A |
What was the firm's end-of-year cash balance? Recreate thefirm's cash flow statement to arrive at your answer. Write out youranswer completely. For example, 5 million should be entered as5,000,000. Round your answer to the nearest dollar, ifnecessary.
