Antioch Company makes eBook readers. The company had the following amounts at the beginning of Year 2: Cash, $671,000; Raw Materials Inventory, $69,000; Work in Process Inventory, $27,000; Finished Goods Inventory, $51,000; Common Stock, $599,000; and Retained Earnings, $219,000. Antioch experienced the following accounting events during Year 2. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions. Paid $24,000 of research and development costs. Paid $58,000 for raw materials that will be used to make eBook readers. Placed $96,000 of the raw materials cost into the process of manufacturing eBook readers. Paid $74,000 for salaries of selling and administrative employees. Paid $107,000 for wages of production workers. Paid $135,000 to purchase equipment used in selling and administrative offices. Recognized depreciation on the office equipment. The equipment was acquired on January 1, Year 2. It has a $15,000 salvage value and a six-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($135,000 – $15,000) ÷ 6 = $20,000. Paid $157,000 to purchase manufacturing equipment. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, Year 2. It has a $29,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($157,000 – $29,000) ÷ 8 = $16,000. Paid $61,000 for rent and utility costs on the manufacturing facility. Paid $72,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost). Completed and transferred eBook readers that had total cost of $248,000 from work in process inventory to finished goods. Sold 980 eBook readers for $425,000. It cost Antioch $215,600 to make the eBook readers sold in Event 13. Required: a. Show how these events affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model. c-1. Prepare a schedule of cost of goods manufactured and sold for the year. c-2. Prepare a formal income statement for the year. c-3. Prepare a balance sheet for the year.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Antioch Company makes eBook readers. The company had the following amounts at the beginning of Year 2: Cash, $671,000; Raw Materials Inventory, $69,000; Work in Process Inventory, $27,000; Finished Goods Inventory, $51,000; Common Stock, $599,000; and
- Paid $24,000 of research and development costs.
- Paid $58,000 for raw materials that will be used to make eBook readers.
- Placed $96,000 of the raw materials cost into the process of manufacturing eBook readers.
- Paid $74,000 for salaries of selling and administrative employees.
- Paid $107,000 for wages of production workers.
- Paid $135,000 to purchase equipment used in selling and administrative offices.
- Recognized depreciation on the office equipment. The equipment was acquired on January 1, Year 2. It has a $15,000 salvage value and a six-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($135,000 – $15,000) ÷ 6 = $20,000.
- Paid $157,000 to purchase manufacturing equipment.
- Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, Year 2. It has a $29,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($157,000 – $29,000) ÷ 8 = $16,000.
- Paid $61,000 for rent and utility costs on the manufacturing facility.
- Paid $72,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).
- Completed and transferred eBook readers that had total cost of $248,000 from work in process inventory to finished goods.
- Sold 980 eBook readers for $425,000.
- It cost Antioch $215,600 to make the eBook readers sold in Event 13.
Required:
a. Show how these events affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model.
c-1. Prepare a schedule of cost of goods manufactured and sold for the year.
c-2. Prepare a formal income statement for the year.
c-3. Prepare a balance sheet for the year.
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