Tuscan Manufacturing Company makes a unique headset for use with mobile phones. The company had the...
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Tuscan Manufacturing Company makes a unique headset for use with mobile phones. The company had the following amounts in its accounts at the beginning of Year 2: Cash, $795,000; Raw Materials Inventory, $5,000; Work in Process Inventory, $11,000; Finished Goods Inventory, $39,000; Common Stock, $650,000; and Retained Earnings, $200,000. Tuscan experienced the following accounting events during Year 2. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions. 1. Paid $50,000 of research and development costs to create the headset. 2. Paid $139,000 for raw materials that will be used to make headsets. 3. Placed $141,000 of the raw materials cost into the process of manufacturing headsets. 4. Paid $82,200 for salaries of selling and administrative employees. 5. Paid $224,000 for wages of production workers. 6. Paid $48,000 to purchase furniture used in selling and administrative offices. 7. Recognized depreciation on the office furniture. The furniture was acquired January 1, Year 2. It has an $8,000 salvage value and a four- year useful life. The amount of depreciation is computed as [(cost salvage) + useful life]. Specifically, ($48,000 $8,000) + 4 = $10,000. 8. Paid $65,000 to purchase manufacturing equipment. 9. Recognized depreciation on the manufacturing equipment. The equipment was acquired January 1, Year 2. It has a $5,000 salvage value and a three-year useful life. The amount of depreciation is computed as [(cost salvage) useful life]. Specifically, ($65,000 - $5,000) = 3 = $20,000. 10. Paid $136,000 for rent and utility costs on the manufacturing facility. 11. Paid $41,000 for inventory holding expenses for completed headsets (rental of warehouse space, salaries of warehouse personnel, and other general storage costs). 12. Completed and transferred headsets that had a total cost of $520,000 from work in process inventory to finished goods. 13. Sold headsets for $738,200. 14. It cost Tuscan $517,400 to make the headsets 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 statement model. b. Explain why Tuscan's recognition of cost of goods sold expense had no impact on cash flow. c. Prepare a schedule of costs of goods manufactured and sold, an income statement, and a balance sheet. d. Distinguish between the product costs and the upstream and downstream costs that Tuscan incurred. Tuscan Manufacturing Company makes a unique headset for use with mobile phones. The company had the following amounts in its accounts at the beginning of Year 2: Cash, $795,000; Raw Materials Inventory, $5,000; Work in Process Inventory, $11,000; Finished Goods Inventory, $39,000; Common Stock, $650,000; and Retained Earnings, $200,000. Tuscan experienced the following accounting events during Year 2. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions. 1. Paid $50,000 of research and development costs to create the headset. 2. Paid $139,000 for raw materials that will be used to make headsets. 3. Placed $141,000 of the raw materials cost into the process of manufacturing headsets. 4. Paid $82,200 for salaries of selling and administrative employees. 5. Paid $224,000 for wages of production workers. 6. Paid $48,000 to purchase furniture used in selling and administrative offices. 7. Recognized depreciation on the office furniture. The furniture was acquired January 1, Year 2. It has an $8,000 salvage value and a four- year useful life. The amount of depreciation is computed as [(cost salvage) + useful life]. Specifically, ($48,000 $8,000) + 4 = $10,000. 8. Paid $65,000 to purchase manufacturing equipment. 9. Recognized depreciation on the manufacturing equipment. The equipment was acquired January 1, Year 2. It has a $5,000 salvage value and a three-year useful life. The amount of depreciation is computed as [(cost salvage) useful life]. Specifically, ($65,000 - $5,000) = 3 = $20,000. 10. Paid $136,000 for rent and utility costs on the manufacturing facility. 11. Paid $41,000 for inventory holding expenses for completed headsets (rental of warehouse space, salaries of warehouse personnel, and other general storage costs). 12. Completed and transferred headsets that had a total cost of $520,000 from work in process inventory to finished goods. 13. Sold headsets for $738,200. 14. It cost Tuscan $517,400 to make the headsets 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 statement model. b. Explain why Tuscan's recognition of cost of goods sold expense had no impact on cash flow. c. Prepare a schedule of costs of goods manufactured and sold, an income statement, and a balance sheet. d. Distinguish between the product costs and the upstream and downstream costs that Tuscan incurred.
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a Show how these events affect the balance sheet income statement and statement of cash flows by recording them in a horizontal financial statement mo... View the full answer
Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
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