Problem 121A Effect of product versus period costs on financ

Problem 1-21A Effect of product versus period costs on financial statements LO 1-2, 1-3 Rundle Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared in accordance with GAAP. 1. Acquired $50,000 cash by issuing common stock. 2. Paid $7100 for the materials used to make its products, all of which were started and completed during the year 3. Paid salaries of $4,100 to selling and administrative employees 4. Paid wages of $6,200 to production workers. 5. Paid $3,800 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,800 estimated salvage value and a two-year useful life. 6. Paid $7,600 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,200 estimated salvage value and a two-year useful life. 7. Sold inventory to customers for $26,300 that had cost $13,800 to make. Required How these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter decreases to account balances with a minus sign.)

Solution

Cash Inventory Manuf. Equip. Office furn. Common stock Ret ear. Rev. Exp. Net inc. 1 50000 50000 2 -7100 7100 3 -4100 -4100 4100 -4100 4 -6200 6200 5a -3800 3800 5b -1000 -1000 1000 -1000 6a -7600 7600 6b 3200 -3200 7a 26300 26300 26300 26300 7b -13800 -13800 13800 -13800