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.

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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