Question

The Devon Motor Company produces automobiles. On April 1, the company had no beginning inventories, and it purchased 8,000 batteries at a cost of $80 per battery. It withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars used by the company’s traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30.

Required:
1. and 2. Determine the cost of batteries appearing in each of the following accounts on April 30 and select whether each of the accounts would appear on the balance sheet or on the income statement.

Answer 1

Account:
Raw Materials -- missing
Works in Progress; balance sheet is correct, $0 is not correct
Finished Goods, balance sheet is correct, $180,000 is not correct
Cost of Goods Sold
Selling Expense : Cost, 8000, income statement (this is correct)

Answer 2

To determine the cost of batteries appearing in each account and their classification on the balance sheet or income statement, we will break down the calculations step by step:

### Information Breakdown:
- **Batteries Purchased**: 8,000 batteries at $80 each
Total Cost = 8,000 * $80 = $640,000

- **Batteries Withdrawn**: 7,600 batteries
- **Used for Sales Staff Cars**: 100 batteries (not part of production)
- **Used in Production**: 7,500 batteries

### Calculation of Batteries in Production:
- **Total Batteries for Production**: 7,500 batteries
- **Total Cars Produced**: Since 90% of the production is completed from the work in process, we can denote the total cars produced as \( X \).
Completed Cars = \( 0.90X \)
- **Batteries Used in Completed Cars**: Let’s assume each completed car uses 1 battery for simplification (the problem does not specify how many batteries each car uses).
Thus,
- Completed Cars = \( 0.90X = 7,500 \) (for the sake of simplicity, we'll assume 1 battery per car)

This leads to:
\( X = \frac{7,500}{0.90} = 8,333.33 \) (Assuming integer values are used, we would round this down to 8,333 for calculations)

### Finished and Unsold Cars
- **Total Cars Completed**: \( 7,500 \)
- **Unsold Cars**: 30% of completed cars were unsold.

Unsold Cars = \( 7,500 \times 0.30 = 2,250 \)
Sold Cars = \( 7,500 - 2,250 = 5,250 \)

### Cost Distribution
1. **Cost of Batteries in Finished Goods Inventory** (for unsold cars):
Since the total cost for batteries used in completed cars is:
- Total batteries for completed cars: 7,500
- Total cost = \( 7,500 \text{ batteries} \times $80 = \$600,000 \)

Now, since \( 2,250 \) cars are unsold:
Cost of Batteries in Finished Goods =
\( \frac{2,250}{7,500} = 0.30 \) (portion of unsold) \( \times 600,000 = \$180,000 \)

2. **Cost of Batteries in Work in Process**:
- Since all batteries used in production of cars were completely accounted for, **there will be no batteries remaining in work in process at the end** of April.
Cost of Batteries in Work in Process = $0

3. **Cost of Batteries Used for Sales Staff Cars**:
The cost for sales staff cars is:
- 100 batteries at $80 = $8,000. This will be treated as an expense.

### Summary
- **Finished Goods Inventory (Balance Sheet)**: $180,000
- **Work in Process Inventory (Balance Sheet)**: $0
- **Expense (Sales Staff Cars) (Income Statement)**: $8,000

### Final Categorization
- **Finished Goods Inventory**: **Balance Sheet** ($180,000)
- **Work in Process Inventory**: **Balance Sheet** ($0)
- **Cost of Batteries Used for Sales Staff**: **Income Statement** ($8,000)

This clarifies the distribution of the battery costs across the relevant accounts and their classification.