Financial statements of a manufacturing firm

Question

The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:

DATA
Materials purchased $229,000
Direct materials used in production 164,880
Direct labor wages 412,200
Factory overhead 164,900
Work in process transferred to finished goods 696,200
Sales revenue 1,099,200
Cost of goods sold 618,300
Selling expense 196,900
Administrative expense 114,500

REQUIRED:
a. Prepare the January income statement for Sorensen Manufacturing Company.
"Type in the item descriptions and use formulas and cell references from the problem data to enter amounts.
Formulas entered in the green cells show in the orange cells. Transfer amounts to CNOWv2 for grading."

Sorensen Manufacturing Company
Income Statement
For the Month Ended January 31 Formulas



Operating expenses:


Total operating expenses


REQUIRED:
Determine the inventory balances at the end of the first month of operations.

Sorensen Manufacturing Company
Inventory Balances
For the Month Ended January 31
Inventory balances on January 31: Formulas
Materials
Work in process
Finished goods

Answer 1

To create the income statement and calculate the inventory balances for Sorensen Manufacturing Company, we'll break the requirements down into two parts: preparation of the income statement and calculation of the inventory balances.

Sorensen Manufacturing Company

Income Statement

For the Month Ended January 31

| Item Description | Amount | Formulas | |----------------------------------------|---------------|--------------------------| | Sales Revenue | $1,099,200 | = 1,099,200 | | Cost of Goods Sold | $(618,300) | = 618,300 | | Gross Profit | $480,900 | = Sales Revenue - COGS | | Operating Expenses: | | | | Selling Expense | $(196,900) | = 196,900 | | Administrative Expense | $(114,500) | = 114,500 | | Total Operating Expenses | $(311,400) | = Selling Expense + Administrative Expense | | Net Income | $169,500 | = Gross Profit - Total Operating Expenses |

Calculation of Inventory Balances

Sorensen Manufacturing Company

Inventory Balances

For the Month Ended January 31

1. Materials Inventory:

   • Beginning Inventory: $0 (since it’s the first month of operation)
   • Purchases: $229,000
   • Direct Materials Used: $(164,880)
   • Ending Materials Inventory:
     • $0 + $229,000 - $164,880 = $64,120

2. Work in Process Inventory:

   • Beginning Inventory: $0 (first month)
   • Total Costs in WIP:
     • Direct Materials Used: $164,880
     • Direct Labor: $412,200
     • Factory Overhead: $164,900
   • Total WIP Cost: = $164,880 + $412,200 + $164,900 = $742,980
   • Transferred to Finished Goods: $(696,200)
   • Ending WIP Inventory:
     • = Total WIP Cost - Transferred to Finished Goods
     • = $742,980 - $696,200 = $46,780

3. Finished Goods Inventory:

   • Beginning Inventory: $0 (first month)
   • Transferred to Finished Goods: $696,200
   • Cost of Goods Sold: $(618,300)
   • Ending Finished Goods Inventory:
     • = Transferred to Finished Goods - Cost of Goods Sold
     • = $696,200 - $618,300 = $77,900

| Inventory Balances | Amount | Formulas | |----------------------------------------|---------------|--------------------------| | Materials | $64,120 | = 229,000 - 164,880 | | Work in Process | $46,780 | = 742,980 - 696,200 | | Finished Goods | $77,900 | = 696,200 - 618,300 |

Summary of Results

• Net Income: $169,500
• Ending Materials Inventory: $64,120
• Ending Work in Process Inventory: $46,780
• Ending Finished Goods Inventory: $77,900

By following the formulas and calculations above, you can establish the income statement and inventory balances for Sorensen Manufacturing Company based on the data provided. Be sure to replace the amounts in the "Formulas" column with cell references corresponding to your worksheet.