Pls answer. Very long question. Very appreciated. Jamie Dolan, the owner of Dola
ID: 2469628 • Letter: P
Question
Pls answer. Very long question. Very appreciated.
Jamie Dolan, the owner of Dolan Cabinets, is reviewing the financial information for the year 2014. His business involves buying large boards of oak wood (all the same size and type), and using them to build bookcases and other cabinets. Ashley Cunningham, Jamie's accountant and office assistant, was Jamie's only employee as of January 1, 2014. He hired Sylvia Gardner, a manual labourer, to help with the cabinet-making process on July 1, 2014. The following in a copy of Dolan Cabinets' balance sheet as at December 31, 2013 Dolan Cabinets Balance Sheet December 31, 2013 Assets Cash Accounts Receivable Raw Materials Work in Progress Finished Goods Manufacturing Equipment Office Equipment Total assets $15,000 0 0 0 $3,000 $20,000 $2,000 $40,000 Liabilities Wages Payable Bank Debt Total liabilites $0 $20,000 $20,000 Owner's Equity Capital stock Retained earnings Total OE Total liabilites &OE; $20,000 0 $20,000 $40,000 Purchased for $25000 on January 1, 2012. Straight line depreciation, salvage value of $5000, 8 year useful life **Purchased for $2000 on December 30, 2013. Straight line depreciation, salvage value of $400, 4 year useful lifeExplanation / Answer
Answer to part a:
Calculation of value of raw materials inventory left on hand:
Raw materials: Oak Boards
Number of boards of wood left on hand = 40
Based on FIFO, 30 Oak Boards purchased on Sep 30 2014 and 10 Oak Boards purchased on June 20 2014 are considered to be on hand.
Value of 30 boards purchased on Sep 30 2014 = $800
Value of 10 boards purchased on June 20 2014 = $1800 / 80 * 10 = $225
Value of raw materials on hand = $800 + $225 = $1025
Answer to part b:
Calculation of cost of goods sold:
Data:
Opening balances of inventory:
Raw material = nil
Work in progress = nil
Finished goods = $3000
Opening Inventory = $3000
Purchases:
Raw materials = $1400 + $1800 + $800 = $4000
Wages = $25400 + $13000 = $38400
Rents & utilities used for manufacturing = 75% (48000) = $36000
Closing balances of inventory:
Raw material = $1025
Work in progress = nil
Finished goods = $1000
Closing Inventory = $1025 + $1000 = $2025
Cost of Goods Sold = Opening Inventory + Purchases + Wages + Rent -Closing Inventory
= $3000 + $4000 + $38400 + 36000 - $2025
= $79375
Answer to part c:
Cash T-account:
Cash a/c
Particulars
Amount
Particulars
Amount
To Balance b/d
15000
By Purchases
4000
To Sales
200000
By Wages
38400
By Rent & utilities
48000
By Interest on bank debt
1200
By payment to reduce debt capital
2000
By General Office Expense
1000
By Balance c/d
120400
215000
215000
Answer to part d:
Income statement:
Income statement
Particulars
Amount
Particulars
Amount
To Opening Inventory
3000
By Sales
200500
To Purchases
4000
By Closing Inventory
2025
To Wages
38400
To Rent & utilities (manufacturing)
36000
To Gross Profit
121125
202525
202525
To Rent & utilities (office space)
12000
By Gross Profit
121125
To Interest on bank debt
1200
To payment to reduce debt principal
2000
To General Office Expense
1000
To depreciation on manufacturing equipment
2500
To depreciation on Office Equipment
400
To Net Profit
102025
121125
121125
Depreciation on manufacturing equipment
Purchase cost
$25000
Salvage value
$5000
Useful life
8 years
Depreciation on manufacturing equipment
$2500
[(25000 - 5000) / 8]
Depreciation on Office Equipment
Purchase cost
$2000
Salvage value
$400
Useful life
4 years
Depreciation on Office Equipment
$400
[(2000 - 400) / 4]
Answer to part e:
Balance Sheet
Liabilities
Amount
Assets
Amount
Wages payable
0
Cash
120400
Bank Debt (20000-2000)
18000
Accounts Receivable
500
Raw materials
1025
Owner's Equity
Work in progress
0
Capital Stock
20000
Finished Goods
1000
Retained Earnings
104025
Manufacturing Equipment (20000 - 2500)
17500
Office Equipment (2000-400)
1600
142025
142025
Cash a/c
Particulars
Amount
Particulars
Amount
To Balance b/d
15000
By Purchases
4000
To Sales
200000
By Wages
38400
By Rent & utilities
48000
By Interest on bank debt
1200
By payment to reduce debt capital
2000
By General Office Expense
1000
By Balance c/d
120400
215000
215000