Answer:
Fanning Company
A) Total amount of assets and total amount of expense & names of expenses in Financial Statements, assuming Fanning used labor and materials to make 1,500 chairs and sold 1,200:
i) Total Assets =
Cash = beginning cash balance less expenses plus revenue = $(135,000 - 101,250 - 31,050 + 105,840) = $108,540
Inventory $(132,300 - 105,840) = $36,460
Total = $135,000
ii) Names and Total Amount of Expenses on Income Statement:
a) Manufacturing Wages = $101.250
b) Direct Materials = $31,050
Total Production Costs = $132,300
Less Cost of Sales (1,200 x ($132,300/1,500)) = $105,840
Closing Inventory ((1,500 - 1,200) x ($132,300/1,500)) = $26,460
B) Total amount of assets and total amount of expense & names of expenses in Financial Statements, assuming Fanning used labor and materials to provide dental cleaning services to 500 patients.
i) Total Assets =
Cash = beginning cash balance less expenses plus revenue = $(135,000 - 101,250 - 31,050 + 132,300) = $135,000
Total = $135,000
ii) Names and Total Amount of Expenses on Income Statement:
a) Service Materials = $31,050
b) Service Labour = $101,250
Explanation:
a) For a manufacturing company, there is inventory of unsold finished goods to account for. The inventory value is the difference between the cost of goods sold and the cost of goods available for sale.
b) For a service company, there is no much inventory to account for, especially in this case. The whole expenses were used for rendering dental cleaning services for 500 patients.
c) In this example, we have assumed that revenue was equal to the cost of sales. There was no profit to be calculated. So it is assumed that the cash balance increased by the amount of cost of sales/revenue.
d) The total assets did not change because at the end of the activities no profit value was made. The assets would have increased or decreased if some profits or losses were recorded in both cases.
