Question

The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 7,390 batteries at a cost of $145 per battery. It withdrew 6,800 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company’s traveling sales staff. The remaining 6,700 batteries withdrawn from the storeroom were placed in cars being produced by the company.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 30th.
1. Determine the cost of batteries that would appear in eachof the following accounts at April 30.

a. raw materials
b. work in process
c. finished goods
d. cost of goods sold
e. selling expanse

2. Specify whether each of the above accounts would appear onthe balance sheet or on the income statement at April 30.

Answer 1

Answer:

1. a. Raw Materials

Materials left in storeroom

= (7,390 - 6,800) * $145

= $‭85,550‬

b. Work in Process

90% were completed so 10% was left. 100 batteries were removed from the 6,800 batteries.

= 10% * (6,700 * 145)

= $‭97,150‬

c. Finished goods

Unsold goods are 30%.

= 6,700 * 90% * 30% * 145

= $‭262,305‬

d. Cost of goods sold

Sold goods were therefore 70%

= 6,700 * 90% * 70% * 145

= $‭612,045‬

e. Selling expense

= 100 batteries used in sales staff cars * 145

= $14,500

2.

• Raw materials  - Balance Sheet

• Work in process  - Balance Sheet

• Finished goods  - Balance Sheet

• Cost of goods sold  - Income statement

• Selling expanse - Income statement