Question

Thornton Company started year 1 with $300,000 in its cash and common stock accounts. During year 1, Thornton paid $225,000 cash for employee compensation and $69,000 cash for materials. Required Determine the total amount of assets and the amount of expense shown on the year 1 financial statements assuming Thornton used the labor and materials to make 1,500 chairs. Further, assume that Thornton sold 1,200 of the chairs it made. State the name(s) of the expense account(s) shown on the income statement. Determine the total amount of assets and the amount of expense shown on the year 1 financial statements assuming Thornton used the labor and materials to provide dental cleaning services to 500 patients. State the name(s) of the expense account(s) shown on the income statement.

Answer 1

Answer and Explanation:

The computation is shown below;

a. Total assets are

= Stock + Cash

= [$294,000 ÷ 1500 × 300] + [$300,000 - $225,000 - $69,000]

= $64,800

And, Total expenses is

= Materials + Labor

= $225,000 + $69,000

= $294,000

The Name of the expense is Purchases, Salaries

b. Total assets are

= Cash

= $300,000 - $225,000 - $69,000

= $64,800

And, the Total expenses = $294,000

The Name of the expense is Supplies, Salaries