Magnificent Modems, Incorporated, makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash.
Acquired $750,000 of cash from the owners.
Purchased $270,000 of manufacturing equipment. The equipment has a $30,000 salvage value and a four-year useful life.
The company started and completed 5,000 modems. Direct materials purchased and used amounted to $40 per unit.
Direct labor costs amounted to $25 per unit.
The cost of manufacturing supplies amounted to $4 per unit.
The company paid $50,000 to rent the manufacturing facility.
Magnificent sold all 5,000 units at a cash price of $120 per unit. (Hint: It will be necessary to determine the manufacturing costs in order to record the cost of goods sold.)
The sales staff was paid a $6 per unit sales commission.
Paid $39,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,000 salvage value and a three-year useful life.
Administrative expenses consisting of office rental and salaries amounted to $71,950. a. Record the transaction data for Magnificent Modems, Incorporated, in the financial statements. The first transaction is recorded as an example.
b-1. Prepare an income statement.
b-2. Prepare a balance sheet.