how do we find Finished Goods Inventory ?

Question

Chekwa is a manufacturing company. The $66,000 was paid to purchase the following items:

Paid $4,400 cash to purchase materials that were used to make products during the year.
Paid $26,000 cash for wages of factory workers who made products during the year.
Paid $2,600 cash for salaries of sales and administrative employees.
Paid $33,000 cash to purchase manufacturing equipment. The equipment was used solely to make products. It had a 3-year life and a $7,500 salvage value. The company uses straight-line depreciation.
During 2007, Chekwa started and completed 2,500 units of product. The revenue was earned when Chekwa sold 2,000 units of product to its customers.

Chekwa Company Balance Sheet December 31, 2007
Assets
Cash = 27000
Finished Goods Inventory = ?
Manufacturing Equipment = 33000
Accumulated Depreciation =?
Total Assets = ?
Equity
Common Stock = 33,000
Retained Earnings = 30320
Total Equity = ?

Answer 1

Cost of equipment $33k less salvage value $7.5k divided by 3 yrs gives depn per yr of $8,500.
Cost of gds manufactured = Direct materials + direct labor + mfg overhead, so
Cost of gds mfd = $4,400 + $26,000 + $8,500 = $38,900. It cost $38,900 to manufacture 2,500 units, but only 2,000 were sold, so the cost of gds sold = 2000/2500 x $38,900 = $31,120,
and the goods not sold (remaining in ending inventory) = 500/2500 x $ 38,900 = $7,780

Chekwa Company Balance Sheet December 31, 2007
Assets
Cash = 27000
Finished Goods Inventory = 7,780
Manufacturing Equipment = 33,000
Accumulated Depreciation = 8,500
Total Assets = 59,280
Equity
Common Stock = 33,000
Retained Earnings = 30320
Total Equity = 63,320