Question

Newton Corporation entered into the following transactions during its first year of operations. (Assume all transactions involve cash.) Acquired $2,000 of capital from the owners. Purchased $600 of direct raw materials. Used $400 of these direct raw materials in the production process. Paid production workers $800 cash. Paid $400 for manufacturing overhead. Started and completed 200 units of inventory. Sold 50 units at a price of $12 each. Paid $80 for selling and administrative expenses. The amount of net income for the year was:

Answer 1

Newton Corporation

Net income for the year = $120

Step-by-step explanation:

a) Data and Calculations:

Direct materials cost = $400

Direct labor cost = 800

Manufacturing overhead 400

Total manufacturing cost $1,600

Cost per unit = $8

Ending Inventory of finished goods = 150 units * $8 = $1,200

Cost of goods sold = 50 * $8 = $400

Sales revenue = 50 * $12 = $600

Newton Corporation

Income Statement

For the year ended December 31:

Sales Revenue $600

Cost of goods sold 400

Gross income $200

Selling & Admin.

expense 80

Net Income $120

b) Newton Corporation's net income is the difference between the Sales Revenue, cost of goods sold and selling and administrative expenses.