Running Data began operations on February 1. The companyproduces GPS watches designed for runners. On February 15, thecompany purchased 1,600 DVD discs to include with each runningwatch it sells. The DVD is preloaded with product setupinformation, an instruction manual including video examples, andwarranty details. Each disc cost Running Data $7.
During February, 500 discs were taken from the raw materialsinventory. Of these, 80 were taken by the sales manager to salesmeetings with prospective retailers to carry the watches and handedout as advertising. The remaining discs were included with the GPSwatches that were being manufactured in February. Of the watchesthat were bundled with the discs during May, 75% were completed andtransferred from work in process to finished goods. Of the watchescompleted during the month, 60% were sold and shipped tocustomers.
1. Determine the cost of discs that would be ineach of the following accounts at February 28:
raw material
work in process
finihed goods'
COGS
advertising expense
2. Specify whether each of the above accountswould appear on the balance sheet or on the income statement atFebruary 28.
raw material
work in process
finished goods
COGS
advertising exp
