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Assume that the following events occurred at a division of American Homes, Inc., a large homebuilder, for the current year.
1 Purchased $270 million in direct materials.
2 Incurred construction labor costs of $165 million.
3 Determined that general and administrative overhead was $246 million.
4 Transferred 70 percent of the materials purchased to jobs (work) in process.
5 Completed work on 55 percent of the jobs in process. Costs are assigned equally across all work in process.
The inventory accounts have no beginning balances. All costs incurred were debited to the appropriate account and credited to Accounts Payable.
Financial Statement Analysis and Preparation
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T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .
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