Question

Ravsten Company uses a job-order costing system. On January 1, the beginning of the current year, the company’s inventory balances were as follows:

Raw materials	$	19,500
Work in process	$	11,400
Finished goods	$	30,700

The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 36,700 machine-hours and incur $168,820 in manufacturing overhead cost. The following transactions were recorded for the year:

1. Raw materials were purchased on account: $214,000.
2. Raw materials were requisitioned for use in production: $197,000 (80% direct and 20% indirect).
3. The following costs were incurred for employee services:

Direct labour	$	165,600
Indirect labour	$	28,400
Sales commissions	$	38,100
Administrative salaries	$	82,800

4. Heat, power, and water costs were incurred in the factory: $45,150.
5. Prepaid insurance expired during the year: $13,500 (85% relates to factory operations, and 15% relates to selling and administrative activities).
6. Advertising costs were incurred, $53,500.
7. Depreciation was recorded for the year: $64,200 (90% relates to factory operations, and 10% relates to selling and administrative activities).
8. Manufacturing overhead cost was applied to production. The company recorded 41,400 machine-hours for the year.
9. Goods that cost $510,900 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
10. Sales for the year totalled $732,500 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $504,500.

Required:

1. Prepare journal entries to record the transactions given above. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account.

3-a. Is manufacturing overhead underapplied or overapplied for the year?

• Underapplied overhead

• Overapplied overhead

3-b. Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account. (Do not round intermediate calculations and round your final answers to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

4. Prepare an income statement for the year. (Round intermediate calculations to nearest whole number.)

Answer 1

No credit Part 1 No debit 510,900 credit account title Raw material inventory accounts payable account title finished goods inventory work in process inventory debit 214,000 510,900 214,000 732,500 work in process inventory manufacturing overhead Raw material inventory 157,600 39,400 Accounts receivable sales 732,500 197.000 504,500 Cost of poods sold finished goods inventory 504,500 Nm work in process inventory manufacturing overhead salaries commission expense administrative salaries expense salaries and wanges payable 28,400 38,100 82,800 314,900 in | *predetermined overhead rate per machine hours 168820/36700 45.150 manufacturing overhead accounts payable 45,150 Mm M manufacturing overhead Insurance expense Prepaid insurance 11,475 2,025 13,500 53,500 Nm t in advertisement expense accounts payable 53,500 manufacturing overhead depreciation expense accumulated depreciation 57,780 6,420 Nm M 64,200 190,440 N work in process inventory manufacturing overhead (41400*4.6) 190,440 m st + Sheet311 Sheet312_ Sheet313 Sheet314 Sheet315 Sheet316 Sheet317 Sheet318 Sheet319 III

Part 2. T accounts Raw Materials inventory beg bal 19,500 197,000 b 214,000 end bal 36,500 work in in Process inventory beg bal 11,400 510,900 157,600 165,600 190,440 end bal 14,140 3A Manufacturing Overhead overapplied = $8235 732,500 496,265 236, 235 Credit Finished Goods inventory beg bal 30,700 504,500 510,900 account title Manufacturing ovehead Cost of goods sold Debit 8,235 4.Income Statement For the year ended December 31. sales cost of goods sold =504500-8235 Gross profit selling and administrative expesne Sales commissions Administrative salaries Insurance expense advertisement expense Depreciation expense Opearting income 8,235 38,100 82,800 2,025 53,500 6,420 end bal 37,100 182,845 53,390 Cost of Goods Sold 504,500 end bal 504,500 h d manufacturing ovehead 39,400 190,440 28,400 45,150 11,475 57,780 end bal 8,235 Sheet311 Sheet312 Sheet313 Sheet314 Sheet315 Sheet316 Sheet317 Sheet318 Sheet319 D