Question

Lhe Problem 3-16 Comprehensive Problem (LO3-1, LO3-2, LO3-4] Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $85,500 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials Work in process Finished goods $10,400 $ 4,800 $ 8,500 During the year, the following transactions were completed: a. Raw materials purchased on account, $ 167,000. b. Raw materials used in production, $146,000 (materials costing $126,000 were charged directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales Commissions $ 161,000 $ 224,700 $ 23.non

Answer 1

	predetermined overhead rate =			85500/45000
				190%
	Accounting titles & Explanations					debit	Credit
a)	Raw materials inventory					167,000
	cash						167,000
b)	work in process inventory					126,000
	Factory overhead					20,000
	Raw materials inventory						146,000
c)	Work in process inventory					161,000
	Factory overhead					224,700
	Sales commission expense					23,000
	Salaries expense					48,000
	cash						456,700
d)	Factory overhead					13,300
	Rent expense					5,100
	cash						18,400
e)	Factory overhead					17,000
	cash						17,000
f)	Advertising expense					14,000
	cash						14,000
g)	Factory overhead					16,000
	Depreciation expense					9,000
	Accumulated depreciation						25,000
h)	work in process inventory					305900
	Factory overhead		(161000*190%)				305900
i)	finished goods inventory					230,000
	work in process inventory						230,000
j)	Cash					510,000
	Sales revenue						510,000
	cost of goods sold					217,000
	finished goods inventory						217,000
	T-Accounts
	Raw materials				Work in process
Bal	10,400				Bal	4,800
a)	167,000	146,000	b)		b)	126,000	230,000	i)
					c)	161,000
Bal	31,400				h)	305900
					Bal	367,700
					Manufacturing overhead
	Finished goods				beg.bal	0
Bal	8,500				b)	20,000	305900	h)
i)	230,000	217,000			c)	224,700
					d)	13,300
Bal	21,500				e)	17,000
					g)	16,000
							14,900	Bal
	cost of goods sold
Beg.bal	0
j)	217,000
3a)	Manufacturing overhead is over applied
3B)	Journal entry
	Account titles & Explanations					Debit	Credit
	Factory overhead					14,900
	Cost of goods sold						14,900
4)		Income Statement
	Sales						510,000
	less : cost of goods sold			(217000-14900)			202,100
	Gross margin						307,900
	less:Selling & administrative expense
	Sales comission					23,000
	Administrative salaries					48,000
	Rent exepense					5,100
	Advertising expense					14,000
	Depreciation expense					9,000	99,100
	Net operating income						208,800