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 $67,500 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 | $ | 10,900 |
Work in process | $ |
4,500 |
Finished goods | $ | 8,900 |
During the year, the following transactions were completed:
Direct labor | $ | 159,000 |
Indirect labor | $ | 156,800 |
Sales commissions | $ | 23,000 |
Administrative salaries | $ |
45,000 |
Required:
1. Prepare journal entries to record the transactions for the year.
2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the beginning balances in your inventory accounts).
3A. Is Manufacturing Overhead underapplied or overapplied for the year?
3B. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4. Prepare an income statement for the year. All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.
Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the beginning balances in your inventory accounts). (Do not round intermediate calculations.)
|
Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No | Transaction | General Journal | Debit | Credit |
---|---|---|---|---|
Prepare an income statement for the year. (All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)
|
1) | Journal Entries | |||||
Particulars | Debit | Credit | ||||
a) | R.M | $ 163,000.00 | ||||
To Accounts Payable | $ 163,000.00 | |||||
b) | WIP | $ 124,000.00 | ||||
Factory OH | $ 23,000.00 | |||||
To R.M | $ 147,000.00 | |||||
c) | WIP | $ 159,000.00 | ||||
Manu. OH | $ 156,800.00 | |||||
Sales commissions expense | $ 23,000.00 | |||||
Adm. Salaries expense | $ 45,000.00 | |||||
To Salaries and wages payable | $ 383,800.00 | |||||
d) | Manu. OH | $ 13,800.00 | ||||
Rent Expense | $ 4,200.00 | |||||
To Accounts Payable | $ 18,000.00 | |||||
e) | Manu. OH | $ 13,000.00 | ||||
To Accounts Payable | $ 13,000.00 | |||||
f) | Advertising Expense | $ 10,000.00 | ||||
To Accounts Payable | $ 10,000.00 | |||||
g) | Manu. OH | $ 17,000.00 | ||||
Depreciation Expense | $ 7,000.00 | |||||
To Accumulated Depreciation | $ 24,000.00 | |||||
h) | WIP | $ 238,500.00 | ||||
To Manu. OH | $ 238,500.00 | |||||
($ 67500 /$ 45000) x $ 159000 | ||||||
i) | Finished Goods | $ 230,000.00 | ||||
To WIP | $ 230,000.00 | |||||
j) | Cash | $ 509,000.00 | ||||
To Sales | $ 509,000.00 | |||||
Cost of Goods Sold | $ 216,000.00 | |||||
To Finished Goods | $ 216,000.00 |
2) | Raw Materials | WIP | Finished Goods | ||||||||||||
Beg. Bal | $ 10,900.00 | b) | $ 147,000.00 | Beg. Bal. | $ 4,500.00 | i) | $ 230,000.00 | Beg. Bal. | $ 8,900.00 | j) | $ 216,000.00 | ||||
a) | $ 163,000.00 | End. Bal. | $ 26,900.00 | b) | $ 124,000.00 | End. Bal. | $ 296,000.00 | i) | $ 230,000.00 | End. Bal. | $ 22,900.00 | ||||
$ 173,900.00 | $ 173,900.00 | c) | $ 159,000.00 | $ 238,900.00 | $ 238,900.00 | ||||||||||
h) | $ 238,500.00 | ||||||||||||||
$ 526,000.00 | $ 526,000.00 | ||||||||||||||
Manufacturing OH | Cost of Goods sold | ||||||||||||||
b) | $ 23,000.00 | h) | $ 238,500.00 | j) | $ 216,000.00 | ||||||||||
c) | $ 156,800.00 | ||||||||||||||
e) | $ 13,000.00 | ||||||||||||||
g) | $ 17,000.00 | ||||||||||||||
d) | $ 13,800.00 |
3) | ||||
a) | Actual OH expenses | $ 209,800.00 | ||
Applied OH | $ 238,500.00 | |||
Overapplied | $ 28,700.00 | |||
b) | Manu. OH | $ 28,700.00 | ||
To Cost of Goods Sold | $ 28,700.00 |
4) | |||||
Income Statement | |||||
Sales | $ 509,000.00 | ||||
Less: | COGS | ($ 216000 - $ 28700) | $ 187,300.00 | ||
Gross Profit | $ 321,700.00 | ||||
Selling and adm. Expenses: | |||||
Sales commission | $ 23,000.00 | ||||
Adm. Salaries expense | $ 45,000.00 | ||||
Advertising ecpense | $ 10,000.00 | ||||
Depreciation Expense | $ 7,000.00 | ||||
Rent Expense | $ 4,200.00 | ||||
$ 89,200.00 | |||||
Net Income | $ 232,500.00 |
Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South...
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...
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...
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...
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 $67,500 of manufacturing overhead for an estimated activity level of $45,000...
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 $67,500 of manufacturing overhead for an estimated activity level of $45,000...
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 $94,500 of manufacturing overhead for an estimated activity level of $45,000...
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 $330,000 of manufacturing overhead for an estimated activity level of $200,000...
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 $76,000 of manufacturing overhead for an estimated
activity level of $40,000...
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 $94,500 of manufacturing overhead for an estimated activity level of $45,000...
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 $330,000 of manufacturing overhead for an estimated activity level of $200,000...