1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
Answer-
Predetermined overhead rate =$395,600 /920 direct labor-hours= $430
1. Journal entries
No. | Account Titles and Explanation | Debit | Credit |
a | Raw Material Inventory | 290,000 | |
Accounts Payable | 290,000 | ||
b | Work in Process Inventory | 275,000 | |
Raw Material Inventory | 275,000 | ||
c | Manufacturing Overhead | 69,300 | |
Utility Expenses | 7,700 | ||
Accounts Payable | 77,000 | ||
d | Work in Process Inventory | 320,000 | |
Manufacturing Overhead | 108,000 | ||
Salaries Expenses | 200,000 | ||
Wages Payable | 628,000 | ||
e | Manufacturing Overhead | 72,000 | |
Accounts Payable | 72,000 | ||
f | Advertisement Expenses | 154,000 | |
Accounts Payable | 154,000 | ||
g | Manufacturing Overhead | 67,500 | |
Depreciation Expenses | 22,500 | ||
Accumulated Depreciation | 90,000 | ||
h) | Manufacturing Overhead | 92,000 | |
Rent Expenses | 23,000 | ||
Accounts Payable | 115,000 | ||
i | Work in Process Inventory ($430*970 hrs) | 417,100 | |
Manufacturing Overhead | 417,100 | ||
J | Finished Good Inventory | 950,000 | |
Work in Process Inventory | 950,000 | ||
k | Accounts Receivable | 2,100,000 | |
Sale | 2,100,000 | ||
(To record the sale ) | |||
Cost of Good Sold | 980,000 | ||
Finished Good Inventory | 980,000 | ||
(To record the cost of the sale) |
2. Posting to T-accounts
Raw Material Inventory | Work in process Inventory | Accounts Payable | |||||||||||
Beg | 48,000 | 275,000 | b | Beg | 39,000 | 950,000 | j | 290,000 | a | ||||
a | 290,000 | b | 275,000 | 77,000 | c | ||||||||
338,000 | 275,000 | d | 320,000 | 72,000 | e | ||||||||
Bal | 63,000 | i | 417,100 | 154,000 | f | ||||||||
115,000 | h | ||||||||||||
Finished Good Inventory | 1,051,100 | 950,000 | |||||||||||
Beg | 78,000 | 980,000 | k | Bal | 101,100 | 708,000 | |||||||
j | 950,000 | ||||||||||||
Manufacturing Overhead | |||||||||||||
1,028,000 | 980,000 | c | 69,300 | 417,100 | i | ||||||||
Bal | 48,000 | d | 108,000 | Cost of Good Sold | |||||||||
e | 72,000 | k | 980,000 | ||||||||||
Utility Expenses | g | 67,500 | |||||||||||
c | 7,700 | h | 92,000 | 980,000 | |||||||||
408,800 | 417,100 | ||||||||||||
7,700 | 8,300 | Bal | Wages Payable | ||||||||||
628,000 | d | ||||||||||||
Advertisement Expenses | Salaries Expenses | ||||||||||||
f | 154,000 | d | 200,000 | 628,000 | |||||||||
154,000 | 200,000 | Accumulated Depreciation | |||||||||||
90,000 | g | ||||||||||||
Rent Expenses | Depreciation Expenses | ||||||||||||
h | 23,000 | g | 22,500 | 90,000 | |||||||||
23,000 | 22,500 | Sale | |||||||||||
2,100,000 | k | ||||||||||||
Account receivable | |||||||||||||
k | 2,100,000 | 2,100,000 | |||||||||||
2,100,000 | |||||||||||||
3. Schedule of cost of goods manufactured
Direct Material | |||
Raw Material Inventory:Beginning | 48,000 | ||
Add: Purchases of Raw Material | 290,000 | ||
Raw Material Available | 338,000 | ||
Deduct: Raw Material Inventory: Ending | 63,000 | ||
Raw Material Used in production | 275,000 | ||
Direct Labor | 320,000 | ||
Manufacturing Overhead applied to Work in process | 417,100 | ||
Total Manufacturing Cost | 1,012,100 | ||
Add:Beginning Work in process Inventory | 39,000 | ||
1,051,100 | |||
Deduct: Ending Work in process Inventory | 101,100 | ||
Cost of Good Manufactured | 950,000 |
4.Journal Entry
Account Titles and Explanation | Debit | Credit |
Manufacturing Overhead | 8,300 | |
Cost of Good Sold | 8,300 |
The schedules of cost of goods sold | ||
Finished Goods Inventory Beginning | 78,000 | |
Add: Cost of Good Manufactured | 950,000 | |
Cost of Goods Available for sale | 1,028,000 | |
Deduct: Finished Goods Inventory Ending | 48,000 | |
Unadjusted Cost of Good Sold | 980,000 | |
Less: Overapplied Overhead | 8,300 | |
Adjusted Cost of Good Sold | 971,700 |
5.
The Income Statement | |||
Sales | 2,100,000 | ||
Cost of Good sold | 971,700 | ||
Gross Margin | 1,128,300 | ||
Selling and Administrative Expenses | |||
Utility Expenses | 7,700 | ||
Advertisement Expenses | 154,000 | ||
Salary Expenses | 200,000 | ||
Depreciation Expenses | 22,500 | ||
Rent Expenses | 23,000 | 407,200 | |
Net Income | 721,100 |
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