Question

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $349,800 of manufacturing overhead for an estimated allocation base of 1,060 direct labor-hours. The following transactions took place during the year:

1. Raw materials purchased on account, $230,000.

2. Raw materials used in production (all direct materials), $215,000.

3. Utility bills incurred on account, $65,000 (85% related to factory operations, and the remainder related to selling and administrative activities).

4. Accrued salary and wage costs:

Direct labor (1,135 hours)	$	260,000
Indirect labor	$	96,000
Selling and administrative salaries	$	140,000

1. Maintenance costs incurred on account in the factory, $60,000

2. Advertising costs incurred on account, $142,000.

3. Depreciation was recorded for the year, $90,000 (75% related to factory equipment, and the remainder related to selling and administrative equipment).

4. Rental cost incurred on account, $115,000 (80% related to factory facilities, and the remainder related to selling and administrative facilities).

5. Manufacturing overhead cost was applied to jobs, $ ? .

6. Cost of goods manufactured for the year, $830,000.

7. Sales for the year (all on account) totaled $1,500,000. These goods cost $860,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials	$	36,000
Work in Process	$	27,000
Finished Goods	$	66,000

Required:

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.

Froya Fabrikker A/S Schedule of Cost of Goods Manufactured Direct materials: Total raw materials available Materials used in production Total manufacturing costs Cost of goods manufactured

Answer 1

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $336,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year:

 

1. Raw materials purchased on account, $245,000.

2. Raw materials used in production (all direct materials), $230,000.

3. Utility bills incurred on account, $68,000 (85% related to factory operations, and the remainder related to selling and administrative activities).

4. Accrued salary and wage costs:

 

Direct labor (1,125 hours)	$	275,000
Indirect labor	$	99,000
Selling and administrative salaries	$	155,000

 

1. Maintenance costs incurred on account in the factory, $63,000

2. Advertising costs incurred on account, $145,000.

3. Depreciation was recorded for the year, $81,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment).

4. Rental cost incurred on account, $106,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities).

5. Manufacturing overhead cost was applied to jobs, $ ? .

6. Cost of goods manufactured for the year, $860,000.

7. Sales for the year (all on account) totaled $1,650,000. These goods cost $890,000 according to their job cost sheets.

 

The balances in the inventory accounts at the beginning of the year were:

 

Raw Materials	$	39,000
Work in Process	$	30,000
Finished Goods	$	69,000

 

Required:

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 2

Froya Fabrikker xlsx - Excel (Product Activation Failed) ? FILE FORMULAS DATA REVIEW VIEW - ox Sign in ! AA X 2 AutoSum" AY Copy 5. HOME INSERT PAGE LAYOUT Cut Calibri - 11 'romat painter BIL Cipboard Font : x fit G == = == Paste e Wrap Text Merge & Center - Alignment General $ % Number D Normal Conditional Format as Neutral Formatting Table Bad Calculation Good Check Cell A Insert Delete Format Sort Find B Filter - Select- Editing Styles Cells H68 D H I J K L M N O P Q R S T U V W X Y Z Credit Accounting titles & Explanations Raw materials inventory Accounts payable Debit 230,000 230,000 215,000 work in process inventory Raw materials inventory 215,000 manufacturing overhead utility expense Accounts payable 55250 9750 65,000 work in process inventory Manufacturing overhead Salary expense Salary & wages payable 260,000 96,000 140,000 496,000 60,000 Manufacturing overhead Accounts payable 60,000 142,000 Advertising expense Accounts payable 142,000 Manufacturing overhead Depreciation expense Accumulated depreciation 67500 22500 90,000 Manufacturing overhead Rent expense Accounts payable 92000 23000 115,000 Sheet1 © READY Type here to search o B e w 9C e x2 11:06 PM ENG 2221/2020

Froya Fabrikker xlsx - Excel (Product Activation Failed) ? FILE FORMULAS DATA REVIEW VIEW - ox Sign in Α AA Α Ε Χ ΕΙ Σ Autnum Α Copy 5. HOME INSERT PAGE LAYOUT Cut Calibri - 11 Format Painter BIU Cipboard Font : x fit G == = = Paste D Normal Conditional Format as Neutral Formatting Table Bad Calculation Good Check Cell A Wrap Text + Merge & Center - Alignment General $ % ) Number = Insert Delete Format Sort Find B Filter - Select- Editing Styles Cells H68 D H I J K L M N O P Q R S T U V W X Y Z Manufacturing overhead Rent expense Accounts payable 92000 23000 115,000 374,550 Work in process inventory Manufacturing overhead 374,550 830,000 finished goods inventory Work in process inventory 830,000 1,500,000 Accounts receivable Sales 1,500,000 860,000 cost of goods sold finished goods inventory 860,000 Accounts receivable Berbal 1,500,000 Sales Beg.bal 1,500,000 k. end bal 1,500,000 1,500,000 end bal Raw Materials Bog.Bal 36,000 220,000 cost of goods sold Beg.Bal 860,000 215,000 h. End bal 51,000 End bal 860,000 Sheet1 READY Type here to search o e 11:07 PM wic e x] ENG 2221/2020

Froya Fabrikker xlsx - Excel (Product Activation Failed) ? - ox Sign in FILE REVIEW VIEW 2 AutoSumA , Copy EX H Bad Calculation Wrap Text Merge & Center - Alignment General $ % Number D Normal Conditional Format as Neutral Formatting Table Good Check Cell Paste Insert Delete Format Sort Find B Filter - Select- Editing Styles Cells H68 2 5. HOME INSERT PAGE LAYOUT FORMULAS DATA Cut Calibri - 11 AA == Format Painter BIU A ' = = Cipboard Fom X fit D [ [ G H I Work in process Beg Bal 27,000 215,000 830,000 260,000 374550 J O P Q R S T U V W X Y Z _ K L M N Manufacturing overhead Beg.Bal 55250 374.550 i 95,000 60,000 67500 92000 3,800 End bal Advertising expense Beg.bal 142,000 end bal 46,550 finished goods Bee bal 66,000 820,000 $60,000 k End bal 36,000 end bal 112,000 Accumulated Depreciation beg. bal 90,000 Utilities expense Beg bal 9750 End bal 90,000 end bal 9,750 Accounts payable Beg.bal Salaries expense Beg. Bal 110,000 230,000 a. 65,000 60,000 e. 142,000 1. 115,000 h. 690,000 end bel end bal 110,000 Sheet1 6 READY o Type here to search e wig C e 11:07 PM x] ENG 2221/2020

Froya Fabrikker xlsx - Excel (Product Activation Failed) ? - ox Sign in FILE FORMULAS DATA REVIEW VIEW Copy 2 AutoSumA , AA A == = 5. HOME INSERT PAGE LAYOUT Cut Calibri - 11 Format Painter BIU Cipboard Font : x for D [ [ G Wrap Text Merge & Center - H EX Bad Calculation D Normal Conditional Format as Neutral Formatting Table Good Check Cell Paste General $ % Number ' = Insert Delete Insert Delete Format - Sort Find B Filter - Select- Editing Alignment Styles Cells H68 2 H I J K L M N O P Q R S T U V W X Y Z _ Depreciation expense Berbal 22500 Endbal 22,500 Salaries & wages payable Berbal 496,000 d. end bal 496,000 rent expense beg bal 23000 23,000 End bal overhead applied - 349800/1050*1135- 374550 Schedule of Cost of Goods Manufactured Direct Materials: Beginning raw materials inventory Add purchase of raw materials Total raw materials available less:Ending raw materials inventory Materials used in productiuni Direct Labor Manufacturing overhead applied to work in process total manufacturing costs Add:Beginning work in process inventory 36,000 230,000 266,000 51,000 215.000 260,000 374550 849,550 27,000 876,550 16.550 830,000 112 113 114 less:Ending work in process inventory Cost of goods manufactured Sheet1 READY Type here to search o e wic e x] 11:07 PM ENG 2221/2020

Froya Fabrikker xlsx - Excel (Product Activation Failed) ? - ox Sign in FILE FORMULAS DATA REVIEW VIEW Copy 2 AutoSumA , AA A == = 5. HOME INSERT PAGE LAYOUT Cut Calibri - 11 Format painter BIU S Cipboard Fom : X fir G Wrap Text Merge & Center. H EX Bad Calculation D Normal Conditional Format as Neutral Formatting Table Good Check Cell Paste General $ % ) Number Insert Delete Format Sort Find B Filter - Select- Editing Alignment Styles Cells H68 D H I J K L M N O P Q R S T U V W X Y Z No TR Credit General lournal l manufacturing overhead cost of goods sold Debit 3,800 1 3,800 Schedule of Cost of goods sold Beginning finished Foods inventory Add:Cost of goods manufactured Cost of gnads available for sale less:ending finished goods inventory Unadjusted cost of goods sold less.overapplied overhead Adjusted cost of goods sold 65,000 830,000 896,000 36,000 860,000 3,800 856,200 1,500,000 856,200 643,800 Income statement Sales cost of goods sold Gross margin Selling and administrative expense Utilities expense Advertising expense Salaries expense Depreciation expense rent expense 9750 112,000 140,000 22,500 23000 141 337,250 306,550 Net operating income 142 143 Sheet1 READY Type here to search o e wic e x] 11:07 PM ENG 2017