Question

Problem 3-16 Comprehensive Problem [LO 3-1, 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 chrect labor cost. Its predetermined Overhead rate is based on a cost formula that estimated $95.000 of manufacturing overhead for an estimated activity level of $50,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Rau materials Work in process Finished goods $10,000 $5,000 5.400 During the year, the following transactions were completed a. Raw materials purchased on account, $ 162.000 b. Raw materials used in production $144.000 (materials costing $120,000 were charged directly to jobs; the remaining materials were indirect) c. Costs for employee services were incurred as follows Direct labor 22.000 Sales C hios Acinis TRE Velarien d. Rent for the year was $18,000 ($13.200 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $13,000 f. Advertising costs incurred, $14,000. q. Depreciation recorded on equipment. $24,000. (517000 of this amount related to equipment used in factory operations, the remaining $7,000 related to equipment used in selling and administrative activities) h. Record the manufacturing overhead cost applied to jobs. Goods that had cost $229,000 to manufacture according to their job cost sheets were completed. 1. Sales for the year (all paid in cash) totaled $498,000. The total cost to manufacture these goods according to their job cost sheets was $218.000. Required:

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Answer 1

No credit Part 1 Transaction debit 229,000 No credit account title Raw material inventory Account payable account title finished goods inventory work in process inventory debit 162,000 229,000 162,000 i(1) cash 498,000 work in process inventory manufacturing overhead Raw material inventory 120,000 24,000 sales 498,000 144,000 218,000 j(2) Cost of goods sold finished goods inventory 218,000 work in process inventory manufacturing overhead salaries commission expense administrative salaries expense cash 163,000 228,200 22,000 49,000 462,200 *predetermined overhead rate per direct labor dollar= 95000/50000 | 1.90 Manufacturing overhead Rent expense cash 13,200 4,800 18,000 13,000 Manufacturing overhead Accounts payable 13,000 Nmt i NM Nm t i NMN m 14,000 Advertisement expense Accounts payable 14,000 manufacturing overhead depreciation expense accumulated depreciation 17,000 7,000 24,000 309,700 work in process inventory manufacturing overhead (163000*1.9) 309,700 Sheet595 Sheet596 Sheet597 Sheet598 Sheet599 Sheet600 Sheet601 Sheet602 Sheet6032 I I

Part 2. T accounts Raw Materials inventory beg bal 10,800 144,000 162,000 end bal 28,800 work in in Process inventory beg bal 5,000 229,000 b 120,000 163,000 309,700 end bal | 368,700 498,000 203,700 h 3A Manufacturing Overhead overapplied = $14300 294,300 credit Finished Goods inventory beg bal 8,400 218,000 229,000 account title Manufacturing overhead Cost of goods sold debit 14,300 4.Income Statement sales Less: COGS =218000-14300 Gross margin Less: selling and administrative expesne Sales commissions Administrative salaries Rent expense advertisement expense Depreciation expense Total expense net income 14,300 22,000 49,000 4,800 14,000 7,000 end bal 19,400 96,800 197,500 Cost of Goods Sold 218,000 end bal 218,000 manufacturing ovehead 24,000 309,700 h 228,200 d 13,200 13,000 17,000 end bal 14,300 /Sheet595 Sheet596 Sheet597_ * N Sheet598 Sheet599 Sheet600 Sheet601 Sheet602 Sheet6039 I I I