Question

Curtis Products manufactures garden tools. It uses a job costing system that allocates factory overhead on the basis of direct labor-costs. Budgeted factory overhead for the year 2019 was $558,000, and management budgeted $372,000 in direct labor costs. The company’s tax rate is 21% (Round income tax to the nearest dollar).

The trial balance of Curtis Products, Inc. on June 30, 2019 is as follows:

Cash……………………………………………… $21,000

Accounts Receivable…………………………….. 65,000

Finished Goods………………………………….. 103,000

Work in Process…………………………………. 31,000

Materials ………………………………………… 19,000   

Prepaid factory Insurance.....……………………… 6,000

Machinery and Equipment (cost)……………… 264,000

Bond payable (due 05/31/2024)………………..​ $150,000

Accumulated Depreciation……………………… 70,000

Additional Paid-in Capital………………………​ 110,000

Accounts Payable……………………………….. 69,000

Common Stock……………………………………. 50,000

Retained Earnings……………………………… 60,000

Total ………………………………………… $509,000 $509,000

During July, the following transactions took place:

July 1. Purchased raw materials for $45,000 and factory supplies for $3,000 on account.

(Record materials and supplies in the materials control account)

2. Received a $50,000 loan from First National Bank to be repaid in 5 years.

3. Declared a $1,500 cash dividend.

3. Issued raw materials to production, $52,000

5. Paid factory utility bill, $10,230 in cash.

15. Received a bill for July’s janitorial services, $4,500. This amount has not yet been paid.

16.​Used factory supplies costing $1,000. (Indirect manufacturing cost).

20. Incurred research & development expense on account, $6,000.

22. Paid other factory overhead costs, $12,500.

23. Incurred selling expenses on account, $6,150 28. Paid cash dividend, $1,500.

25. Incurred payroll costs of $45,000 (not yet paid). Of this amount, $30,000 were direct labor costs

and $15,000 indirect labor cost.

27. Incurred restructuring costs totaling $15,000 on account.

27. Incurred administrative expenses on account, 7,100.

28. Prepaid factory insurance expired, $1,750.

28. Paid payroll costs, $45,000.

30. Record depreciation for July. Depreciation rate is 10% per annum on the cost of machinery and equipment. One-fifth of this depreciation is for office equipment and the remainder for factory equipment.

30. Allocate manufacturing overhead costs to production on the basis of direct labor costs.

31. Completed and transferred goods with a total cost of $95,000 to the finished goods storeroom.

31. Sold goods costing $185,000 for $374,000. (Assume all sales were made on account).

31. Paid accounts payable totaling, $158,000

31. Collected accounts receivable in the amount of $320,000.

31. Accrue $400 interest expense.

31. Calculate the overallocated or underallocated overhead and close this amount to the Cost of Goods Sold account.

Required: Prepare a multi step income statement and classified balance sheet for July 2019.

Answer 1

Spread Sheet- Accounting Equation method:
Overhead allocation rate = 558000/372000 = 1.5 per DLC
Date	Assets									=	Liabilities +				Shareholders' Equity
	Cash +	Acc Rec. +	FG +	WIP +	Mat. +	Fac Sup +	Fac O/h +	Prep F. Ins. +	PPE	=	AP +	Bond P +	Loan +	Acc. Dep.+	Com Sto +	APIC +	RE	Details
OB	21000	65000	103000	31000	19000			6000	264000	=	69000	150000		70000	50000	110000	60000
1-Jul					45000	3000				=	48000
2	50000									=			50000
3	-1500									=							-1500	dividend
3				52000	-52000					=
5-Fact utilities	-10230						10230			=
15-janitorial							4500			=	4500
16						-1000	1000			=
20-R&D payable							6000			=	6000
22-other Fac o/h	-12500						12500			=
23-selling exp.										=	6150						-6150	Selling exp.
28-dividend	-1500									=							-1500	dividend
25-salary payable				30000			15000			=	45000
27-restructuring exp.										=	15000						-15000	admin exp.
27-admin exp.										=	7100						-7100	admin exp.
28							1750	-1750		=
28	-45000									=	-45000
30							21120			=				26400			-5280	Admin exp.
30-O/h allocation				45000			-45000			=
31-FG			95000	-95000						=
31-Sale		374000								=							374000	Sales
31-COGS			-185000							=							-185000	COGS
31	-158000									=	-158000
31	320000	-320000								=
31-Interest payable										=	400						-400	Interest exp.
31-under allocated to COGS							-27100			=							-27100	COGS
TOTAL	162270	119000	13000	63000	12000	2000	0	4250	264000	=	-1850	150000	50000	96400	50000	110000	184970
G TOTAL									639520	=	639520

Income Statement
	Amount $
Sales	374000
Less:COGS	212100
Gross Profit	161900
Less:Admin exp.	27380
Income before selling exp.	134520
Less:Selling exp.	6150
Income before interest	128370
Less:interest exp.	400
Income before taxes	127970
Less:Taxes - 21%	26874
Net Income	101096
Add: OB of Retained Earnings	60000
Less:Dividend paid	3000
CB of Retained Earnings	158096

Balance Sheet:
Assets	Amount $
Cash	162270
Acc. Receivable	119000
Inventory-FG	13000
Inventory-WIP	63000
Inventory-Material	12000
Inventory-supplies	2000
Prepaid Fac Insurance	4250
Current Assets	375520
PPE	264000
Less: Acc. Depreciation	96400
Total Assets	543120
Liabilities & Stockholders' Equity	Amount $
Accounts Payable	-2250
Tax payable	26874
Interest payable	400
Current Liabilities	25024
Long term liabilities:
bond payable	150000
Loans	50000
Total Liabilities	225024
Stockholders' Equity:
Common Stock	50000
APIC	110000
Retained Earnings	158096
Total Liabilities & SH. Eq.	543120