Question

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 lobs 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 direct labor dollars. At the beginning of the year, the inventory balances were as follows: materials Work in process Finished goods $10.00 During the year, the following transactions were completed: a. Raw materials purchased on account, $275,000, b. Raw materials used in production, $280,000 (materials costing $220.000 were charged directly to jobs, the remaining materials were indirect) c Costs for employee services were incurred as follows: Direct labor Indirect labor Sales issions Administrative salaries $ $ 12.00 63,000 90. d Rent for the year was $18.000 ($13.000 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, 557000 Advertising costs incurred. $140,000 Depreciation recorded on equipment. $100.000 (588.000 of this amount related to equipment used in factory operations the remaining $12.000 related to equipment used in selling and administrative activities) h. Record the manufacturing overhead cost applied to jobs. 1. Goods that had cost $675,000 to manufacture according to their job cost sheets were completed Sales for the year all paid in cash) totaled $1.250.000. The total cost to manufacture these goods according to their job cost sheets was $700,000 Required: Pe n al entre the tractions in the < Prev 13 of 13 Next

Answer 1

1.

Transaction/ Event	Account Titles	Debit	Credit
		$	$
a.	Raw materials inventory	275,000
	Accounts payable		275,000
b.	Work in process inventory	220,000
	Manufacturing overhead	60,000
	Raw materials inventory		280,000
c.	Work in process inventory	180,000
	Manufacturing overhead	72,000
	Sales commission expense	63,000
	Salaries expense	90,000
	Salaries and wages payable		405,000
d.	Manufacturing overhead	13,000
	Rent expense	5,000
	Accounts payable		18,000
e.	Utilities expense	57,000
	Accounts payable		57,000
f.	Advertising expense	140,000
	Accounts payable		140,000
g.	Manufacturing overhead	88,000
	Depreciation expense	12,000
	Accumulated depreciation : Equipment		100,000
h.	Work in process inventory ( 330,000 / 200,000 * 180,000 )	297,000
	Manufacturing overhead		297,000
i.	Finished goods inventory	675,000
	Work in process inventory		675,000
j. 1.	Cash	1,250,000
	Sales Revenue		1,250,000
j. 2.	Cost of goods sold	700,000
	Finished goods inventory		700,000

2.

Raw Materials Inventory
Beg. bal.	25,000
a.	275,000	b.	280,000
End. bal.	20,000
Work in Process Inventory
Beg. bal.	10,000	i.	675,000
b.	220,000
c.	180,000
h.	297,000
End. bal.	32,000
Finished Goods Inventory
Beg. bal.	40,000	j.	700,000
i.	675,000
End. bal.	15,000
Manufacturing Overhead
Beg. bal.	0	h.	297,000
b.	60,000
c.	72,000
d.	13,000
e.	57,000
g.	88,000
Cost of goods sold	7,000
Cost of Goods Sold
Beg. bal.	0	Manufacturing overhead	7,000
j.	700,000
	693,000

3A. Manufacturing overhead is over-applied for the year.

3B.

Account Titles	Debit	Credit
Manufacturing Overhead	7,000
Cost of Goods Sold		7,000

4.

Income Statement For the year ended.......
Sales		$ 1,250,000
Cost of Goods Sold		693,000
Gross Profit		557,000
Selling and Administrative Expenses
Advertising Expense	140,000
Sales Commission Expense	63,000
Salaries Expense	90,000
Rent Expense	5,000
Depreciation Expense	12,000	310,000
Net Operating Income		$ 247,000