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 the sales The company uses a job order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead Tate 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 $ 25,000 Haw materials Work in process Finished goods $10,000 $ 40,00 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) Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $ $ 72, cee 63.000 90,000 5 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, $57.000 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. 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

Answer 1

credit Part 1 No Transaction 1a) No 9 i debit 675,000 credit account title Raw material inventory Account payable account title finished goods inventory work in process inventory debit 275,000 675,000 275,000 2b 10 j(1) 1,250,000 work in process inventory manufacturing overhead Raw material inventory 220,000 60,000 cash sales 1,250,000 280,000 11 j(2) 700,000 Cost of goods sold finished goods inventory 700,000 work in process inventory 180,000 manufacturing overhead 72,000 salaries commission expense 63,000 administrative salaries expense | 90,000 cash 405,000 1.65 *predetermined overhead rate per direct labor dollar= 330000/200000 13,000 Manufacturing overhead Rent expense cash 5,000 18,000 57,000 Manufacturing overhead Accounts payable 57,000 6 f 140,000 Advertisement expense Accounts payable 140,000 78 manufacturing overhead depreciation expense accumulated depreciation 88,000 12,000 100,000 8 h 297,000 297,000 work in process inventory manufacturing overhead (180000*1.65) Sheet153 Sheet154 Sheet155 Sheet152 Sheet156 Sheet157 Sheet158 Sheet159 Sheet160 II BAENG TU UK 11:40 08/02/2020

Part 2. T accounts Raw Materials inventory beg bal 25,000 280,000b | 275,000 end bal 20,000 i work in in Process inventory beg bal 10,000 675,000 220,000 180,000 297,000 end bal 32,000 4.Income Statement sales Less: COGS =700000-7000 3A Manufacturing Overhead overapplied = $7000 1,250,000 693,000 557,000 credit Finished Goods inventory beg bal 40,000 700,000 675,000 account title Manufacturing overhead Cost of goods sold debit 7,000 Gross margin Less: selling and administrative expesne Sales commissions Administrative salaries Rent expense advertisement expense Depreciation expense Total expense 7,000 63,000 90,000 5,000 140,000 12,000 end bal 15,000 310,000 247,000 net income Cost of Goods Sold 700,000 end bal 700,000 이이 | | 0 manufacturing ovehead 60,000 297,000 h 72,000 13,000 57,000 88,000 end bal 7,000 Sheet152 Sheet153/Sheet154 + Sheet155 Sheet156 Sheet157 Sheet158 Sheet159 Sheet160 I I I