Question

Please Help Me!

Gold Nest Company of Guandang, China, is a family-owned enterprise that makes birdcages for the South China market. The company Sells its birdcages through an externe network of street vendors who receive commissions on their sales The corrpany uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $75,000 of manufacturing overhead for an estimated activity level of $50.000 Cirect labor dollars. At the beginning of the year, the inventory balances were as folows Raw materials Work in proces Finished goods $11,000 $4,900 During the year, the following transactions were completed: a. Raw materials purchased on account, $ 166.000 b. Raw materials used in production $147,000 materials costing indirect). c. Costs for employee services were incurred as follows were charged directly to jobs, the remaining materials were aso,000 $146.200 $ 24,000 45,000 d. Rent for the year was $18,000 ($13,500 of this amount related to factory operations, and the remainder related to selling and administrative activities] e. Utility costs incurred in the factory, $15.000 f. Advertising costs incurred, $10.000 g. Depreciation recorded on equipment, $23,000. ($16,000 of this amount related to equipment used in factory operations, the remaining $7,000 related to equipment used in seling 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 Sales for the year (all paid in cash totaled $501,000. The total cost to manufacture these goods according to their job cost sheets was $219.000 Required: 1. Prepare journal entries to record the transactions for the year 2. Prepare Taccounts for each inventary account Manufacturing Overhead, and Cost of Goods Sold. Post relevant clata from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts A Marvinnorward in the ?

Answer 1

Part 1

No.	Transaction	General journal	Debit	Credit
1	a	Raw materials	166000
		cash		166000
2	b	Work in process	129000
		Manufacturing overhead	18000
		Raw materials		147000
3	c	Work in process	150000
		Manufacturing overhead	146200
		Sales commissions expense	24000
		Administrative salaries	47000
		cash		367200
4	d	Manufacturing overhead	13500
		Rent expense	4500
		Cash		18000
5	e	Manufacturing overhead	18000
		cash		18000
6	f	Advertising expense	10000
		Cash		10000
7	g	Manufacturing overhead	16000
		Depreciation expense	7000
		Accumulated depreciation		23000
8	h	Work in process	225000
		Manufacturing overhead		225000
9	i	Finished goods	229000
		Work in process		229000
10	j	Cash	501000
		Sales		501000
		Cost of goods sold	219000
		Finished goods		219000

Predetermined overhead rate = Estimated manufacturing overhead cost/Estimated total amount of the allocation base = 75000/50000= 150%

Manufacturing overhead applied = direct labor cost * Predetermined overhead rate = 150000*150% = 297000

Part 2

Raw materials

Beg bal.	11000	(b)	147000
(a)	166000
End. Bal.	30000

Work in process

Beg bal.	4900	(i)	229000
(b)	129000
(c)	150000
(h)	225000
End. Bal.	279900

Finished goods

Beg bal.	8400	(j)	219000
(i)	229000
End. Bal.	18400

Manufacturing overhead

(b)	18000	(h)	225000
(c)	146200
(d)	13500
(e)	18000
(g)	16000
End. Bal.	13300

Cost of goods sold

(j)

219000

Part 3 a

Underapplied.

Manufacturing overhead underapplied = actual manufacturing overhead - manufacturing overhead applied

Part 3 b

General Journal	Debit	Credit
Cost of goods sold	13300
Manufacturing overhead		13300

Part 4

Gold Nest Company Income Statement
Sales		501000
Cost of goods sold		232300
Gross profit		268700
Selling and administrative expenses
Sales commissions	24000
Administrative salaries	47000
Rent expense	4500
Advertising expense	10000
Depreciation expense	7000	92500
Net operating income		$176200

Cost of goods sold = 219000+13300= 693000