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 jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $85,500 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials Work in process Finished goods $ 10,100 $ 5,000 $ 8,700 During the year, the following transactions were completed: a. Raw materials purchased on account, $ 160,000. b. Raw materials used in production, $141,000 (materials costing $125,000 were charged directly to jobs, the remaining materials were indirect). c. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $ 160,000 $ 230,400 $ 28,000 $ 44,000

Answer 1

credit solution: Part 1 Transaction a No i debit 225,000 credit 9 No 1 account title Raw material inventory Account payable account title finished goods inventory work in process inventory debit 160,000 225,000 160,000 2 b 10 j(1) 515,000 work in process inventory manufacturing overhead Raw material inventory 125,000 16,000 cash sales 515,000 141,000 11 j(2) 218,000 Cost of goods sold finished goods inventory 218,000 work in process inventory manufacturing overhead salaries commission expense administrative salaries expense cash 160,000 230,400 28,000 44,000 462,400 | *predetermined overhead rate per direct labor dollar=85500/45000 1.90 4 d Manufacturing overhead Rent expense cash 13,400 4,800 18,200 12,000 Manufacturing overhead Accounts payable 12,000 13,000 Advertisement expense Accounts payable 13,000 manufacturing overhead depreciation expense accumulated depreciation 18,000 5,000 23,000 8 h* work in process inventory manufacturing overhead Sheet217 Sheet218 Sheet219 304,000 304,000 Sheet220 Sheet221 Sheet216 Sheet222 Sheet223 Sheet224 I LI e 9 SOM il ENG 18:39 lll UK 11/11/2019

Part 2. T accounts Raw Materials inventory beg bal 10,100 141,000 160,000 end bal 29,100 workin in Process inventory begbal 5,000 225,000 i 125,000 160,000 304,000 end bal 369,000 4.Income Statement sales Less : COGS =218000-14200 3A Manufacturing Overhead overapplied = $14200 | 515,000 203,800 311,200 credit Finished Goods inventory beg bal 8,700 218,000 225,000 account title Manufacturing overhead Cost of goods sold manufacturingoverhead debit 14,200 1.270 14,200 Gross margin Less : selling and administrative expesne Sales commissions Administrative salaries Rent expense advertisement expense Depreciation expense Total expense net income 28,000 44,000 4,800 13,000 5,000 end bal 15,700 94,800 216,400 Cost of Goods Sold 218,000 end bal 218,000 h LC manufacturing ovehead 16,000 304,000 230,400 13,400 12,000 18,000 end bal 14.20