Question

PROBLEM 3-16 Comprehensive Problem L03-10, L03-20, L03-42 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 $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: Raw materials $25,000 Work in process $10,000 Finished goods $40,000 During the year, the following transactions were completed: a. Raw materials purchased for cash, $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. Cash paid to employees as follows: Direct labor Indirect labor Sales commissions Administrative salaries $180,000 $72,000 $63,000 $90,000 d. Cash paid for rent during the year was $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Cash paid for utility costs in the factory, $57,000. f. Cash paid for advertising, $140,000. g. Depreciation recorded on equipment, $100,000. ($88,000 of this amount related to equipment used in factory operations, the remaining $12,000 related to equipment used in selling and administrative activities.)

Answer 1

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Part 1
Event	Account	Debit	Credit
a	Raw material inventory	$       275,000
	Accounts Payable		$       275,000
b	Work in process inventory	$       220,000
	Factory Overhead	$         60,000
	Raw material Inventory		$       280,000
c	Work in process inventory	$       180,000
	Factory Overhead	$         72,000
	Sales Commission	$         63,000
	Administrative Salaries	$         90,000
	Wages Payable		$       405,000
d	Factory Overhead	$         13,000
	Rent Expense-Selling	$           5,000
	Accounts Payable		$         18,000
e	Factory Overhead	$         57,000
	Cash		$         57,000
f	Advertising Expense	$       140,000
	Cash		$       140,000
g	Factory Overhead	$         88,000
	Depreciation Expense-Selling	$         12,000
	Accumulated Depreciation		$       100,000
h	Work in process inventory	$       297,000
	Factory Overhead		$       297,000
	$330,000/$200,000*$180,000
i	Finished Goods Inventory	$       675,000
	Work in process inventory		$       675,000
j	Cash	$   1,250,000
	Sales		$   1,250,000
	Cost of goods sold	$       700,000
	Finished Goods Inventory		$       700,000