Question

Exercise 2 osder he olowing transactions for Star Manufacturing Inc in 2017/ 1. Inventory at the beginning of the year consisted of materials ( 3,500), work in progress (job 122, 7,500; job 123, 4,800), finished goods (11,500) 2. Incurred manufacturing wages of € 112,000 (20% was direct labor ofjob 122, 25% direct labor of job 123, and 55% was indirect labor). 3. Purchased materials on account, 72,000 4. Incurred and paid Advertising costs, 33,600. 5. Recorded various manufacturing overhead: depreciation on plant, 36,000; utilities, 7,500; maintenance, 11,000. 6. Incurred and paid administrative salaries, 22,200. 7. On September 1, paid a yearly third party liability insurance for the company's executives for 7,500 8. On May 15, purchased a new piece of equipment for 76,000, with a down payment of €7,000 and the issuance of a 2-year, 7% note payable for the remaining balance. 9. Paid interest expenses on loan payable, 3,800. An "Accrued interest payable" account already existed at the beginning of the year in relation to this expense and had a credit balance of 900. 10. Used in production: direct materials for job 122, 22,800; direct materials for job 123, 27,800; indirect materials, 17,800. 11. Allocated manufacturing overhead to jobs using the predetermined rate of 220% of direct labor costs. 12. Depreciation of non-manufacturing plant assets: 4,500 13. Completed jobs 122 and 123. 14. Sold 70% of job 122 on credit for €178,400 15. Journalized the closing of the manufacturing overhead account 16. Journalized the necessary adjustments at the end of the year. 17. Recorded provision for income tax, 5,700

Answer 1

working	Job 122	Job 123		april total
Beginning Goods on process A	7500	4800		12300
During the year
Direct material	22800	27800		50600
Direct labor	22400	28000		50400
	(112000*20%)	(112000*25%)
Applied overhead	49280	61600		110880
	(22400*220%)	(28000*220%)
Total cots added during the year B	94480	117400		211880
Total cost A+B	101980	122200		224180
cost included in	Cost of good sold	Finsihed goods

ans 1
Transa	Accounst Title	Dr	Cr
2	Work in Process Inventory	50400
	MAnufacturing Overhead	61600
	Wages Payable		112000
3	Raw Material Inventory	72000
	Accounts payable		72000
4	Advertsiing expenses	33600
	Cash		33600
5	MAnufacturing Overhead	54500
	Accumulated depreciation		36000
	Accounts payable		18500
6	Salaries expenses	22200
	Cash		22200
7	Prepaid Insurance	7500
	Cash		7500
8	Equipment	76000
	Cash		7000
	Notes payable		69000
9	Interest expenses	2900
	Accurued Interest payable	900
	CAsh		3800
10	Work in Process Inventory	50600
	MAnufacturing Overhead	17800
	Raw Material Inventory		68400
11	Work in Process Inventory	110880
	MAnufacturing Overhead		110880
12	Depreciation expenses	4500
	Accumulated Depreciation		4500
13	Finished Goods Inventory	224180
	Work in Process Inventory		224180
14	Accounts payable	178400
	Sales		178400
	Cost of good sold (101980*70%)	71386
	Finished Goods Inventory		71386
15	Cost of good sold	23020
	Factory Overhead		23020
	underapplied	23020
	Actual-Applied
	(61600+54500+17800)-110880
16	Insurance expenses	2500
	Prepaid insurance		2500
	(7500/12*4)
17	Income Tax expense	5700
	Income tax payable		5700

ans b	Raw Material Inventory
	Opening Balance	3500	10) WIP	50600
	3) accounts payable	72000	10) Factory Overhead	17800
	EndinG balance	7100
	Work In process
	Opening Balance	12300	f) Finsihed Goods Inv	224180
	10)Raw material Inventory	54500
	1) Wages payable	50400
	11) Manufacturing Overhead	110880
	Ending balance	3900
	Cost of good sold
	g) Finished Goods Inventory	224180
	End bal	224180

ans d
	Income statement
	Sales		178400
	Less: cost of good sold (71386+23030)		94406
	Gross profit		83994
	Selling & administrative expenses
	Salaries expenses	22200
	Insurance expenses	5700
	Depreciation expenses	4500
	Advertising expenses	33600	66000
	Operating income		17994
	Less: Interest expenses		2900
	Income before taxes		15094
	Income taxes expenses		5700
	Net Income		9394