Question

Gold Nest Company of Guandong, China, 15 a farvily-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 averhead rate is based on a cost formula that estimated $75,000 of manufacturing overhead for an estimated activity level of 550.000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Work in process Tinished goods 4.900 & 8, 100 During the year, the following transactions were complete the remaining materials were a. Raw materials purchased on account. $ 155,000 b. Raw materials used in production, $147000 materials costing $1 indirect) c. Costs for employee services were incurred as follows Indirect labor S180,000 24,000 47,000 346,200 Primitetive LBILE d. Rent for the year was $18.000 1513,500 of this amount related to factory operations, and the remain sted to selling and administrative activities) e. Utility costs incurred in the factory, $18,000. 1. Advertising costs incurred, $10,000 Depreciation recorded on equipment, $23,000 $16,000 of this amount related to equipment used in factory operations, the remaining $7000 related to equipment used in selling and administrative activities.) h. Record the manufacturing overhead cost applied to jobs. 1. Gools 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 T accounts for each inventory account Manufacturing Overhead, and Cost of Goods Sold Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts). 31. ann o rhornaranno trar?

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	130000
		Manufacturing overhead	146200
		Sales commissions expense	24000
		Administrative salaries	47000
		cash		347200
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	195000
		Manufacturing overhead		195000
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 = 130000*150% = 297000

Part 2

Raw materials

Beg bal.	11000	(b)	147000
(a)	166000
End. Bal.	20000

Work in process

Beg bal.	4900	(i)	229000
(b)	129000
(c)	130000
(h)	195000
End. Bal.	32000

Finished goods

Beg bal.	8100	(j)	219000
(i)	229000
End. Bal.	15000

Manufacturing overhead

(b)	18000	(h)	195000
(c)	146200
(d)	13500
(e)	18000
(g)	16000
End. Bal.	16700

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	16700
Manufacturing overhead		16700

Part 4

Gold Nest Company Income Statement
Sales		501000
Cost of goods sold		235700
Gross profit		265300
Selling and administrative expenses
Sales commissions	24000
Administrative salaries	47000
Rent expense	4500
Advertising expense	10000
Depreciation expense	7000	92500
Net operating income		$172800

Cost of goods sold = 219000+16700= 693000