Question

Problem 3-15 (Algo) Journal Entries; T-Accounts; Financial Statements [LO3-1, LO3-2, LO3-3, LO3-4] Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor- hours. Its predetermined overhead rate was based on a cost formula that estimated $349,800 of manufacturing overhead for an estimated allocation base of 1,060 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $230,000. b. Raw materials used in production (all direct materials), $215,000. c. Utility bills incurred on account, $65,000 (85% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (1,135 hours) Indirect labor Selling and administrative salaries $ 260,000 $ 96,000 $ 140,000 e. Maintenance costs incurred on account in the factory, $60,000 f. Advertising costs incurred on account, $142,000. g. Depreciation was recorded for the year, $90,000 (75% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $115,000 (80% related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, $_? . j. Cost of goods manufactured for the year, $830,000. k. Sales for the year (all on account) totaled $1,500,000. These goods cost $860,000 according to their job cost sheets.

Answer 1

Credit Sales Requirement (1) No Transaction General Journal 1 (a) Raw Materials Accounts Payable Debit $ 230,000 Requirement (2) Accounts Receivable Beg Bal. (k) $1,500,000 Beg Bal. $ 230,000 $1,500,000 (k) 2 (b) $ 215,000 Work in process Raw Materials End Bal. $1,500,000 End Bal. $1,500,000 $ 215,000 3 (c) Manufacturing overhead Utilities Expense Accounts Payable $ $ 55,250 9,750 Raw Materials Beg Bal. $ 36,000 (a) $ 230,000 $215,000 (6) Cost of goods sold Beg Bal. $ (k) $ 860,000 $ 65,000 4 (d) $ 260,000 $ 96,000 $ 140,000 End Bal. $ 51,000 Work in process Manufacturing overhead Salaries Expense Salaries and wages payable End Bal. $ 860,000 $ 496,000 Manufacturing Overhead 5 $ Manufacturing overhead Accounts payable 60,000 Work In Process Beg Bal. $ 27,000 (6) $ 215,000 $830,000 6) (d) $ 260,000 $ 374,550 $ 60,000 Beg Bal. (c) (d) (e) (9) (h $ 55,250 $ 374,550 0 $ 96,000 $ 60,000 $ 67,500 $ 92,000 6 (1) $ 142,000 Advertising Expense Accounts payable $ 142,000 $ 46,550 (9) $ 3,800 Manufacturing overhead Depreciation Expense Accumulated Depreciation $ $ 67,500 22,500 $ 90,000 Advertising Expense Finished Goods Beg Bal. $ 66,000 6) $ 830,000 $860,000 (k) Beg Bal. (0) 8 (h) $ 142,000 Manufacturing overhead Rent Expense Accounts Payable $ $ 92,000 23,000 $ 115,000 End Bal. $ 36,000 End Bal. $ 142,000 9 (0) $ 374,550 Utilities Expense Work in process Manufacturing overhead Accumulated Depreciation $ 90,000 (9) $ 374,550 Beg Bal Beg Bal (c) $ 9,750 10 6) Finished goods Work in process $ 830,000 $ 830,000 End Bal. $ 90,000 End Bal. $ 9,750 11 (ki) Accounts Receivable Sales $1,500,000 Accounts Payable Salaries Expense $1,500,000 Beg Bal. Beg Bal. (d) $140,000 12 (K2) $ 860,000 Cost of goods sold Finished goods $ 860,000 $ 230,000 (a) $ 65,000 C $ 60,000 (e) $ 142,000 (0) $ 115,000 (h) End Bal. $140,000 Salaries and Wages Payable End Bal. $612,000 Beg Bal. $ 496,000 (d) Depreciation Expense $ 496,000 Beg Bal. (9) $ 22,500 Rent Expense End Bal. $ 22,500 Beg Bal. (h) $ 23,000 End Bal $ 23,000

Credit Requrement 4a NO Transaction General Journal Debt 1 Manufacturing Overhead $3,800 Cost of goods sold $3,800 Requirement (3) Froya Fabriker Ns Schedule of cost of goods manufactured Direct materials Raw materials inventory,Beginning $ 36,000 Add : Purchase of Raw materials $ 230,000 Materials available for use $ 266,000 Less : Raw materials inventory, Ending $ 51,000 Materials used in production $215,000 Direct labour $260,000 Manufacturng overhead applied to work in process $ 374,550 Total manufacturing overhead $ 849,550 Add : Work in process,Beginning $ 27,000 $ 876,550 Less : Work in process, Ending $ 46,550 Cost of goods manufactured $830,000 Requirement (5) Froya Fabrikker A/S Income Statement For the Year Ended Sales Cost of goods sold Gross Margin Seling and administrative expense Utilities Expense $ 9,750 Advertising Expense $ 142,000 Salaries Expense $140,000 Depreciation Expense $ 22,500 Rent Expense $ 23,000 Total Seling and administrative expense $1,500,000 $ 856,200 $ 643,800 $ 337,250 Net Income $ 306,550 Requirement 4(b) Froya Fabrikker A/S Schedule of cost of goods sold Fnished goods inventory, Beginning Add: Cost of goods manufactured Goods available for sale Less : Fnished goods inventory, Ending Unadjusted cost of goods sold Less; Overappled overhead Adjusted Cost of goods sold $ 66,000 $830,000 $896,000 $ 36,000 $ 860,000 $ 3,800 $856,200