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 $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 Work in process Finished goods $ 25,000 $ 10,000 $ 40,000 During the year, the following transactions were completed: a. Raw materials purchased on account, $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. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $ 180,000 $ 72,000 $ 63,000 $ 90,000 d. Rent for the year was $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $57,000. f. Advertising costs incurred, $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.) h. Manufacturing overhead cost was applied to jobs, $_?. i. Goods that had cost $675,000 to manufacture according to their job cost sheets were completed. j. Sales for the year (all paid in cash) totaled $1,250,000. The total cost to manufacture these goods according to their job cost sheets was $700,000.

Answer 1

XI 5 2020-09(3) SEP.xlsx - Microsoft Excel ? X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW DEVELOPER Sign in 028 : X fi A B D E F G H 1 J K L M N 0 P Q 1 Answer 2 2 3 4 с Answer 1 Gold Nest Company Journal entries Account titles Raw material inventory Account payable (To record Purchase of raw material inventory.) Date Credit Debit 275,000 Raw material Inventory Debit Credit Transaction 25,000 280,000 B 275,000 Transactior Beg Bal A A Transactior Beg Bal B 275,000 Manufacture Overhead Debit Credit Transaction 297,000 H 60,000 72,000 13,000 57,000 88,000 5 6 7 8 9 10 C End. Bal $ 20,000 D E B 220,000 60,000 G Work in progress inventory Manufacture overhead (280000-220000) Raw material inventory (To record Issue of raw material inventory.) 11 280,000 Transactior Beg. Bal Finished Goods Inventory Debit Credit Transaction 40,000 700,000 J 675,000 12 End. Bal 7,000 7,000 Over applied 13 14 15 с End. Bal 180,000 72,000 63,000 90,000 $ 15,000 Work in progress inventory Manufacture overhead Sales commissions Expenses Salaries Expenses - Administrative Cash (To record labor Cost.) 16 17 18 Cost of Goods sold Debit Credit Work in Progress Inventory Transactio Debit Credit Transaction Beg. Bal 10,000 675,000 1 B 220,000 C 180,000 H 297,000 405,000 Transaction 19 20 21 Transactior Beg. Bal J 700,000 D 13,000 5,000 End. Bal $ 700,000 End. Bal $ 32,000 Manufacture overhead Rent Expense (18000-13000) Cash (To record rent.) 22 23 24 25 18,000 Answer 3 Manufacture Overhead account has credit balance. It means overapplied overhead. 7,000 E 57,000 26 27 28 29 30 Manufacture overhead Cash (To record utility costs.) 57,000 Credit Date Adj 140,000 General Journal Debit Manufacture overhead 7,000 Cost of goods sold To rerarduer annlied of manufacture overheadil Sheet34 F Advertising expense cach Sheet26 Sheet27 Sheet28 7,000 Activate Windows Go to Settings to activate Windows Sheet29 1000 Sheet32 Sheet30 Sheet31 Sheet33 READY I + 90% 08:53 i Search the web and Windows O ENG IN 25-09-20

X] 5 2020-09(3) SEP.xlsx - Microsoft Excel ? X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW DEVELOPER Sign in N25 X f А B C D E F K L M N 0 Р Q 25 H 1 J Manufacture Overhead account has credit balance. It means overapplied overhead. 7,000 E 57,000 Manufacture overhead Cash (To record utility costs.) 57,000 Credit 26 27 28 29 30 31 32 Date General Journal Debit Adj Manufacture overhead 7,000 Cost of goods sold (To record over applied of manufacture overhead.) F 140,000 7,000 Advertising expense Cash (To record Advertising expense.) 140,000 33 34 G Manufacture overhead Depreciation Expense Accumulated depreciation equipment (To record Depreciation on equipment.) 88,000 12,000 35 36 37 38 39 100,000 $ 1,250,000 $ 693,000 $ 557,000 H TRUE Answer 4 Gold Nest Company Income statement Sales revenue Less: Cost of Goods Sold (Adjusted) Gross Profit Less: Selling and Administrative Expenses Sales commissions Expenses $ 63,000 Salaries Expenses - Administrative $ 90,000 Rent Expense (18000-13000) $ 5,000 Advertising expense $ 140,000 Depreciation Expense $ 12,000 Total Selling and Administrative Expenses Net income Work in progress inventory 297,000 Manufacture overhead 297,000 (To record Manufacture overhead Applied to Job.) (180000*165%) 40 41 42 43 1 44 Finished goods inventory 675,000 Work in progress inventory (To record completion of Finished goods inventory.) 675,000 $ 45 46 310,000 247,000 $ 47 J 700,000 Cost of goods sold Finished goods inventory (To record Finished goods Inventory sold.) 48 49 700,000 Cost of goods Sold Under (Over) applied of overhead Adjusted Cost of goods Sold $ 700,000 (7,000) 693,000 J 1,250,000 50 51 52 53 Cash Sales Revenue (To record sales revenue.) 1,250,000 $ Budgeted Manufacture overhead Divided by: Budgeted labor Cost Predetermined overhead rate S 330,000 200,000 165% 54 55 Activate Windows Go to Settings to activate Windows Sheet26 Sheet27 Sheet28 Sheet29 Sheet30 Sheet31 Sheet32 Sheet33 Sheet34 + READY 3 1 + 90% i Search the web and Windows O ENG IN 08:53 25-09-20