Question

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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 $95,000 of manufacturing overhead for an estimated activity level of $50,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials Work in process Finished goods $ 10,100 $ 4,900 $ 8,200 During the year, the following transactions were completed: a. Raw materials purchased on account, $162,000. b. Raw materials used in production, $143,000 (materials costing $125,000 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 $ 162,000 $ 232,700 $ 26,000 $ 42,000 n 2 5 Next

Answer 1

credit Part 1 No Transaction 1 a) No 9 li debit 2,30,000 credit account title Raw material inventory Account payable account title finished goods inventory work in process inventory debit 1,62,000 2,30,000 1,62,000 2 b 5,15,000 work in process inventory manufacturing overhead Raw material inventory 1,25,000 18,000 10j(1) cash sales 5,15,000 1,43,000 3c 2,19,000 11 (2) Cost of goods sold finished goods inventory 2,19,000 work in process inventory manufacturing overhead salaries commission expense administrative salaries expense cash 1,62,000 2,32,700 26,000 42,000 4,62,700 1.90 *predetermined overhead rate per direct labor dollars 95000/50000 d Manufacturing overhead Rent expense cash 13,600 4,500 18,100 5 e 12,000 Manufacturing overhead Accounts payable 12,000 6f 12,000 Advertisement expense Accounts payable 12,000 78 manufacturing overhead depreciation expense accumulated depreciation 17,000 8,000 25,000 8h* 3,07,800 work in process inventory manufacturing overhead (162000*1.90) 3,07,800

Part 2. T accounts Raw Materials inventory beg bal 10,100 1,43,000 b a 1,62,000 end bal 29,100 work in in Process inventory beg bal 4,900 2,30,000 i b 1,25,000 с 1,62,000 h 3,07,800 end bal 3,69,700 4.Income Statement sales Less : COGS =219000-14500 3A Manufacturing Overhead overapplied = $14500 5,15,000 2,04,500 3,10,500 3B credit Finished Goods inventory beg bal 8,200 2,19,000 i 2,30,000 account title Manufacturing overhead Cost of goods sold debit 14,500 14,500 Gross margin Less : selling and administrative expesne Sales commissions Administrative salaries Rent expense advertisement expense Depreciation expense Total expense net income 26,000 42,000 4,500 12,000 8,000 end bal 19,200 92,500 2,18,000 Cost of Goods Sold 2,19,000 end bal 2,19,000 manufacturing ovehead b 18,000 3,07,800 h C 2,32,700 d 13,600 e 12,000 g 17,000 end bal 14,500