Question

Froya Fabrikker AS of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oll 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 $351,500 of manufacturing overhead for an estimated allocation base of 950 direct labor-hours. The following transactions took place during the year. 29 a. Raw materials purchased on account. $215,000. b. Raw materials used in production (all direct materials) $200.000, c. Utility bills incurred on account. $62.000 (85% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs: Direct labor (1,025 hours) Indirect labor Selling and administrative salaries $ 245,000 $93,000 $ 125,000 e. Maintenance costs incurred on account in the factory, $57,000 Advertising costs incurred on account $139.000 Depreciation was recorded for the year. $87000 (80% related to factory equipment, and the remainder related to selling and administrative equipment) In Rental cost incurred on account, $112.000 (85% related to factory facilities, and the remainder related to selling and administrative facilities Manufacturing overhead cost was applied to jobs. _? Cost of goods manufactured for the year $800.000 Sales for the year on account) totaled $1350,000. These goods cost $800,000 according to their job cost sheets The balances in the inventory accounts at the beginning of the year were: Ro Raterials Work in Process $ 13,000 1 24.000 Required: 1. Prepare journal entries to record the preceding transactions 2. Post your entries to T-accounts. Don't forget to enter the beginning inventory balances above 2. Prepare a schedule of cost of goods manufactured 4A Prepare a journal entry to close any balance in the Manufacturing Overhead account to cost of Goods Sold 40. Prepare a schedule of cost of goods sold 5. Prepare an income statement for the year LE

Answer 1

Credit Sales Requirement (1) No Transaction General Journal 1 (a) Raw Materials Accounts Payable Debit $ 215,000 Requirement (2) Accounts Receivable Beg Bal. $1,350,000 Beg Bal. $ 215,000 $ 1,350,000 (k) 2 (b) $ 200,000 End Bal $1,350,000 Work in process Raw Materials End Bal. $ 1,350,000 $ 200,000 3 (c) Manufacturing overhead Utilities Expense Accounts Payable $ $ 52,700 9,300 Raw Materials Beg Bal. $ 33,000 (a) $ 215,000 $200,000 (b) Cost of goods sold Beg Bal. $ (k) $830,000 $ 62,000 4 (d) $ 245,000 93,000 125,000 End Bal. $ 48,000 Work in process Manufacturing overhead Salaries Expense Salaries and wages payable End Bal. $830,000 $ 463,000 Manufacturing Overhead 5 (e) $ 57,000 Manufacturing overhead Accounts payable Beg Bal. (b) (d) 0 Work In Process $ 24,000 $ 200,000 $800,000 6) $ 245,000 $ 379,250 $ 57,000 Beg Bal. (c) (d) (e) (9) $ 52,700 $ 379,250 $ 93,000 $ 57,000 $ 69,600 $ 95,200 6 () $ 139,000 Advertising Expense Accounts payable $ 139,000 $ 48,250 7 (g) $ 11,750 Manufacturing overhead Depreciation Expense Accumulated Depreciation 69,600 17,400 $ $ 87,000 Advertising Expense Finished Goods Beg Bal. $ 63,000 6) $ 800,000 $830,000 (k) Beg Bal. 8 E $ 139,000 Manufacturing overhead Rent Expense Accounts Payable $ $ 95,200 16,800 $ 112,000 End Bal. $ 33,000 End Bal. $139,000 9 0 $ 379,250 Utilities Expense Work in process Manufacturing overhead Accumulated Depreciation $ 87,000 (9) $ 379,250 Beg Bal Beg Bal c) $ 9,300 10 6) $ Finished goods Work in process 800,000 $ 800,000 End Bal. $ 87,000 End Bal. 9,300 11 (k1) Accounts Receivable Sales $ 1,350,000 Accounts Payable Salaries Expense $1,350,000 Beg Bal. Beg Bal. (d) $ 125,000 12 (K2) $ Cost of goods sold Finished goods 830,000 $ 830,000 $215,000 (a) $ 62,000 (C) $ 57,000 (e) $ 139,000 (0) $ 112,000 (h) End Bal. $125,000 Salaries and Wages Payable End Bal. $585,000 Beg Bal. $ 463,000 (d) Depreciation Expense $ 463,000 Beg Bal. (9) $ 17,400 Rent Expense End Bal. $ 17,400 Beg Bal. $ 16,800 End Bal $ 16,800

Requirement 4(a) No 1 Transaction General Journal Debit Credit 1 Manufacturing Overhead $11,750 Cost of goods sold $ 11,750 Requirement (3) Froya Fabrikker A/s Schedule of cost of goods manufactured Drect materials Raw materials inventory, Beginning $ 33,000 Add : Purchase of Raw materials $ 215,000 Materials available for use $ 248,000 Less : Raw materials inventory, Ending $ 48,000 Materials used in production $ 200,000 Direct labour $ 245,000 Manufacturing overhead applied to work in process $ 379,250 Total manufacturing overhead $ 824,250 Add : Work in process, Beginning $ 24,000 $ 848,250 Less : Work in process, Ending $ 48,250 Cost of goods manufactured $ 800,000 Requirement (5) Froya Fabricker A/S Income Statement For the Year Ended Sales Cost of goods sold Gross Margin Seling and administrative expense Utilities Expense $ 9,300 Advertising Expense $ 139,000 Salaries Expense $125,000 Depreciation Expense $ 17,400 Rent Expense $ 16,800 Total Seling and administrative expense $ 1,350,000 $ 818,250 $ 531,750 $ 307,500 Net Income $ 224,250 Requirement 4(b) Froya Fabrikker A/S Schedule of cost of goods sold Finished goods inventory,Beginning Add: Cost of goods manufactured Goods available for sale Less : Finished goods inventory, Ending Unadjusted cost of goods sold Less; Overappled overhead Adjusted Cost of goods sold $ 63,000 $ 800,000 $ 863,000 $ 33,000 $ 830,000 $ 11,750 $ 818,250