Question

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 $380,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $220,000. b. Raw materials used in production (all direct materials) $205,000. c. Utility bills incurred on account, $63,000 (90% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (1,075 hours) Indirect labor Selling and administrative salaries $250,000 $ 94,000 $130,000 e. Maintenance costs incurred on account in the factory, $58,000 f. Advertising costs incurred on account, $140,000 g. Depreciation was recorded for the year. $88,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $113,000 (90% 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. $810,000. k. Sales for the year (all on account) totaled $1.400.000. These goods cost $840,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were:

Answer 1

Credit Sales Requirement (1) No Transaction General Journal 1 (a) Raw Materials Accounts Payable Debit $ 220,000 Requirement (2) Accounts Receivable Beg Bal. $1,400,000 Beg Bal. $ 220,000 $1,400,000 (k) 2 (b) $ 205,000 End Bal. $1,400,000 Work in process Raw Materials End Bal. $1,400,000 $ 205,000 3 (c) Manufacturing overhead Utilities Expense Accounts Payable 56,700 6,300 $ Raw Materials Beg Bal. $ 34,000 (a) $ 220,000 $205,000 (b) Cost of goods sold Beg Bal. $ (k) $840,000 $ 63,000 4 (d) $ 250,000 94,000 130,000 End Bal. $ 49,000 Work in process Manufacturing overhead Salaries Expense Salaries and wages payable End Bal. $ 840,000 $ 474,000 Manufacturing Overhead 5 (e) $ 58,000 Manufacturing overhead Accounts payable Beg Bal. (b) (d) 0 Work In Process $ 25,000 $ 205,000 $810,000 6) $ 250,000 $ 408,500 $ 58,000 Beg Bal. (c) (d) (e) (9) $ 56,700 $ 408,500 ( $ 94,000 $ 58,000 $ 74,800 $ 101,700 6 () $ 140,000 Advertising Expense Accounts payable $ 140,000 $ 78,500 7 (g) $ 23,300 Manufacturing overhead Depreciation Expense Accumulated Depreciation 74,800 13,200 $ $ 88,000 Advertising Expense Finished Goods Beg Bal. $ 64,000 6) $ 810,000 $840,000 (k) Beg Bal. 8 h) Manufacturing overhead Rent Expense Accounts Payable $ $ 101,700 11,300 $ 140,000 $ 113,000 End Bal. $ 34,000 End Bal. $140,000 9 0 $ 408,500 Utilities Expense Work in process Manufacturing overhead Accumulated Depreciation $ 88,000 (9) $ 408,500 Beg Bal Beg Bal c) $ 6,300 10 6) $ Finished goods Work in process 810,000 $ 810,000 End Bal. $ 88,000 End Bal. 6,300 11 (k1) Accounts Receivable Sales $ 1,400,000 Accounts Payable Salaries Expense $1,400,000 Beg Bal. Beg Bal. (d) $ 130,000 12 (K2) $ Cost of goods sold Finished goods 840,000 $ 840,000 $ 220,000 (a) $ 63,000 (C) $ 58,000 (e) $ 140,000 (0) $ 113,000 (h) End Bal. $ 130,000 Salaries and Wages Payable End Bal. $ 594,000 Beg Bal. $ 474,000 (d) Depreciation Expense $ 474,000 Beg Bal. (9) $ 13,200 Rent Expense End Bal. $ 13,200 Beg Bal. $ 11,300 End Bal $ 11,300

Requirement 4(a) No 1 Credit Transaction General Journal Debit 1 Manufacturing Overhead $ 23,300 Cost of goods sold $23,300 Requirement (3) Froya Fabrikker A/s Schedule of cost of goods manufactured Drect materials: Raw materials inventory,Beginning $ 34,000 Add : Purchase of Raw materials $ 220,000 Materials avalable for use $ 254,000 Less : Raw materials inventory, Ending $ 49,000 Materials used in production $ 205,000 Direct labour $ 250,000 Manufacturing overhead applied to work in process $ 408,500 Total manufacturing overhead $ 863,500 Add : Work in process, Beginning $ 25,000 $ 888,500 Less : Work in process, Ending $ 78,500 Cost of goods manufactured $ 810,000 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 $ 6,300 Advertising Expense $140,000 Salaries Expense $ 130,000 Depreciation Expense $ 13,200 Rent Expense $ 11,300 Total Seling and administrative expense $1,400,000 $ 816,700 $ 583,300 $ 300,800 Net Income $ 282,500 Requirement 46) Froya Fabricker 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 $ 64,000 $ 810,000 $ 874,000 $ 34,000 $ 840,000 $ 23,300 $ 816,700