Question

"Of all the times this hard drive could crash, it had to be now." Linda cried. "How can I finish the June financial reports without all the information? I knew I should have backed up the disk last night before I left work." News of the disaster traveled quickly through the office, and people began to stop by her cubicle to offer their help. Robert was the first to the rescue. "It might not be as bad as you think, Linda. I have the financial reports from May right here. According to the balance sheet, we had a total inventory of $190,000 at the end of May. And I remember that the Finished Goods Inventory was 60% of that amount." just finished the inventory counts last night," Michael chimed in from across the hall. "According to my tally sheets, we finished June with $38,000 in Direct Materials Inventory, $21,000 in Work in Process Inventory, and $43,000 in Finished Goods Inventory. This was a 25% increase from the balances in Direct Materials Inventory at the end of May. I bet with a little more investigative work, we can get all the numbers you need to complete the reports." Barbara called from Payroll to tell Linda that the company had paid a total of $26,000 for direct labor during June Juan, the billing supervisor, e-mailed Linda that the company had sent out invoices to customers totaling $561,000. Linda knew that the overhead rate was 200% of direct labor costs. She also knew that the company priced its product using a 100% markup on the cost of goods sold. Armed with all this information, she sat down to reconstruct the inventory accounts for June.

Answer 1

1. Schedule of Cost of Goods Sold -

Schedule of Cost of Good Sold Beginning Direct Material $ 30,400 Purchase $ 114,500 Closing Direct Material $ (38,000) Direct Material Used Direct Labour Overhead Total Manufacturing Cost Beginning Work in Progress (-) Closing Work in Progress Cost of Goods Manufactured + Beginning Finished Goods Cost of Goods Available for Sale (-) Closing Finished Goods Cost of Goods Sold + $ 106,900 $ 26,000 $ 52,000 $184,900 $ 45,600 $ (21,000) $ 209,500 $ 114,000 $323,500 $ (43,000) $ 280,500

2. Ledgers -

Direct Material $ 30,400 RM Used $ 114,500 Op. Bal Purchase $ 106,900 Cl. Bal $ 38,000 $209,500 Work in Progress Op. Bal $ 45,600 Cost of Goods RM Used $ 106,900 Manufactured Direct Labour $ 26,000 Overhead $ 52,000 Cl. Bal $ 21,000 Op. Bal Finished Goods $ 114,000 Cost of Goods Sold $ 280,500 $209,500 Cost of Goods Manufactured Cl. Bal $ 43,000