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 $336,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $225,000. b. Raw materials used in production (all direct materials). $210,000. c. Utility bills incurred on account, $58,000 (95% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs: Direct labor (1,125 hours) Indirect labor Selling and administrative salaries $ 255, eee $ 95, eee $ 135, eee e. Maintenance costs incurred on account in the factory, $59,000 f. Advertising costs incurred on account, $141,000. g. Depreciation was recorded for the year, $89,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $114,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities). 1. Manufacturing overhead cost was applied to jobs, $_? . J. Cost of goods manufactured for the year, $820,000. k. Sales for the year (all on account) totaled $1,450,000. These goods cost $850,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials Work in Process Finished Goods $ 35,000 $ 26,00 $ 65,800 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.) 3. 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. 4B. Prepare a schedule of cost of goods sold. 5. Prepare an income statement for the year.

Answer 1

Income statement for Froya Fabrikkers A/S , operating income= $269000

This is after deducting all the expenses related to utilities, salary, advertisment, depreciation, rent.