P2-17R. Review Problem for Chapter 1 and 2
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UltraLift Corp. manufactures chain hoists. The raw materials inventories on hand on October 1 were as follows:
The balances in the ledger accounts on October 1 were as follows:
Transactions during October were as follows:
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Payroll recorded during the month: direct labor, $28,000; indirect labor, $4,800.
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Indirect materials purchased for cash, $1,000.
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Materials purchased on account: chain–4,000 lb, $8,800; pulleys–2,000 sets, $10,200; steel plates–5,000 units, $3,000.
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Sales on account for the month, $126,375.
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Accounts receivable collected, $72,500.
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Materials used during October (FIFO costing): chain–14,000 lb; pulleys–4,400 sets; bolts and taps–4,000 lb; steel plates–3,800 units.
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Payroll paid, $32,800.
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Indirect materials issued to production in October, $650.
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Factory heat, light, and power costs for October, $3,000 (not yet paid).
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Office salaries paid, $6,000.
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Advertising paid, $2,000.
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Accounts payable paid, $33,750.
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Expired insurance–on office equipment, $100; on factory machinery, $300.
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Factory rent paid, $2,000.
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Depreciation on office equipment, $400; on office furniture, $180; on machinery, $1,200.
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Factory overhead charged to jobs, $11,950.
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Work in Process, October 31, $31,000. (Hint: The difference between the sum of the beginning balance in Work in Process plus the total charges to it during the period less the ending balance in Work in Process represents the cost of the goods completed during the period.)
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Cost of goods sold during the month, $84,250.
REQUIRED:
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Set up T-accounts and enter the balances as of October 1.
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Prepare journal entries to record each of the previous transactions.
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Post the journal entries to the accounts, setting up any new ledger accounts necessary. Only controlling accounts are to be maintained; however, show the calculation for the cost of materials used.
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Prepare a statement of cost of goods manufactured for October.
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Prepare an income statement.
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Prepare a balance sheet showing the classifications of current assets, plant and equipment, current liabilities, and stockholders’ equity.
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Homework Answers
In the books of UltraLift Corp.
| Journal entry | ||||||
| Dr.($) | Cr.($) | |||||
| 1 | Direct labour A/c dr. | 28,000.00 | ||||
| Indirect labour A/c Dr. | 4,800.00 | |||||
| To | Payroll A/c | 32,800.00 | ||||
| 2 | Indirect materials A/c Dr. | 1,000.00 | ||||
| To | Cash A/c | 1,000.00 | ||||
| 3 | Chain A/c Dr. | 8,800.00 | ||||
| Pulley A/c Dr | 10,200.00 | |||||
| Steel Plates A/c Dr. | 3,000.00 | |||||
| To | Accounts payable A/c | 22,000.00 | ||||
| 4 | Accounts receivable A/c Dr. | 126,375.00 | ||||
| To | Sales A/c | 126,375.00 | ||||
| 5 | Cash A/c | Dr. | 72,500.00 | |||
| To | Accounts receivable A/c Dr. | 72,500.00 | ||||
| 6 | Work in progress A/c Dr. | 54,340.00 | ||||
| To | Chain A/c | 28,400.00 | ||||
| To | Pulley A/c | 22,040.00 | ||||
| To | Bolts and taps A/c | 2,000.00 | ||||
| To | Steel Plates A/c | 1,900.00 | ||||
| 7 | Payroll A/c Dr. | 32,800.00 | ||||
| To | Cash A/c | 32,800.00 | ||||
| 8 | Work in progress A/c Dr. | 650.00 | ||||
| To | Indirect materials A/c | 650.00 | ||||
| 9 | Factory expenses A/c Dr. | 3,000.00 | ||||
| To | Factory expenses payable A/c | 3,000.00 | ||||
| 10 | Office salaries A/c Dr. | 6,000.00 | ||||
| To | Cash A/c | 6,000.00 | ||||
| 11 | Advertising Expense A/c Dr. | 2,000.00 | ||||
| To | Cash A/c | 2,000.00 | ||||
| 12 | Accounts payable A/c Dr. | 33,750.00 | ||||
| To | Cash A/c | 33,750.00 | ||||
| 13 | Expense A/c Dr. | 400.00 | ||||
| To prepaid insurance A/c | 400.00 | |||||
| 14 | Factory rent A/c Dr. | 2,000.00 | ||||
| To | Cash A/c | 2,000.00 | ||||
| 15 | Depreciation A/c | 1,780.00 | ||||
| Office equipment A/c | 400.00 | |||||
| Office furniture A/c | 180.00 | |||||
| Machinery | 1,200.00 | |||||
| 16 | Factory overhead A/c Dr. | 11,950.00 | ||||
| To | Accounts payable A/c | 11,950.00 | ||||
| 17 | Work in progress A/c Dr. | 11,950.00 | ||||
| To | Factory overhead A/c | 11,950.00 |
| Balances in Ledger Accounts on October 31 | |||
| Ledgers | $ | $ | |
| Cash | 6,950.00 | ||
| Finished Goods | 24,490.00 | ||
| Work In progress | 31,000.00 | ||
| Materials | 19,010.00 | ||
| Prepaid insurance | 2,600.00 | ||
| Accounts Receivable | 53,875.00 | ||
| Machinery | 125,000.00 | ||
| Accumulated depreciation | Machinery | 11,700.00 | |
| Office Equipment | 30,000.00 | ||
| Accumulated depreciation | Office Equipment | 5,200.00 | |
| Office Furniture | 20,000.00 | ||
| Accumulated depreciation | Office Furniture | 2,680.00 | |
| Accounts Payable | 30,200.00 | ||
| Factory expenses payable | 3,000.00 | ||
| Capital Stock | 182,200.00 | ||
| Retained Earnings | 77,945.00 | ||
| 312,925.00 | 312,925.00 |
| Cost of raw materials used | |||||||||||||
| Quantity (lb) | Rate($) | Chain | Quantity (sets) | Rate($) | Pulley | Quantity (lb) | Rate($) | Bolts and taps | Quantity (units) | Rate($) | Steel Plates | ||
| Opening balance | 12,000.00 | 2.00 | 24,000.00 | 4,000.00 | 5.00 | 20,000.00 | 10,000.00 | 0.50 | 5,000.00 | 4,000.00 | 0.50 | 2,000.00 | |
| Add | Purchase | 4,000.00 | 2.20 | 8,800.00 | 2,000.00 | 5.10 | 10,200.00 | - | 5,000.00 | 0.60 | 3,000.00 | ||
| Less | Closing Balance | 2,000.00 | 2.20 | 4,400.00 | 1,600.00 | 5.10 | 8,160.00 | 6,000.00 | 0.50 | 3,000.00 | 5,200.00 | 3,100.00 | |
| Material used | 14,000.00 | 28,400.00 | 4,400.00 | 22,040.00 | 4,000.00 |
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