Question

Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $94,500 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials Work in process Finished goods $ 10,900 $ 4,400 $ 8,600 During the year, the following transactions were completed: a. Raw materials purchased on account, $164,000. b. Raw materials used in production, $146,000 (materials costing $122,000 were charged directly to jobs; the remaining materials were Indirect). c. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $164,000 $ 262,500 $ 30,000 $ 42,000 d. Rent for the year was $18.400 ($13,500 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory. $14,000. f. Advertising costs incurred, $13,000. g. Depreciation recorded on equipment, $22,000. ($17,000 of this amount related to equipment used in factory operations, the remaining $5,000 related to equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $_?. i. Goods that had cost $229,000 to manufacture according to their job cost sheets were completed. j. Sales for the year (all paid in cash) totaled $507,000. The total cost to manufacture these goods according to their job cost sheets was $215,000. Required: 1. Prepare journal entries to record the transactions for the year. 2. Prepare T-accounts for each inventory account Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts). 3A. Is Manufacturing Overhead underapplied or overapplied for the year? 3B. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4. Prepare an income statement for the year. All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared. Complete this question by entering your answers in the tabs below. Req! Reg 2 Req ЗА Req 38 Req 4 Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 11 > Raw materials purchased on account, $164,000. Note: Enter debits before credits Transaction General Journal Debit Credit

Answer 1

Goldnest Company Requirement 1 Requirement 2 146000 Journal Enteries Trans. Particulars a. Raw materials a/c To Cash Raw Materials 10900 b. 164000 Debit in $ Credit in $ 164000 164000 Beg. Bal a. Dr. 28900 End Bal. 174900 b. 174900 174900 Work in process a/c Dr. Manufacturing overhead a/c Dr. To Raw materials 122000 24000 146000 Work In Process 4400i. 229000 Beg. Bal b. c. c. Work in process a/c Dr. Manufacturing overhead a/c Dr. Sales commissions expense a/c Dr. Administrative salaries a/c Dr. To Cash 164000 262500 30000 42000 h. 122000 164000 344400 End Bal. 634800 405800 498500 634800 d. 13500 Manufacturing overhead a/c Dr. Rent expense a/c Dr. To Cash 4900 Finished Goods 8600 i. 229000 Beg. Bal i. 215000 18400 End Bal. 22600 14000 237600 237600 Manufacturing overhead a/c Dr. To Cash 14000 f. 13000 b. Advertising expense a/c Dr. To Cash Manufacturing Overhead 24000 h. 344400 262500 13500 13000 C. d. e 14000 Manufacturing overhead a/c Dr. Depreciation expense a/c Dr. To Accumulated depreciation 17000 5000 22000 End Bal. 17000 13400 344400 344400 Cost of Goods Sold 215000 j. h. Work in process a/c Dr. 344400 To Manufacturing overhead 344400 164000 x 210% % Predetermined overhead rate = Estimated manufacturing overhead cost Estimated total amount of the allocation base = 94500 / 45000 = 210% Requirement 3a. i. i Dr. 229000 Finished goods a/c To Work in process Manufacturing Overhead is overapplied 229000 Requirement 4 j. Dr. 507000 Cash a/c To Sales (Cash sales) 507000 507000 -215000 292000 Dr. 215000 Cost of goods sold a/c To Finished goods 215000 Income Statement Sales Cost of Goods Sold Gross profit Selling and administrative expenses: Sales commissions Administrative salaries Rent expense Advertising expenses Depreciation expense Net operating income Requirement 3b. 30000 42000 4900 13000 5000 94900 Journal Enteries Trans. Particulars Manufacturing overhead a/c Dr. To Cost of Goods Sold Debit in $ Credit in $ 13400 13400 197100