Question

Comprehensive Cases 43. Journal Entries, Closing Manufacturing Overhead, and Preparing an Income Statement Jansen, Inc., is a defense contractor that uses job costing. Because the firm uses a perpetual inventory system, the three supporting schedules to the income statement (the schedule of raw materials placed in production, the schedule of cost of goods manufactured, and the schedule of cost of goods sold) are not necessary. Inventory account beginning balances at January 1, 2016, are listed as follows. Raw materials inventory $ 500,000 Work-in-process inventory $ 700,000 Finished goods inventory $1,800,000 You will be recording the following transactions, which summarize the activities that occurred during the year ended December 31, 2016: 1. Raw materials were purchased for $300,000 on account. 2. Raw materials totaling $420,000 were placed in production, $60,000 for indirect materials and $360,000 for direct materials. 3. The raw materials purchased in transaction 1 were paid for. 4. A total cost of $800,000 for direct labor, shown on the timesheets, was recorded as wages payable. 5. Production supervisors and other indirect labor working in the factory were owed $540,000, recorded as wages payable. 6. Wages owed, totaling $1,200,000, were paid. (These wages were previously recorded correctly as wages payable.) 7. The costs listed in the following related to the factory were incurred during the period. (Hint: Record these items in one entry with one debit to manufacturing overhead and four separate credits): Building depreciation $580,000 Insurance (prepaid during 2016, now expired) $220,000 Utilities (on account) $ 80,000 Maintenance (paid cash) $440,000 8. Manufacturing overhead was applied at a rate of $20 per machine hour, and 90,000 machine hours were utilized during the year. (Hint: No need to calculate the predetermined overhead rate since it is already given to you here.) FLASHCARDS & QUIZ IOUS

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Answer-

Opening Balance 1)Accounts payable Ending balance Raw Material Inventory 500000 2) Work In Process $300,000 2) ManufacturingOverhead $380,000 360000 60000 2030000 Opening Balance 2) Raw material 4) Wages payable 8) ManufacturingOverhead Ending balance Work in process 700000 11) Finsihed Goods Inv 360000 800000 1800000 1630000 Cost of good sold 2570000 13) Finished Goods Inventory

6) Cash 800000 540000 140000 1800000 2) Raw Material 5) Wages payable 7) Acc Dep-Buidling 7) Prepaid Insurance 7) accounst payable 7) Cash Ending balance Wages Payable 1200000 4) Work In Process 5) ManufacturingOverhead ending balance Manufacturing overhead 60000 8) Work in process 540000 (90000*20) 580000 $220,000 80000 440000 120000 2570000 Opening Balance 11) Work in process Ending balance Finsihed Goods 1800000 13) Cost of good sold 2030000 1260000

Cr Transa Accounst Title 1 Raw Material Inventory Accounst Payable Dr $300,000 $300,000 2 Work in Process Inventory Manufacturing Overhead Raw material Inventory $360,000 $60,000 $420,000 3 $300,000 Accounst Payable Cash $300,000

4 Work in Process Inventory $800,000 wages payable/Factory labor $800,000 5 $540,000 Manufacturing Overhead wages payable $540,000 6 $1,200,000 wages payable Cash $1,200,000

7 Manufacturing Overhead 1320000 Accumulated Depreciation-Building Prepaid expenses Accounts Payable Cash 580000 220000 80000 440000 8 1800000 Work in Process Inventory Manufacturing Overhead 1800000

9 $430,000 Selling expenses Cash $430,000 10 265000 G&A expenses Cash 265000 11 2030000 Finished Goods Inventory Work in Process Inventory 2030000

12 3800000 Accounts Receivable sales 3800000 13 $2,570,000 Cost of Good sold Finished Goods Inventory 2570000 14 3300000 Cash Accounts Receivable 3300000

Underapplied overhead Cost of Good sold Manufacturing Overhead 120000 120000

3800000 $2,690,000 $1,110,000 Income statement Sales Less: cost of Good sodl Gross profit Less: Selling expenses G & A expenses Net operating income $430,000 265000 $695,000 $415,000

The cost of good sold is adjusted upward as manufacturing overhead was underapplied so the COGS will be increased with underapplied amount.