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 $329,000 of manufacturing overhead for an estimated allocation base of 940 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $205,000. b. Raw materials used in production (all direct materials), $190,000. c. Utility bills incurred on account, $60,000 (90% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (1,015 hours) Indirect labor Selling and administrative salaries $ 235,000 $ 91,000 $ 115,000 e. Maintenance costs incurred on account in the factory, $55,000 f. Advertising costs incurred on account, $137,000. g. Depreciation was recorded for the year, $85,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $110,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, $_? . j. Cost of goods manufactured for the year, $780,000. k. Sales for the year (all on account) totaled $1,250,000. These goods cost $810,000 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 $ 31,000 $ 22,000 $ 61,000

STEP 1: Create the following Journal Entries:

• The raw materials were purchased for use in production, $205,000 on account.
• The raw materials used in production (all direct materials), $190,000.
• The utility bills were incurred on account, $60,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
• The salary and wage costs accrued were $235,000 (Direct labor), $91,000 (Indirect labor), $115,000 (Selling and administrative salaries).
• The maintenance costs were incurred on account in the factory, $55,000.
• The advertising costs were incurred on account, $137,000.
• The depreciation was recorded for the year, $85,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment).
• The entry for rental cost incurred on account on buildings, $110,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities).
• The entry for manufacturing overhead cost applied to jobs.
• The cost of goods manufactured for the year, $780,000.
• The sales for the year (all on account) totaled $1,250,000.
• The goods cost $810,000 according to their job cost sheets.

STEP 2: Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)

STEP 3: Prepare a schedule of cost of goods manufactured.

STEP 4-A: Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

STEP 4-B: Prepare a schedule of cost of goods sold.

STEP 5: Prepare an income statement for the year.

Sorry, it's a long question, I greatly appreciate your time!

Answer 1

Credit Requirement (1) No Transaction General Journal 1 (a) Raw Materials Accounts Payable Debit $ 205,000 $ 205,000 2 (b) $ 190,000 Work in process Raw Materials $ 190,000 3 o Manufacturing overhead Utilities Expense Accounts Payable $ $ 54,000 6,000 $ 60,000 4 (d) Work in process Manufacturing overhead Salaries Expense Salaries and wages payable $ $ $ 235,000 91,000 115,000 $ 441,000 5 (e) $ 55,000 Manufacturing overhead Accounts payable $ 55,000 6 (f) $ 137,000 Advertising Expense Accounts payable $ 137,000 7 (9) Manufacturing overhead Depreciation Expense Accumulated Depreciation $ $ 59,500 25,500 $ 85,000 8 (h) Manufacturing overhead Rent Expense Accounts Payable $ $ 82,500 27,500 $ 110,000 9 (i) $ Work in process Manufacturing overhead 355,250 $ 355,250 10 6) $ Finished goods Work in process 780,000 $ 780,000 11 (ki) Accounts Receivable Sales $ 1,250,000 $ 1,250,000 12 (k2) $ 810,000 Cost of goods sold Finished goods $ 810,000

Sales Requirement (2) Accounts Receivable Beg Bal. $ 1,250,000 Beg Bal. $ 1,250,000 (k) End Bal. $1,250,000 End Bal. $1,250,000 Raw Materials Beg Bal. $ 31,000 (a) $ 205,000 $190,000 (b) Cost of goods sold Beg Bal. $ (k) $ 810,000 End Bal. 46,000 End Bal. $ 810,000 Manufacturing Overhead Work In Process Beg Bal. $ 22,000 (b) $ 190,000 $780,000 G) (d) $ 235,000 0 $ 355,250 Beg Bal. c) (d) (e) (9) (h) $ 54,000 $ 355,250 (0) $ 91,000 $ 55,000 $ 59,500 $ 82,500 $ 22,250 $ 13,250 Advertising Expense Finished Goods Beg Bal. $ 61,000 6) $ 780,000 $810,000 (k) Beg Bal. () $ 137,000 End Bal. $ 31,000 End Bal. $137,000 Utilities Expense Accumulated Depreciation $ 85,000 (9) Beg Bal Beg Bal $ 6,000 End Bal. $ 85,000 End Bal. $ 6,000 Accounts Payable Salaries Expense Beg Bal. Beg Bal. (d) $ 115,000 $ 205,000 (a) $ 60,000 (C) $ 55,000 (e) $ 137,000 (6) $ 110,000 (h) End Bal. $ 115,000 Salaries and Wages Payable End Bal. $ 567,000 Beg Bal. $ 441,000 (d) Depreciation Expense Beg Bal. $ 441,000 (9) $ 25,500 Rent Expense End Bal. $ 25,500 Beg Bal. (h) $ 27,500 End Bal $ 27,500

Requrement 4(a) No 1 Credt Transaction General Journal Debit 1 Manufacturing Overhead $13,250 Cost of goods sold $13,250 Requrement (3) Froya Fabriker Als Schedule of cost of goods manufactured Drect materials: Raw materials inventory,Beginning $ 31,000 Add : Purchase of Raw materials $ 205,000 Materials avalable for use $ 236,000 Less : Raw materials inventory, Ending $ 46,000 Materials used in production Direct labour Manufacturing overhead applied to work in process Total manufacturing overhead Add: Work in process, Beginning Requirement (5) Froya Fabrikker A/S Income Statement For the Year Ended Sales Cost of goods sold Gross Margin Seling and administrative expense Utities Expense $ 6,000 Advertising Expense $137,000 Salaries Expense $115,000 Deprecation Expense $ 25,500 Rent Expense $ 27,500 Total Seling and administrative expense $1,250,000 $ 796,750 $ 453,250 $190,000 $ 235,000 $ 355,250 $ 780,250 $ 22,000 $ 802,250 $ 22,250 $ 780,000 $ 311,000 Less : Work in process, Ending Cost of goods manufactured Net Income $ 142,250 Requirement 46) Froya Fabrikker A/S Schedule of cost of goods sold Finished goods inventory,Beginning Add: Cost of goods manufactured Goods available for sale Less : Finished goods inventory, Ending Unadjusted cost of goods sold Less; Overappled overhead Adjusted Cost of goods sold $ 61,000 $ 780,000 $ 841,000 $ 31,000 $ 810,000 $ 13,250 $ 796,750