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 $76,500 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 $11,000 $ 4,900 $ 8,800 During the year, the following transactions were completed: a. Raw materials purchased for cash, $ 167,000. b. Raw materials used in production, $149,000 (materials costing $125,000 were charged directly to jobs; the remaining materials were indirect). c. Cash paid to employees as follows: Direct labor Indirect labor Sales Commissions Administrative salaries $ 161,000 $ 192,900 $ 21,000 $ 45,000

Answer 1

General Journal Credit Credit Requirement (1) Transaction a) Raw Materials Cash Debit $ 167,000 Requirement (2) Raw Materials Beg. Bal. 11,000 $149,000 b) a) $ 167,000 Requirement (3) Event General Journal 1 Manufacturing Overhead Cost of goods sold Debt $14,900 $ 167,000 $ 14,900 b) End. Bal. $ 29,000 Work in Process Manufacturing Overhead Raw Materials $ $ 125,000 24,000 (To Close Balance in MOH to Cost of goods sold) $ 149,000 Work in Process Manufacturing Overhead Sales Commissions Expense Salaries Expense Cash $ 161,000 $ 192,900 $ 21,000 $ 45,000 Work in Process Beg. Bals 4,900 $ 226,000 b) $ 125,000 c) $ 161,000 h) $ 273,700 End. Bal. $ 338,600 $ 513,000 $ 201,100 $ 311,900 $ 419,900 Requirement (4) Gold Nest Company Income Statement Sales Less Cost of Goods Sold Gross Profit Less Seling and Administrative Expenses Sales Commissions Administrative Salaries Rent Expense Advertising Expense Depreciation Expense Net Operatng Income d) Manufacturing Overhead Rent Expense Cash $ $ 13,900 4,100 $ 21,000 $ 45,000 $ 4,100 $11,000 $ 9,000 $ $ $ 18,000 e) Manufacturing Overhead Cash $ 90,100 221,800 13,000 Finished Goods Beg. Bal. $ 8,800 $ 216,000 5) D $ 226,000 $ 13,000 f) $ 11,000 End. Bal. $ 18,800 Note: Please comment down for any further clarifications Advertising Expense Cash $ 11,000 9) Manufacturing Overhead Depreciation Expense Accumulated Depreciation $ $ 15,000 9,000 $ 24,000 h) $ 273,700 Work in Process Manufacturing Overhead b) c) d) e) 9) Manufacturing Overhead $ 24,000 $273,700 h) $ 192,900 S 13,900 $ 13,000 $ 15,000 $ 14,900 End. Bal. $ 273,700 0. $ 226,000 Finished Goods Work in Process $ 226,000 Cash Sales $ 513,000 $ 513,000 Cost of Goods Sold $ 216,000 1) $ 216,000 Cost of Goods Sold Finished Goods $ 216,000 End. Bal. $ 216,000