Question

51-301-01 Chapter Two Assignment A Income Statement & Schedule of Cost of Goods Manufactured 5,000 Nick's Knacks Company had the following account balances as of January 1, 2020: Direct Materials Inventory $24,300 Supplies Inventory Work-In-Process Inventory 7,000 Finished Goods Inventory 18,000 Prepaid Insurance 8,000 During January, the company incurred the following costs: 1. Purchased $114,000 of direct materials and S50,000 of supplies on account. 2. Issued $134,000 of direct materials and $46,000 of supplies to production. 3. Accrued factory payroll of $88,000; $62,000 was for direct manufacturing labor and the rest was supervisor's salaries. 4. Accrued plant utility costs of $7,000; $1,600 of this was fixed. 5. Accrued property taxes on the factory for $2,000. 6. Had prepaid insurance of $1,600 on factory equipment expire in January 7. Had straight-line depreciation on factory equipment of $40,000. 8. Applied actual MOH to Work-In-Process Inventory 9. Transferred goods costing $320,000 to Finished Goods Inventory. 10. Had total sales on account of $700,000. 11. Had cost of goods sold of $330,000. 12. Had selling and administrative costs of $280,000; $175,000 was accrued wages and the rest charged on account. (Check figure: ending Work-In-Process Inventory should equal $5,600.) Required: 1. Journalize the transactions for January, using the item number as the date and the chart of accounts provided 2. Post necessary transactions to the ledger account (use T-accounts) for Direct Materials Inventory, WIP Inventory, FG Inventory, and COGS. (You may post others if desired. but these four are for points). 3. Prepare a Schedule of Cost of Goods Manufactured for January. 4. Prepare an Income Statement for January, using the detailed Schedule of Cost of Goods Sold.

Answer 1

1.

No.	Account Titles and Explanation	Debit	Credit
1	Direct materials inventory	114000
	Supplies inventory	50000
	Accounts payable		164000
	(To record purchases on account)
2	Work in process inventory	134000
	Variable manufacturing overhead control	46000
	Direct materials inventory		134000
	Supplies inventory		46000
	(To record materials issued to production)
3	Work in process inventory	62000
	Fixed manufacturing overhead control	26000
	Wages payable		88000
	(To record accrued factory payroll)
4	Fixed manufacturing overhead control	1600
	Variable manufacturing overhead control	5400
	Utilities payable		7000
	(To record accrued plant utility costs)
5	Fixed manufacturing overhead control	2000
	Property taxes payable		2000
	(To record accrued property taxes)
6	Fixed manufacturing overhead control	1600
	Prepaid insurance		1600
	(To record expired prepaid insurance)
7	Fixed manufacturing overhead control	40000
	Accumulated depreciation-factory equipment		40000
	(To record depreciation)
8	Work in process inventory	122600
	Variable manufacturing overhead control		51400
	Fixed manufacturing overhead control		71200
	(To record actual MOH applied)
9	Finished goods inventory	320000
	Work in process inventory		320000
	(To record goods completed and transferred)
10	Accounts receivable	700000
	Sales		700000
	(To record sales on account)
11	Cost of goods sold	330000
	Finished goods inventory		330000
	(To record the cost of goods sold)
12	Sales & administrative expense	280000
	Wages payable		175000
	Accounts payable		105000
	(To record selling and administrative costs)

2.

Direct Materials Inventory
Beg. Bal.	24300
1	114000	134000	2
End. Bal.	4300
WIP Inventory
Beg. Bal.	7000
2	134000	320000	9
3	62000
8	122600
End. Bal.	5600
FG Inventory
Beg. Bal.	18000
9	320000	330000	11
End. Bal.	8000
COGS
11	330000

3.

Nick's Knacks Company
Schedule of Cost of Goods Manufactured
For the Month of January
Direct materials:
Beginning direct materials inventory	24300
Raw materials purchases	114000
Raw materials available for use	138300
Less ending direct materials inventory	4300
Direct materials used		134000
Direct labor		62000
Factory overhead:
Factory supplies used	46000
Indirect labor	26000
Factory utilities	7000
Property taxes on factory	2000
Insurance-factory equipment	1600
Depreciation-factory equipment	40000
Total factory overhead		122600
Total manufacturing costs		318600
Add beginning work in process inventory		7000
Total cost of work in process		325600
Less ending work in process inventory		5600
Cost of goods manufactured $		320000

4.

Nick's Knacks Company
Income Statement
For the Month of January
Sales		700000
Cost of goods sold:
Beginning finished goods inventory	18000
Add Cost of goods manufactured	320000
Cost of goods available for sale	338000
Less ending finished goods inventory	8000
Cost of goods sold $		330000
Gross profit		370000
Sales & administrative expense		280000
Net operating income $		90000