Question

managerial accounting

Question 2 Honda Motorcycles manufactures motor scooters. The company has automated production, so it allocates manufacturing overhead based on machine hours. Honda expects to incur $240,000 of manufacturing overhead costs and to use 4,000 machine hours during 2020. At the end of 2019, Honda reported the following inventories: Raw materials inventory Work in process inventory Finished goods inventory $20,000 $17,000 $11,000 During January 2020, Honda actually used 300 machine hours and recorded the following transactions: a. Purchased materials on account, $31.000 b. Used direct materials, $39.000 Manufacturing wages incurred totaled $40,000, of which 90% was direct labor and 10% was indirect labor d. Used indirect materials, $3,000 e. Incurred other manufacturing overhead on account, $13,000 £ Allocated manufacturing overhead for January 2016 Cost of completed motor scooters, $100.000 h. Sold scooters on account, $175.000 cost of scooters sold. $95.000 Required: 1 Calculate Honda's predetermined overhead rate for 2020 2. Journaline the transactions in the general journal. Use the following Account Receivable, Raw Materials Inventory. Work-in-Process Inventory Finished Goods Inventory. Accounts Payable. Wages Payable. Sales Revenue Manufacturing Overhead, and Cost of Goods Sold 3. Ses, up T-accounts for the accounts listed in Requirement 2. Enter the beginning bilances for the inventory accounts and assume the remaining a have a beginning balance of 50. Pose the transactions to the accounts and determine the ending balances 4. Agus Manufacturing Overhead for the overallocated or underallocated overhead. Post your entry to the T-accounts. 5. What are the ending balances in the three inventory counts and in Cost of Goods Sold?

Answer 1

1	Compute Predermined overhead rate:
	Overhead Allocation rate for 2020 = 240,000/4,000	$60 per machine per hour

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2	Prepare Journal entries as follows:
Tr.	General Journal	Debit	Credit
a	Raw material Inventory	$31,000
	Accounts payable		$31,000
	(To record purchase inventory on account)
b	Work-in-process	$39,000
	Raw material inventory		$39,000
	(To record material used)
c	Work-in-process [$40000*90%]	$36,000
	Manufacturing overheads	$4,000
	Wages payable		$40,000
	(To record wages expense)
d	Indirect material Inventory	$3,000
	Accounts payable		$3,000
	(To record purchase of indirect material)
	Manufacturing overheads	$3,000
	Indirect material Inventory		$3,000
	(To record indirect material used)
e	Manufacturing overheads	$13,000
	Accounts payable		$13,000
	(To record overhead incurred)
f	Work-in-process [300 machine hours × $60]	$18,000
	Manufacturing overheads		$18,000
	(To record overheads applied)
g	Finished goods inventory	$100,000
	Work-in-process		$100,000
	(To record cost of completed units)
h	Accounts Receivable	$175,000
	Sales		$175,000
	(To record sales)
	COGS	$95,000
	Finished goods inventory		$95,000

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4.

General Journal	Debit	Credit
COGS	$2,000
Manufacturing overheads		$2,000
(To record under application of overheads)

Manufacturing Overheads
Wages payable	$4,000	WIP	$18,000
Indirect labor	$3,000	COGS	$2,000
Accounts payable	$13,000
	$20,000		$20,000

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Prepare T-accounts as follows:

Raw material Inventory
Beg.bal.	$20,000	WIP	$39,000
Accounts payable	$31,000
End. Bal.	$12,000
WIP
Beg.bal.	$17,000	FG	$100,000
Raw material	$39,000
Wages payable	$36,000
Manufacturing overhead	$18,000
End. Bal.	$10,000
Finished goods
Beg.bal.	$11,000	COGS	$95,000
WIP	$100,000
End. Bal.	$16,000