Question

Coronado Wings, Inc. manufactures airplanes for use in stunt shows. Coronado’s factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Coronado uses a job order costing system to accumulate product costs.

At the end of 2016, Coronado’s accountants developed the following expectations for 2017 based on the marketing department’s sales forecast:

Budgeted overhead cost		$1,101,000
Estimated machine hours		53,000
Estimated direct labor hours		9,000
Estimated direct materials cost		$1,500,000

Coronado’s inventory count, completed on December 31, 2016, revealed the following ending inventory balances:

Raw Materials Inventory		$249,000
Work in Process Inventory		$625,000
Finished Goods Inventory		$1,470,000

The company’s 2017 payroll data revealed the following actual payroll costs for the year:

Job Title		Number Employed		Wage Rate per Hour		Annual Salary per Employee		Total Hours Worked per Employee
President and CEO		1				$228,000
Vice president and CFO		1				$178,000
Factory manager		1				$41,000
Assistant factory manager		1				$31,300
Machine operator		5		$14.5				2,250
Security guard, factory		2				$20,500
Forklift operator		2		$7.5				2,000
Corporate secretary		1				$36,200
Janitor, factory		2		$6				2,150

The following information was taken from Coronado’s Schedule of Plant Assets. All assets are depreciated using the straight-line method.

Plant Asset		Purchase Price		Salvage Value		Useful Life
Factory building		$4,000,000		$150,000		20 Years
Administrative office		$650,000		$125,000		30 Years
Factory equipment		$2,000,000		$20,000		12 Years

Other miscellaneous costs for 2017 all paid in cash included:

Cost		Amount
Factory insurance (fully expired)		$14,000
Administrative office utilities		$5,700
Factory utilities		$32,000
Office supplies (fully consumed)		$5,200

Additional information about Coronado’s operations in 2017 includes the following:

•	Raw materials purchases for the year amounted to $1,945,000. All materials were purchased on account.
•	The company used $1,860,000 in raw materials during the year. Of that amount, 85% was direct materials and 15% was indirect materials.
•	Coronado applied overhead to Work in Process Inventory based on direct materials cost.
•	Airplanes costing $3,450,000 to manufacture were completed and transferred out of Work in Process Inventory.
•	Coronado uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000. All sales are made on account. (Note: This transaction requires two journal entries.)

Prepare the journal entries to record Coronado’s costs for 2017. (Use Salaries Payable and Wages Payable accounts for payroll costs.)

Prepare the journal entries to record Coronado’s costs for 2017. (Use Salaries Payable and Wages Payable accounts for payroll costs.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Post entries in order presented in the problem. Round answers to 0 decimal places, e.g. 5,275.)

Answer 1

No	Accounts title	Dr	Cr
1	Salaries & wages expenses	$442,200
	Salaries & wages payable		$442,200
2	Manufacturing overhead (41000+31350+41000)	$113,300
	Salaries & wages payable		$113,300
	(to record salried worker cost)
3	Manufacturing overhead (30000+25800)	$55,800
	Work in process (163125	$163,125
	Salaries & wages payable		$218,925
	( to record hourluy workers cost)
4	Depreciation expenses (650000-125000)/30	17500
	Accumulated depreciation		17500
5	Manufacturing overhead	357500
	Accumulated depreciation		357500
	((4000000-150000)/20)+((2000000-20000)/12))
	( to record dep on factiru building and equipment)
6	Office supplies	5700
	Office utilities	5200
	Cash		10900
7	Manufacturing overhead	46000
	Cash		46000
	( to record factory insurance and factory utilities)
8	Raw Material Inventory	1945000
	Accounts payable		1945000
9	Work in process (1860000*85%)	1581000
	Manufacturing overhead	279000
	Raw Material Inventory		1860000
10	Work in process	1160454
	Manufacturing overhead (1101000/1500000*1581000)		1160454
11	Finished Goods Invemtory	3450000
	Work in process		3450000
12	Accounts Receiuvable	6570000
	Sales		6570000
	Cost of Good sold (6570000/1.8)	3650000
	Finished Goods Invemtory		3650000
If any doubt please comment
	working	Number	Wage Rate	Annual	Total Hours	Total	Head
		Employed	per Hour	Salary per	Worked per
				Employee	Employee
	President and CEO	1		$228,000		$228,000	Salaries & wages expenses
	Vice president and CFO	1		$178,000		$178,000	Salaries & wages expenses
	Factory manager	1		$41,000		$41,000	Manufacturing overhead
	Assistant factory manager	1		$31,300		$31,300	Manufacturing overhead
	Machine operator	5	$14.50		2,250	$163,125	Work in process
	Security guard, factory	2		$20,500		$41,000	Manufacturing overhead
	Forklift operator	2	$7.50		2,000	$30,000	Manufacturing overhead
	Corporate secretary	1		$36,200		$36,200	Salaries & wages expenses
	Janitor, factory	2	$6		2,150	$25,800	Manufacturing overhead
	Salaries & wages expenses
	President and CEO	$228,000
	Vice president and CFO	$178,000
	Corporate secretary	$36,200
	Total	$442,200