Keisha spent the month of December talking to various suppliers in order to dete

Question

Keisha spent the month of December talking to various suppliers in order to determine her cost structure. She added cost data to the information in Table 1. K&J Bakery Inc. opened for business on January 1, 20X1 as planned. During the month of January, the business purchased and used 200 pounds of flour, 200 pounds of sugar, 67 dozen eggs and had 5 bad eggs to dispose of during the month, 20 baking soda boxes, 200 pounds of butter, 100 pounds of raisons, 50 bottles of run, and the other ingredients (one box of each for a total of four) all from one supplier on account. Manufacturing overhead is applied to production at $4 per cake. Keisha purchased the oven using the startup capital and paid all salaries. Her nieces worked 300 hours in total for the month. January was a very good month for the bakery since it baked 200 cakes and sold all for cash. The average selling price was $50 per cake. All manufacturing overhead is closed out at month end. The supplier was paid at month end. Required: Document K&J Bakery Inc January transactions using journal entries (round all calculations to 2 decimal places) and t-accounts. All other costs such as utilities, must be accounted for in the journal entries (assume such transactions where applicable, are paid in cash)

Item and Ingredients Cost Standard per Cake $6,000 (depreciate over 5 years on a straightline basis with no residual/salvage value) Provided by landlord Provided by dad $24 per 8 pound bag $2 per dozen $15 per 25 pound b $6 per 14 pound box $6.50 per 4 pounds 58 per 2 pounds N/A N/A N/A Convential Oven Refrigerator Baking pans, licenses Baking flour Eggs Sugar Baking Soda Butter Raisons Others (current, diced date, nutmeg, molasses) Rum (alcohol) Utilities (includes gas, electric and water Moblie phone (business) Salary-Keisha 4 eggs see question 1 pound 1/2 pound $30 for all 4 boxes per month $12 per bottle 1/4 of bottle $50 per month $50 per month $500 per month 1 person 1.5 hrs per cake Salary-nieces Salary-aunt Accountant Estimated MOH 58 per hour $100 per month $100 per month 4 per cake

Explanation / Answer

Material Inventory Beg Balance $                 -   1 Material Inventory A/c Dr $    2,329.00 Flour   $        600.00 Direct Material $    2,179.00 Flour $        600.00 [200 pound*$24/8Bags]] Baking Soda $        120.00 Indirect Material $        150.00 Baking Soda $        120.00 [20 bx *$6 per box] Sugar $        120.00 Sugar $        120.00 [200 pound*$15/25 pound bag] Egg $        134.00 Egg $        134.00 [67 dozen*$2] Butter   $        325.00 Butter $        325.00 [200 pound*$6.5/4pound] Raisons $        400.00 Raisons $        400.00 [100 pound*$8/2pound] Others   $          30.00 Others $          30.00 Rum $        600.00 Rum $        600.00 [50 bottles*$12 per bottes] End Bal $                 -   2 Direct Material A/c Dr. $    2,179.00 Indirect Material A/c. Dr. $        150.00 Work In Progress To Material Inventory A/c $    2,329.00 Beg Balance $                 -   Direct Material $    2,179.00 Finished Goods $    5,379.00 Direct Labour $    2,400.00 3 Selling & Adm A/c Dr $        700.00 Manufacturing Overhead $        800.00 Direct Labour A/c Dr. $    2,400.00 [300 hrs*$8] To Salary Payable $    3,100.00 End Bal $                 -   Salary Payable A/c Dr. $    3,100.00 To Salary Neice A/c $    2,400.00 [300 hrs*$8] Aunt Salary $        100.00 Salary Payable Salary Keisha $        500.00 Beg Balance $                 -   Accounntant $        100.00 Keisha Salary $        500.00 Selling & Adm Exp $        700.00 Aunt Salary $        100.00 Direct Labour $    2,400.00 Neice Salary $    2,400.00 Accountant $        100.00 End Bal $                 -   4 WIP A/c DR $    6,079.00 To Direct Labour $    3,100.00 To Direct Material $    2,179.00 Finished Goods To Material Overhead $        800.00 [200 cakes*$4] Beg Balance $                 -   WIP $    5,379.00 COGS $    5,379.00 5 Finished Goods A/c DR $    5,379.00 End Bal $                 -   To WIP A/c $    5,379.00 Selling & Adm Exp 6 COGS A/c Dr $    5,379.00 Beg Balance $                 -   To Finished Goods A/c $    5,379.00 Keisha Salary $        500.00 Accountant $        100.00 Phone   $          50.00 7 Selling & Adm Exp A/c DR $          62.00 Cash Registed $          12.00 To Phone Exp $          50.00 End Bal $                 -   To Cash Register $          12.00 ManifacturingOverhead Beg Balance $                 -   8 Manufacturing Overhead A/c DR $    1,000.00 Baking Soda $        120.00 WIP $        800.00 Indirect Material $        150.00 [$120+$30] Others   $          30.00 Underapplied Overhead $        200.00 Utilities $          50.00 Utilities $          50.00 Rent $        600.00 Rent $        600.00 Aunt Salary $        100.00 Aunt Salary $        100.00 Depreciation $        100.00 Depreciation $        100.00 End Bal $                 -   9 Cost of Goods Sold A/c DR $        200.00 [$1000- $800] To Under applied Overhead $        200.00 COGS Beg Balance $                 -   8 Sales A/c DR $    5,579.00 Finished goods $    5,370.00 Sales $    5,579.00 To COGS $    5,579.00 Under applied OH $        200.00 9 Accounts Payable $    2,391.00 End Bal $                 -   Wages Payable $    3,100.00 To Cash $    5,491.00 Accounts Payable 10 Cash A/c $ 10,000.00 Beg Balance $                 -   To Sales $ 10,000.00 Cash $    2,391.00 Direct Material $    2,329.00 Phone Exp   $          50.00 Cash Register $          12.00 End Bal $                 -   Cash   Beg Balance $                 -   Sales $ 10,000.00 Wages $    3,100.00 Accounts Payable $    2,391.00 End Bal $                 -   Sales Beg Balance $                 -   COGS $    5,579.00 Cash $ 10,000.00

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