Gold Nest Company of Guandong, China, is a family-owned enterprise that makes bi
ID: 2401810 • Letter: G
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 $85,000 of manufacturing overhead for an estimated activity level of $50,000 direct labor dollars. At the beginning of the year, the inventory balances were as follow:s Raw materials Work in process Finished goods $10,600 $4,600 $8,100 During the year, the following transactions were completed a. Raw materials purchased for cash, $ 169,000 b. Raw materials used in production, $149,000 (materials costing $124,000 were charged directly to jobs; the remaining materials were indirect) C. Cash paid to employees as follows: $ 164,000 $ 196,200 $ 20,000 $ 40,000 Direct labor Indirect labor ales commissions Administrative salaries d. Cash paid for rent during the year was $18,600 ($13,500 of this amount related to factory operations, and the remainder related to selling and administrative activities) e. Cash paid for utility costs in the factory, $15,000 f. Cash paid for advertising, $10,000 g. Depreciation recorded on equipment, $21,000. ($16,000 of this amount related to equipment used in factory operations; the remaining $5,000 related to equipment used in selling and administrative activities.)Explanation / Answer
Journal Entries:-
Transaction
General Journal
Debit
Credit
(a)
Raw Materials
169000
Cash
169000
(b)
WIP
124000
Manufacturing O/H
25000
Raw Materials
149000
(c)
WIP
164000
Manufacturing O/H
196200
Sales Commission Exp
20000
Salary Exp
40000
Cash
420200
(d)
Manufacturing O/H
13500
Rent Exp
5100
Cash
18600
(e)
Manufacturing O/H
15000
Cash
15000
(f)
Advertising Exp
10000
Cash
10000
(g)
Manufacturing O/H
16000
Dep Exp
5000
Accumulated Dep
21000
(h)
WIP
278800
Manufacturing O/H
278800
Predetermined O/H Rate = Estimated total mfr OH cost/Estimated total amt of allocation base
85000/50000 = 1.7
Actual Direct Labour =164000
164000 * 1.7 = 278800
(i)
Finished Goods
227000
WIP
227000
(j)
Cash
500000
Sales
500000
COGS
220000
Finished goods
220000
Raw Materials
Beg. Bal
10600
149000
(b)
(a)
169000
Bal.
30600
WIP
Beg. Bal
4600
227000
(i)
(b)
124000
(c)
164000
(h)
278800
Bal.
344400
Finished Goods
Beg. Bal
8100
220000
(j)
(i)
227000
Bal.
15100
Manufacturing O/H
(b)
25000
278800
(h)
(c)
196200
(d)
13500
(e)
15000
(g)
16000
13100
Bal.
COGS
(j)
220000
Journal Entry to close balance:-
Transaction
General Journal
Debit
Credit
Manufacturing O/h
13100
COGS
13100
Income Statement:-
Sales
500000
Less: COGS (220000 – 13100)
206900
Gross Margin
293100
Less: S & A Exp
Sales commission
20000
Admn Salaries
40000
Rent Exp
5100
Adv Exp
10000
Dep Exp
5000
80100
Net Operating Income
213000
Transaction
General Journal
Debit
Credit
(a)
Raw Materials
169000
Cash
169000
(b)
WIP
124000
Manufacturing O/H
25000
Raw Materials
149000
(c)
WIP
164000
Manufacturing O/H
196200
Sales Commission Exp
20000
Salary Exp
40000
Cash
420200
(d)
Manufacturing O/H
13500
Rent Exp
5100
Cash
18600
(e)
Manufacturing O/H
15000
Cash
15000
(f)
Advertising Exp
10000
Cash
10000
(g)
Manufacturing O/H
16000
Dep Exp
5000
Accumulated Dep
21000
(h)
WIP
278800
Manufacturing O/H
278800
Predetermined O/H Rate = Estimated total mfr OH cost/Estimated total amt of allocation base
85000/50000 = 1.7
Actual Direct Labour =164000
164000 * 1.7 = 278800
(i)
Finished Goods
227000
WIP
227000
(j)
Cash
500000
Sales
500000
COGS
220000
Finished goods
220000
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