Gold Nest Company of Guandong, China, is a family-owned enterprise that makes bi

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. All of the company’s transactions with customers, employees, and suppliers are conducted in cash; there is no credit.

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 $126,000 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:                               

Raw materials                 $10,600

Work in process             $4,400

Finished goods                 $8,000

During the year, the following transactions were completed:

a. Raw materials purchased for cash, $169,000.

b. Raw materials requisitioned for use in production, $147,000 (materials costing $121,000 were charged directly to jobs; the remaining materials were indirect).

c. Costs for employee services were incurred as follows:               

Direct labor       $151,000

Indirect labor    $366,900

Sales commissions          $27,000

Administrative salaries $46,000

d. Rent for the year was $18,100 ($13,800 of this amount related to factory operations, and the remainder related to selling and administrative activities).

e. Utility costs incurred in the factory, $14,000.

f. Advertising costs incurred, $13,000.

g. Depreciation recorded on equipment, $23,000. ($16,000 of this amount was on equipment used in factory operations; the remaining $7,000 was on equipment used in selling and administrative activities.)

h. Manufacturing overhead cost was applied to jobs, $?

i. Goods that had cost $227,000 to manufacture according to their job cost sheets were completed.

j. Sales for the year totaled $510,000. The total cost to manufacture these goods according to their job cost sheets was $218,000.

Required:

Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)

Explanation / Answer

Journal Entries:

S.No. Accounts Title and explanation Debit $ Credit $ a Raw Materials 169000 Cash 169000 b Work in process 121000 Manufacturing overhead 26000 Raw Materials inventory 147000 c Work in process 151000 Manufacturing overhead 366900 Cash 517900 (wages) Sales and Administrative Expenses 73000 Cash 73000 (salaries and commission) d Manufacturing overhead 13800 Sales and Administrative Expenses 4300 Cash 18100 (rent) e Manufacturing overhead 14000 Cash 14000 (utilities) f Sales and Administrative Expenses 13000 Cash 13000 (advertisement) g Manufacturing overhead 16000 Depreciation -Equipments factory 16000 Sales and Administrative Expenses 7000 Depreciation - Equipments Sales & Administration 7000 h Work in process (2.8 * 151000) 422800 Manufacturing Overhead 422800 i Finished Goods Inventory 227000 Work in Process 227000 j Cash 510000 Sales Revenue 510000 Cost of Goods Sold 218000 Finished Goods Inventory 218000

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