During the year,the following transactions were completed; raw materials were pu
ID: 2427005 • Letter: D
Question
During the year,the following transactions were completed; raw materials were purchased on account $170,000 Raw materials were issued from the store room for used in production $180,000. Employee salaries and wages were accrued as fallows direct labor, $200,000 indirect labor, $82,000 and selling and administrative salaries, $90,000. Utility costs were incurred in the factory, 65,000. Advertising cost were incurred $100,000. Prepaid insurance expired during the year $20,000. Depreciation was recorded, $180,000(85% related to factory assets and 15% related to selling and administrative assets). Manufacturing overhead was applied to jobs at the rate of 175% of direct labor cost. Goods the cost $700,000 to manufacture according to their job cost sheets were transferred to the finished goods warhorse. Sales for the year total$1,000,0000 and were all on account. the total cost to manufacture these goods according to their job cost sheets was $ 720,000. Prepare journal entries to record the transactions for the year. Prepare T-accounts for Raw Materials, Work in process. Finished Goods, Manufacturing Overhead, and Cost of Goods Sold. Post the appropriate parts of your journal entries to these T- accounts. Computing the ending balance in each account(Don't forget to enter the beginning balances in the inventory accounts.) Is Manufacturing Overhead under applied or over applied for the year? Prepare a journal entry to close this balance to Cost of Goods Sold. Prepare an income statement for the year.(Do not prepare a schedule of cost of goods manufactured; all of the information needed for the income statement is available in the journal entries and T- accounts you have prepared.)Explanation / Answer
Solution:1
a. Raw material................170000
To accounts payable..............170000
b. Work in process...........144000
Manufacturing overhead....36000
To raw material.......................180000
c. work in process.............200000
Manufacturing overhead..82000
Salary expense.................90000
To salary and wages payable....372000
d. Manufacturing overhead.......65000
To accounts payable.................65000
e. Advertising expense............100000
To accounts payable.......................100000
f. Manufacturing overhead.........18000
Insurance expence...................2000
To prepaid insurance........................20000
g. Manufacturing overhead.........153000
Depreciation expense...............27000
To Accumulated depreciation..............180000
h. Work in process....................350000
To manufacturing overhead.................350000
($200,000 actual direct labor cost × 175% = $350,000 overhead applied)
i. Finished goods......................700000
To work in process..............................700000
j. accounts receivables.............1000000
To sales............................................1000000
h. Cost of goods sold...............720000
To finished goods.............................720000
Solution:2
Raw material
Work in process
Cost of goods sold
Finished goods
Manufacturing overhead
Solution:3 Overhead is underapplied by $4,000 for the year. The entry to close this balance to Cost of Goods Sold would be:
Cost of goods sold...........4000
To manufacturing overhead..........4000
Solution:4
Almeda Products, Inc.
Income Statement
For the Year Ended March 31
Sales.......................................................
$1,000,000
Less cost of goods sold ($720,000 + $4,000)
724,000
Gross margin...........................................
276,000
Less selling and administrative expenses:
Salary expense.......................................
$ 90,000
Advertising expense................................
100,000
Insurance expense.................................
2,000
Depreciation expense..............................
27,000
219,000
Net operating income................................
$ 57,000
Balance..............32000 180000 (a) 170000 Balance............22000Related Questions
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