P2-14R Review Problem for Chapters 1 and 2 Lift It, Inc., manufactures chain hoi
ID: 2461973 • Letter: P
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P2-14R Review Problem for Chapters 1 and 2 Lift It, Inc., manufactures chain hoists. The raw materials inventories on hand on October 1 were as follows: Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000 pounds, $24,000 Pulleys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 sets, $20,000 Bolts and taps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 pounds, $5,000 Steel plates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 units, $2,000 The balances in the ledger accounts on October 1 were as follows: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,000 Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000 Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000 Accumulated depreciation—machinery . . . . . . . . . . . . . $ 10,500 Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Accumulated depreciation—office equipment . . . . . . . 4,800 Office furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Accumulated depreciation—office furniture . . . . . . . . . 2,500 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,200 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,000 $276,000 $276,000 Transactions during October were as follows: a. Payroll recorded during the month: direct labor, $28,000; indirect labor, $3,000. b. Factory supplies purchased for cash, $1,000. (Use a separate inventory account, Factory Supplies.) c. Materials purchased on account: chain—4,000 pounds, $8,800; pulleys—2,000 sets, $10,200; steel plates—5,000 units, $3,000. d. Sales on account for the month, $126,375. e. Accounts receivable collected, $72,500. f. Materials used during October (FIFO costing): chain, 14,000 pounds; pulleys, 4,400 sets; bolts and taps, 4,000 pounds; steel plates, 3,800 units. g. Payroll paid, $31,000. h. Factory supplies on hand, October 31, $350. i. Factory heat, light, and power costs for October, $3,000 (not yet paid). j. Office salaries paid, $6,000. k. Advertising paid, $2,000. l. Factory superintendence paid, $1,800. m. Expired insurance—on office equipment, $100; on factory machinery, $300. n. Factory rent paid, $2,000. o. Depreciation on office equipment, $400; on office furniture, $180; on machinery, $1,200. p. Factory overhead charged to jobs, $11,950. q. Work in Process, October 31, $31,000. (Hint: The difference between the sum of the beginning balance in Work in Process plus the total charges to it during the period less the ending balance in Work in Process represents the cost of the goods completed during the period.) r. Cost of goods sold during the month, $84,250. s. Accounts payable paid, $33,750. Required: 1. Set up T-accounts and enter the balances as of October 1. 2. Prepare journal entries to record each of the previous transactions. 3. Post the journal entries to the accounts, setting up any new ledger accounts necessary. Only controlling accounts are to be maintained; however, show the calculation for the cost of materials used. 4. Prepare a statement of cost of goods manufactured for October. 5. Prepare an income statement. 6. Prepare a balance sheet showing the classifications of current assets, plant and equipment, current liabilities, and stockholders’ equity. MINI-CASE 1
Explanation / Answer
COG completed- 35000+28000+54340+31000+11950-31000 = 129290
Journal Entries Debit Credit a. Payroll recorded during the month: direct labor, $28,000; indirect labor, $3,000 WIP 28000 Factory OH 3000 Cash 31000 b. Factory supplies purchased for cash, $1,000. (Use a separate inventory account, Factory Supplies.) Factory supplies 1000 Cash 1000 c. Materials purchased on account: chain—4,000 pounds, $8,800; pulleys—2,000 sets, $10,200; steel plates—5,000 units, $3,000. Materials Chains 4000 pds 8800 Pulleys- 2000 sets 10200 Steel plates 5000 units 3000 22000 Cash 22000 d. Sales on account for the month, $126,375 Accounts Receivables 126375 Sales Revenue 126375 e. Accounts receivable collected, $72,500. Cash 72500 Accounts Receivables 72500 f. Materials used during October (FIFO costing): chain, 14,000 pounds; pulleys, 4,400 sets; bolts and taps, 4,000 pounds; steel plates, 3,800 units WIP Materials 54340 Chains 14000 Pds.12000@2+2000@2.2 28400 Pulleys 4000 sets4000@5+400@5.1 22040 Bolts& Taps4000 pds.@0.5 2000 Steel plates3800 units@0.5 1900 g. Payroll paid, $31,000. WIP 31000 Cash 31000 h. Factory supplies on hand, October 31, $350 Factory OH(1000-350) 650 Factory Supplies 650 i. Factory heat, light, and power costs for October, $3,000 (not yet paid) Factory OH 3000 Accounts Payables 3000 j. Office salaries paid, $6,000. Office Salaries 6000 Cash 6000 k. Advertising paid, $2,000. Advertising exp. 2000 Cash 2000 l. Factory superintendence paid, $1,800 Factory OH 1800 Cash 1800 m. Expired insurance—on office equipment $ 100 Insurance 100 Pre-paid Insurance 100 on factory machinery, $300. Factory OH 300 Pre-paid Insurance 300 n. Factory rent paid, $2,000. Factory OH 2000 Cash 2000 o. Depreciation on office equipment, $400; Depoffice equipment 400 Acc.Dep-Off.Eqpt. 400 on office furniture, $180; Depoffice furniture 180 Acc.Dep-Off.Furn. 180 on machinery, $1,200. Factory OH 1200 Acc.Dep-machinery 1200 p. Factory overhead charged to jobs, $11,950 WIP 11950 Factory OH 11950 q. Work in Process, October 31, $31,000. Cost of goods completed129290 WIP 129290 r. Cost of goods sold during the month, $84,250. COGS 84250 Sales 84250 s. Accounts payable paid, $33,750. Accounts Payables 33750 Cash 33750Related Questions
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