Hi there, I have a question that I have tried to work out, however, I still need
ID: 2473574 • Letter: H
Question
Hi there,
I have a question that I have tried to work out, however, I still needs help please as I know something is wrong. I have my answers in an Excel workbook and I have included a link to download it at the bottom of my message. I spent already hours. Thank you.
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APC builds custom swimming pools for homeowners in New Zealand. APC uses material requisition forms and direct labour time tickets to trace direct materials and direct labour costs to specific jobs. Manufacturing overhead is applied to jobs at a rate of $100 per direct labour hour. During the first month of operations, the company recorded the following transactions:
a) Paid raw materials, $200,000.
b) Issued the following materials to production:
• $130,000 was directly traceable to specific job.
• $20,000 was not directly traceable to specific jobs.
c) Paid the following labour costs:
• Direct labour, $50,000
• Construction supervision, $30,000
d) Incurred the following actual manufacturing overhead costs:
• Paid construction insurance, $5,000
• Construction equipment depreciation, $25,000
• Paid pool permits and inspections, $5,000
e) Incurred the following additional costs:
• Office equipment depreciation, $3,000
• Paid rent and insurance on owner’s company car for the month, $2,000
• Paid advertising costs, $10,000
f) Applied manufacturing overhead to jobs in process based on 900 actual direct labour hours.
g) Completed 15 pools at a total cost of $195,000.
h) Made the sale of 13 pools that cost $176,000 in total. The other 2 pools are completed and awaiting inspection by the customer before the sale is finalised.
i) Recorded sales revenue of $325,000 on the 13 pools that were sold on account.
j) Closed the Manufacturing Overhead account balance to Cost of Goods Sold.
Required: Use the template provided to complete the following requirements. Enter answers as formulas where appropriate to show your workings.
1. Prepare journal entries to record the preceding transactions. No narrations needed.
2. Post the entries in requirement (1) to the T form ledger accounts. Letter your entries from (a) to (j), instead of using account names. Do not forget to enter the ending balances in the cash and the inventory accounts.
3. Assuming there were no beginning balances in any of the accounts, calculate the ending balance in the following accounts:
(i) Work in Process Inventory.
(ii) Finished Goods Inventory.
(iii) Manufacturing Overhead (over/underapplied)
(iv) Cost of Goods Sold (after the overhead adjustment).
4. Prepare a cost of goods manufactured statement for APC.
5. Prepare an income statement showing the adjustment to Cost of Goods Sold. Your answer must show the calculation of Cost of Goods Sold.
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Here is the link to my Excel template that I have already filled in.
http://www.mediafire.com/download/i615cwr9v14idj8/Answer_Booklet.xlsx
Thanks for your help.
Alex
Explanation / Answer
Journal Entries:-
a) Paid raw materials, $200,000.
Material A/C Dr. $200,000
To Cash/bank A/C $2,00,000
b) Issued the following materials to production:
• $130,000 was directly traceable to specific job.
Job A/c Dr. 1,30,000
To Material A/c 1,30,00
• $20,000 was not directly traceable to specific jobs.
Factory overheads A/c Dr. 20,000
To Material A/c 20,000
(Since material was not directly traceable to specific jobs , so it will be booked as an overhead rather than booking the cost of material to specific job Account)
c) Paid the following labour costs:
• Direct labour, $50,000
Labour A/c Dr. 50,000
To Cash /Bank A/c 50,000
( Since labour is a direct expense so booking is done in labour A/c rather than overhead A/c)
• Construction supervision, $30,000
Factory Overheads A/c Dr. 30,000
To cash/Bank A/c 30,000
( Since supervision is an indirect expense so booking is done in Fatory overheads A/c)
d) Incurred the following actual manufacturing overhead costs:
• Paid construction insurance, $5,000
Manufacturing Overheads A/c Dr. 5,000
To cash/Bank A/c 5,000
( Since insurance is an indirect expense related manufacturing activity so booking is done in Manufacturing overheads A/c)
• Construction equipment depreciation, $25,000
Depreciation A/c Dr. 25,000
To Construction Equipment A/c 25,000
• Paid pool permits and inspections, $5,000
Manufacturing Overheads A/c Dr. 5,000
To cash/Bank A/c 5,000
(Since permit and inspection is an indirect expense related manufacturing activity so booking is done in Manufacturing overheads A/c)
e) Incurred the following additional costs:
• Office equipment depreciation, $3,000
Depreciation A/c Dr. 3,000
To Office Equipment A/c 3,000
• Paid rent and insurance on owner’s company car for the month, $2,000
Administrative Overheads A/c Dr. 2,000
To cash/Bank A/c 2,000
( Since rent and insurance of car is an indirect expense related to Administration so booking is done in Administrative overheads A/c)
• Paid advertising costs, $10,000
Administrative Overheads A/c Dr. 10,000
To cash/Bank A/c 10,000
( Since advertisement is an indirect expense related to Administration so booking is done in Administrative overheads A/c)
f) Applied manufacturing overhead to jobs in process based on 900 actual direct labour hours.
i) Recorded sales revenue of $325,000 on the 13 pools that were sold on account.
Bank A/c Dr. 176000
To Sales A/c 176000
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