Problem 2-27B Cost Flows; T-Accounts; Income Statement [LO2-1, LO2-2, LO2-4, LO2
ID: 2490357 • Letter: P
Question
Problem 2-27B Cost Flows; T-Accounts; Income Statement [LO2-1, LO2-2, LO2-4, LO2-5, LO2-6, LO2-7]
Carpenter Cornices, Ltd., produces a wide variety of cornice moldings for windows at a plant located in Evergreen Park, Illinois. Because there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company’s fiscal year, inventory account balances were as follows:
The company applies overhead cost to jobs on the basis of machine-hours. Its predetermined overhead rate for the fiscal year starting July 1 was based on a cost formula that estimated $100,800 of manufacturing overhead for an estimated activity level of 42,000 machine-hours. During the year, the following transactions were completed (Assume all purchases and services were acquired on account):
Raw materials requisitioned for use in production, $148,000 (materials costing $128,500 were chargeable directly to jobs; the remaining materials were indirect).
Prepaid insurance expired during the year, $20,000 ($14,500 of this amount related to factory operations, and the remainder related to selling and administrative activities).
Depreciation recorded on equipment, $23,000. ($17,500 of this amount was on equipment used in factory operations; the remaining $5,500 was on equipment used in selling and administrative activities.)
Manufacturing overhead cost was applied to jobs, $?. (The company recorded 40,000 machine-hours of operating time during the year.)
Sales (all on account) to customers during the year totaled $534,000. These goods had cost $293,000 to manufacture according to their job cost sheets.
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.)
Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account. (Round your intermediate calculations to 2 decimal places.)
3-a.
Is Manufacturing Overhead underapplied or overapplied for the year? (Round your intermediate calculations to 2 decimal places.)
3-b.
Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (Round your intermediate calculations to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Prepare an income statement for the year. (Round your intermediate calculations to 2 decimal places.)
Carpenter Cornices, Ltd., produces a wide variety of cornice moldings for windows at a plant located in Evergreen Park, Illinois. Because there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company’s fiscal year, inventory account balances were as follows:
Explanation / Answer
Answer to requirement 2:
Dr Raw Material Inventory Cr
July 1 Balance 11,100
(a) 170,000
(b) 148,000
Dr Manufacturing Overhead Cr
(b) 19,400
(c) 40,300
(d) 14,500
(e) 17,500
(g) 17,500
109,200
(h) 96,000
(i) 13,200_
109,200
Dr Cost of Goods Sold Cr
(j) 293,000
(i) 13,200
Answer to requirement 3-a).
Manufacturing overhead is under applied to the extent of 109200 – 96000 = $13200
Answer to requirement 3-b).
Cost of goods sold……………………….13,200
Manufacturing overhead…………………………………..13,200
Answer to Requirement 1: Carpenter Cornices Ltd Date Account Title & Explanations Debit Credit a raw material inventory 170000 accounts payable 170000 b work in process 128500 manufacturing overhead 19500 raw material inventory 148000 c work in process 95000 manufacturing overhead 40300 sales commissions expense 26500 salaries expense 45500 salaries and wages payable 207300 d manufacturing overhead 14500 insurance expense 5500 prepaid insurance 20000 e manufacturing overhead 17500 utilities payable 17500 f advertising expenses 11600 accounts payable 11600 g manufacturing overhead 17500 depreciation expense 5500 accumulated depreciation 23000 h work in process - $2.4*40000 96000 manufacturing overhead 96000 i finished goods 294000 work in process 294000 j accounts receivable 534000 sales 534000 cost of goods sold 293000 finished goods 293000Related Questions
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