Process costing system Eminence Corporation makes rocking chairs. The chairs mov
ID: 2547716 • Letter: P
Question
Process costing system Eminence Corporation makes rocking chairs. The chairs move through two departments during production. Lumber is cut into chair parts in the cutting department, which transfers the parts to the assembly department for completion. The company sells the unfinished chairs to hobby shops. The following transactions apply to Eminence's operations for its first year, 2018. (Assume that all transactions are for cash unless otherwise states.)
1. The company was started when it acquired a $47000 cash contribution from the owners.
2. The company purchased $15000 of direct raw materials and $400 of indirect materials. Indirect materials are capitalized in the Production Supplies account.
3. Direct materials totaling $7000 were issued to the cutting department.
4. Labor cost was $28200. Direct labor for the cutting and assembly departments was $10000 and $13000, respectively. Indirect labor costs were $5200.
5. The predetermined overhead rate was $0.5 per direct labor dollar in each department.
6. Actual overhead costs other than indirect materials and indirect labor were $6400 for the year.
7. The cutting department transferred $12500 of inventory to the assembly department.
8. The assembly department transferred $20500 of inventory to finished goods.
9. The company sold inventory costing $18500 for $30000.
10. The selling and administrative expenses were $3000.
11. A physical count revealed $100 of production supplies on hand at the end of 2018.
12. Assume that over- or underapplied overhead is insignificant.
Required
a. Record the data in T-accounts.
b. Record the closing entry for over- or underapplied manufacturing overhead, assuming that the amount is insignificant.
c. Close the revenue and expense accounts.
d. Prepare a schedule of costs of goods manufactured and sold, an income statement, and a balance sheet for 2018.
Explanation / Answer
Cash Owner's Capital 1 47000 15400 2 47000 1 9 30000 28200 4 6400 6 3000 10 End. Bal. 24000 End. Bal. 47000 Raw Materials Production Supplies 2 15000 7000 3 2 400 300 11 End. Bal. 8000 End. Bal. 100 Work in Process-Cutting Department Work in Process-Assembly Department 3 7000 12500 7 4 13000 20500 8 4 10000 5 6500 5 5000 7 12500 End. Bal. 9500 End. Bal. 11500 Manufacturing Overheads Finished Goods 4 5200 11500 5 8 20500 18500 9 6 6400 400 Cl. Entry 11 300 End. Bal. 0 End. Bal. 2000 Cost of Goods Sold Sales Revenue 9 18500 30000 9 Cl. Entry 400 Income summary 30000 18900 Income summary End. Bal. 0 End. Bal. 0 Selling and Administrative Expense Income Summary 10 3000 3000 Income summary Cost of goods sold 18900 30000 Sales revenue S&A expense 3000 End. Bal. 0 End. Bal. 8100 Cost of Goods Manufactured Schedule For the Year 2018 Direct materials 7000 Direct labor 23000 Manufacturing overhead applied 11500 Total current manufacturing costs 41500 Add: Beginning work in process 0 Total cost of work in process 41500 Less: Ending work in process 21000 Cost of goods manufactured $ 20500 Add: Beginning finished goods 0 Cost of goods available for sale 20500 Less: Ending finished goods 2000 Unadjusted Cost of goods sold $ 18500 Add: Underapplied manufacturing overheads 400 Adjusted Cost of goods sold $ 18900 Income Statement For the Year Ended 2018 Sales 30000 Cost of goods sold 18900 Gross profit 11100 Selling and administrative expense 3000 Net income 8100 Balance Sheet 2018 Assets Cash 24000 Raw materials 8000 Production supplies 100 Work in process 21000 Finished goods 2000 Total assets 55100 Liabilities and Owner's Capital Owner's capital 47000 Retained earnings 8100 Total liabilities and owner's capital 55100
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