Bergamo Bay\'s computer system generated the following trial balance on December

Question

Bergamo Bay's computer system generated the following trial balance on December 31, 2015. The com- pany's manager knows something is wrong with the trial balance because it does not show any balance Problem 19-2A Source documents, journal entries, overhead, for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition. and financial reports the accrued factory payroll (Factory Payroll Payable) has not been recorded. P1 P2 P3 P Debit Credit $170,000 75,000 80,000 Accounts receivable work in process inventory . . Finished goods inventory . . 15,000 $17,000 Accounts payable Notes payable Common stock Retained earnings 50,000 271,000 373,000 Factory overhead Operating expenses … … Totals 115,000 60,000 $736,000 $736,000 After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date. Materials requisition 21-3010: $10.200 direct materials to Job 402 Materials requisition 21-3011: $18,600 direct materials to job 404 Materials requisition 21-3012 $5,600 indirect materialts Labor time ticker 6052 Labor time ticket 6053 Labor time ticket 6054 36.000 direct labor to job 402 $23,800 direct labor to Job 404 $8,200 indirect labor

Explanation / Answer

Answer:

1. Use information on the six source documents to prepare journal entries to assign the following costs.

Date

Decription

Debit $

Credit $

a. Direct materials costs to Work in Process Inventory.

WIP (10200+18600)

$    28,800

Raw Materials

$    28,800

(to Record direct materials used)

b. Direct labor costs to Work in Process Inventory.

WIP (36000+23800)

$    59,800

Wages Payable

$    59,800

(to Record direct labor used)

c. Overhead costs to Work in Process Inventory.

WIP (200%*59800)

$ 119,600

To overhead

$ 119,600

(to record OH applied, 200% of DL)

d. Indirect materials costs to the Factory Overhead account.

Overhead

$      5,600

To raw material

$      5,600

(t0 Indirect materials used added to OH)

e. Indirect labor costs to the Factory Overhead account.

Overhead

8200

To wages payable

8200

____________________________________________________

2

Determine the revised balance.

Factory OH

DR

CR

Bal

$        115,000

$        119,600

add'l ind. Matl.

$             5,600

add'l ind. Lbr

$             8,200

$             9,200

Under
applied OH

Date

Decription

Debit $

Credit $

a. Direct materials costs to Work in Process Inventory.

COGS

9200

TO Overhead

9200

(to Adjust for underapplied OH)

Adjustments

WIP

Raw Materials

Job 402

Job 404

      Total

$       80,000

Orig bal

DM

$           10,200

$       18,600

$         28,800

$     (28,800)

add'l used

DL

$           36,000

$       23,800

$         59,800

$       (5,600)

add'l ind mtl

OH

$           72,000

$       47,600

$      119,600

$       45,600

Tot

$        118,200

$       90,000

$      208,200

Wages Payable

$ 59,800

COGS

$    218,000

$    8,200

$         9,200

$ 68,000

$    227,200

__________________________________________________________

3

BERGAMO BAY COMPANY
Trial Balance
December 31, 2015
BERGAMO BAY COMPANY
Trial Balance
December 31, 2015

DR

CR

Cash

$     170,000

Accounts receivable

$       75,000

Raw materials inventory

$       45,600

Work in process inventory

$     208,200

Finished goods inventory

$       15,000

Prepaid rent

$          3,000

Accounts payable

$               17,000

Wages payable

$               68,000

Notes payable

$               25,000

Common stock

$               50,000

Retained earnings

$            271,000

Sales

$            373,000

Cost of goods sold

$     227,200

Factory overhead

$                 -  

Operating expenses

$       60,000

Totals

$     804,000

$            804,000

______________________________________________

4

BERGAMO BAY COMPANY
Income Statemnt
December 31, 2015

Sales

$            373,000

Cost of goods sold

$          (227,200)

Gross profit

$            145,800

Operating expenses

$            (60,000)

Net income

$               85,800

BERGAMO BAY COMPANY
Balance Sheet
December 31, 2015

Assets

Cash

$            170,000

Accounts receivable

$               75,000

Inventories

Raw materials inventory

$       45,600

Work in process inventory

$     208,200

Finished goods inventory

$       15,000

$            268,800

Prepaid rent

$                 3,000

Total assets

$            516,800

Liabilities and equity

Accounts payable

$               17,000

Wages payable

$               68,000

Notes payable

$               25,000

Total liabilities

$            110,000

Common stock

$               50,000

Retained earnings

$            356,800

Total stockholders' equity

$            406,800

Total liabilities and equity

$            516,800

________________________________________________

5

Costs would be understated, net income would be overstated Assets would be understated (WIP, raw materials)

Date

Decription

Debit $

Credit $

a. Direct materials costs to Work in Process Inventory.

WIP (10200+18600)

$    28,800

Raw Materials

$    28,800

(to Record direct materials used)

b. Direct labor costs to Work in Process Inventory.

WIP (36000+23800)

$    59,800

Wages Payable

$    59,800

(to Record direct labor used)

c. Overhead costs to Work in Process Inventory.

WIP (200%*59800)

$ 119,600

To overhead

$ 119,600

(to record OH applied, 200% of DL)

d. Indirect materials costs to the Factory Overhead account.

Overhead

$      5,600

To raw material

$      5,600

(t0 Indirect materials used added to OH)

e. Indirect labor costs to the Factory Overhead account.

Overhead

8200

To wages payable

8200

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