PROBLEM 3-9 Preparing Journal Entries; T-Accounts; Cost Flows [LO4 - cc8; LO6 -

Question

PROBLEM 3-9 Preparing Journal Entries; T-Accounts; Cost Flows [LO4 - cc8; LO6 - cc12; LO Cc14; LO8 - CC18] Almeda Products, Inc, uses a job-order costing system. The company's inventory balances on April 1, the start of its fiscal year, were as follows: CHECK FIGURES (3) Underapplied by $11,000 (4) NI: $23,000 Raw materials $52,000 Work in process 40,000 Finished goods 38,000 During the year, the following transactions were completed: a. Raw materials were purchased on account, $170,000. b. Raw materials were issued from the storeroom for use in production, $200,000 (80% direct and 20% indirect). c. Employee salaries and wages were accrued as follows: direct labour, $200,000; indirect labour, $82,000; selling and administrative salaries, $120,000. d. Utility costs were incurred in the factory. $75,000. e. Advertising costs were incurred. $90,000. f. Prepaid insurance expired during the year, $20,000 (70% related to factory operations, and 30% related to selling and administrative activities). g. Depreciation was recorded, $150,000 (80% related to factory assets, and 20% related to selling and administrative assets). h. Manufacturing overhead was applied to jobs at the rate of 160% of direct labour cost.

Explanation / Answer

Account Title Debit Credit a. Raw materials 170000 Accounts Payable 170000 b. WIP Inventory 160000 Manufacturing OH 40000 Raw materials 200000 c. WIP Inventory 200000 Manufacturing OH 82000 S&A salaries 120000 Wages payable 402000 d. Manufacturing OH 75000 Cash 75000 e. Advertising costs 90000 Cash 90000 f. Manufacturing OH 14000 Insurance expense 6000 Prepaid Insurance 20000 g. Manufacturing OH 120000 Depreciation Expense 30000 Accumulated depreciation 150000 h. WIP Inventory(200000*160%) 320000 Manufacturing OH 320000 i Finished goods 700000 WIP Inventory 700000 j. Accounts Receivables 1000000 Sales Revenue 1000000 COGS 720000 Finished goods 720000 COGS 11000 Manufacturing OH 11000 (Under-applied Mfg.OH) 3858000 3858000 LEDGER postings Accounts Payable 170000 j. Accounts Receivables 1000000 Accumulated depreciation 150000 e. Advertising costs 90000 Cash 75000 Cash 90000 COGS 720000 COGS 11000 731000 Depreciation Expense 30000 Op.bal. 38000 i Finished goods 700000 Finished goods 720000 18000 Insurance expense 6000 Manufacturing OH 40000 Manufacturing OH 82000 d. Manufacturing OH 75000 f. Manufacturing OH 14000 g. Manufacturing OH 120000 Manufacturing OH 320000 Manufacturing OH 11000 0 Prepaid Insurance 20000 Op. Balance 52000 a. Raw materials 170000 Raw materials 200000 22000 S&A salaries 120000 Sales Revenue 1000000 Wages payable 402000 Op.balance 40000 WIP Inventory 700000 b. WIP Inventory 160000 c. WIP Inventory 200000 h. WIP Inventory(200000*160%) 320000 20000 3. Manufacturing OH incurred 331000 Less; Manufacturing OH applied 320000 Mfg. OH under-applied 11000 So, the foll.JE COGS 11000 Mfg. OH 11000 4. Income statement Sales Revenue 1000000 Less:COGS 731000 Gross Margin 269000 Less: Operating Expenses: Advertising costs 90000 Depreciation Expense 30000 Insurance expense 6000 S&A salaries 120000 246000 Operating Income 23000

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