3) Redmond Manufacturing Company began operations on January 1. The Company was

Question

3) Redmond Manufacturing Company began operations on January 1. The Company was affected by the following events during its first year of operation: a) Company issued stock to owners for $100,000 cash. b) Purchased materials, $8,000 for cash. c) Transferred $4,000 of direct materials to production (Job #1 : $3,000; Job #2: $1,000). d) Paid direct labor costs, $5,000 (Job # 1: $2,500; Job #2: $2,500). e) Paid $3,000 cash for various actual overhead costs. f) Allocated overhead to work in process at 60% of direct labor cost. g) Completed Job #1 and transferred it to Finished Goods. h) Sold Job #1 for $8,400 cash. i) Paid S200 cash for selling and administrative expenses. Required: 1) Record the above events in the T-accounts provided. Label your transactions (a) -(). 2) Determine the ending balance in the work in process account. 3) Prepare a schedule of cost of goods manufactured and sold. 4) Compute the amount of gross profit earned on Job #1.

Explanation / Answer

a. Leder accounts:

2. ending balance in wip= 4000+5000+3000-7000= 5000

3.

4. Gross profit= sales revenue- cost of goods sold= 8400-7000= 1400

Cash Ref Account Debit Ref Account Credit a To Common stock 100000 b By materials 8000 h To Sales revenue 8400 d By Labor 5000 e By Manufacturing OH 3000 i By Selling and administrative expenses 200 Materials Ref Account Debit Ref Account Credit b To Cash 8000 c By Work in process 4000 Manufacturing OH Ref Account Debit Ref Account Credit e To cash 3000 f By Work in process 3000 Work in process Ref Account Debit Ref Account Credit c To Materials 4000 g By Finished goods 7000 d To Labor 5000 f To Manufacturing OH 3000 Finished goods Ref Account Debit Ref Account Credit g To Work in process 7000 h By cost of goods sold 7000 cost of goods sold Ref Account Debit Ref Account Credit h To Finished goods 7000 Sales revenue Ref Account Debit Ref Account Credit h By Cash 8400 Common stock Ref Account Debit Ref Account Credit a By Cash 100000 Selling and administrative expenses Ref Account Debit Ref Account Credit i To Cash 200

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