Problem 4-32 (Part Level Submission) Bonita Wings, Inc. manufactures airplanes f

Question

Problem 4-32 (Part Level Submission) Bonita Wings, Inc. manufactures airplanes for use in stunt shows. Bonita's factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible Since each plane has different features (such as its shape, weight, and color), Bonita uses a job order costing system to accumulate product costs. At the end of 2016, Bonita's accountants developed the following expectations for 2017 based on the marketing department's sales forecast: Budgeted overhead cost Estimated machine hours Estimated direct labor hours Estimated direct materials cost $1,510,000 51,075,000 49,000 9,000 Bonita's inventory count, completed on December 31, 2016, revealed the following ending inventory balances Raw Materials Inventory Work in Process Inventory $625,000 Finished Goods Inventory 2,090,000 $251,000 The company's 2017 payroll data revealed the following actual payroll costs for the year: Annual Total Hours Number Wage Rate salary per Worked per Employed per Hour Fr ployee mployee Job Title $224,000 177,000 $40,300 $31,400 President and CEO Vice president and CFO Factory manager Assistant factory manager Machine operator Security guard, factory Forklift operator Corporate secretary Janitor, factory $14.5 2,250 $20,400 $7.5 2,000 $35,700 $6 2,150 The following information was taken from Bonita's Schedule of Plant Assets, All assets are depreciated using the straight-line method

Explanation / Answer

Solution:

Journal Entries

Transaction

General Journal

Debit

Credit

1)

Administrative Expense (224,000 + 177,000 + 35,700)

$436,700

Salaries Payable

$436,700

2)

Factory Overhead (40300 + 31400 + 20400)

$92,100

Salaries Payable

$92,100

3)

Work In Process (2250*14.5 + 2000*7.5 + 2150*6)

$60,525

   Wages Payable

$60,525

4)

Administrative Expense

$17,500

Accumulated Depreciation - Administrative Office Equipment

$17,500

(Depreciation = (Cost 650,000 - Salvage Value 125,000) / Useful life 30 = $17,500)

5)

Factory Overhead (192,500 + 165,000)

$357,500

Accumulated Depreciation - Factory Building and Equipment

$357,500

(Annual Depreciation Factory Building = (Cost 4,000,000 - Salvage Value 150,000) / Useful life 20 = $192,500)

(Annual Depreciation Factory Equipment = (Cost 2,000,000 - Salvage Value 20,000) / Useful life 12 = $165,000)

6)

Administrative Expense (5400 + 4100)

$9,500

Office Supplies

$4,100

Accounts Payable

$5,400

7)

Factory Overhead (12300 + 30100)

$42,400

Prepaid Insurance

$12,300

Accounts Payable

$30,100

8)

Raw Materials Inventory

$1,945,000

Accounts Payable

$1,945,000

9)

Work in process inventory (direct materials) (1860,000*85%)

$1,581,000

Factory Overhead (indirect materials) (1860,000*15%)

$279,000

    Raw Materials Inventory

$1,860,000

10)

Work In Process Inventory (Direct materials $1,581,000*Predetermined OH Rate 71.19%)

$1,125,514

Factory Overhead

$1,125,514

11)

Finished Goods Inventory

$3,450,000

Work In Process Inventory

$3,450,000

12)

Accounts Receivable

$6,570,000

Sales Revenue

$6,570,000

13)

Cost of Goods Sold (6,570,000/180%)

$3,650,000

   Finished Goods Inventory

$3,650,000

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Transaction

General Journal

Debit

Credit

1)

Administrative Expense (224,000 + 177,000 + 35,700)

$436,700

Salaries Payable

$436,700

2)

Factory Overhead (40300 + 31400 + 20400)

$92,100

Salaries Payable

$92,100

3)

Work In Process (2250*14.5 + 2000*7.5 + 2150*6)

$60,525

   Wages Payable

$60,525

4)

Administrative Expense

$17,500

Accumulated Depreciation - Administrative Office Equipment

$17,500

(Depreciation = (Cost 650,000 - Salvage Value 125,000) / Useful life 30 = $17,500)

5)

Factory Overhead (192,500 + 165,000)

$357,500

Accumulated Depreciation - Factory Building and Equipment

$357,500

(Annual Depreciation Factory Building = (Cost 4,000,000 - Salvage Value 150,000) / Useful life 20 = $192,500)

(Annual Depreciation Factory Equipment = (Cost 2,000,000 - Salvage Value 20,000) / Useful life 12 = $165,000)

6)

Administrative Expense (5400 + 4100)

$9,500

Office Supplies

$4,100

Accounts Payable

$5,400

7)

Factory Overhead (12300 + 30100)

$42,400

Prepaid Insurance

$12,300

Accounts Payable

$30,100

8)

Raw Materials Inventory

$1,945,000

Accounts Payable

$1,945,000

9)

Work in process inventory (direct materials) (1860,000*85%)

$1,581,000

Factory Overhead (indirect materials) (1860,000*15%)

$279,000

    Raw Materials Inventory

$1,860,000

10)

Work In Process Inventory (Direct materials $1,581,000*Predetermined OH Rate 71.19%)

$1,125,514

Factory Overhead

$1,125,514

11)

Finished Goods Inventory

$3,450,000

Work In Process Inventory

$3,450,000

12)

Accounts Receivable

$6,570,000

Sales Revenue

$6,570,000

13)

Cost of Goods Sold (6,570,000/180%)

$3,650,000

   Finished Goods Inventory

$3,650,000

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