Question

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $380,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year:

1. Raw materials purchased on account, $275,000.
2. Raw materials used in production (all direct materials), $260,000.
3. Utility bills incurred on account, $74,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
4. Accrued salary and wage costs:

Direct labor (1,100 hours)	$	305,000
Indirect labor	$	105,000
Selling and administrative salaries	$	185,000

5. Maintenance costs incurred on account in the factory, $69,000
6. Advertising costs incurred on account, $151,000.
7. Depreciation was recorded for the year, $87,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
8. Rental cost incurred on account, $112,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
9. Manufacturing overhead cost was applied to jobs, $ ? .
10. Cost of goods manufactured for the year, $920,000.
11. Sales for the year (all on account) totaled $1,950,000. These goods cost $950,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials	$	45,000
Work in Process	$	36,000
Finished Goods	$	75,000

1. Journal Entries

In the books of Froya Fabrikker A/S:

Transaction / Event	General Journal	Debit	Credit
		$	$
a.	Raw Materials Inventory	275,000
	Accounts Payable		275,000
b.	Work in Process Inventory	260,000
	Raw Materials Inventory		260,000
c.	Manufacturing Overhead	70,300
	Utilities Expense	3,700
	Accounts Payable		74,000
d.	Work in Process Inventory	305,000
	Manufacturing Overhead	105,000
	Salaries Expense	185,000
	Salaries and Wages Payable		595,000
e.	Manufacturing Overhead	69,000
	Accounts Payable		69,000
f.	Advertising Expense	151,000
	Accounts Payable		151,000
g.	Manufacturing Overhead	69,600
	Depreciation Expense	17,400
	Accumulated Depreciation : Equipment		87,000
h.	Manufacturing Overhead	95,200
	Rent Expense	16,800
	Accounts Payable		112,000
i.	Work in Process Inventory ( $ 380,000 / 1,000 x 1,100)	418,000
	Manufacturing Overhead		418,000
j.	Finished Goods Inventory	920,000
	Work in Process Inventory		920,000
k.	Accounts Receivable	1,950,000
	Sales		1,950,000
	Cost of Goods Sold	950,000
	Finished Goods Inventory		950,000

Required:

1. Prepare journal entries to record the preceding transactions. COMPLETED ABOVE

HELP PLEASE WITH 2 AND 3

2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)

3. Prepare a schedule of cost of goods manufactured.

Answer 1

2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)

Raw materials inventory					Work in process inventory
Beg. bal.	$45000	260000	(b)		Beg. bal.	$36000	920000	(j)
(a)	275000				(b)	260000
					(d)	305000
End. bal.	$60000				(i)	418000
Finished goods inventory					End. bal.	$99000
Beg. bal.	$75000	950000	(k)
(j)	920000				Manufacturing overhead
					(c)	$70300	418000	(i)
End. bal.	$45000				(d)	105000
					(e)	69000
Accounts payable					(g)	69600
		$275000	(a)		(h)	95200
		74000	(c)
		69000	(e)		End. bal.		8900
		151000	(f)
		112000	(h)		Utilities expense
					(c)	3700
End. bal.		$681000
					End. bal.	3700
Salaries expense
(d)	185000				Salaries and wages payable
							595000	(d)
End. bal.	185000
					End. bal.		595000
Advertising expense
(f)	151000				Depreciation expense
					(g)	17400
End. bal.	151000
					End. bal.	17400
Accumulated depreciation- Equipment
		87000	(g)		Rent expense
					(h)	16800
End. bal.		87000
					End. bal.	16800
Accounts receivable
(k)	1950000				Sales
							1950000	(k)
End. bal.	1950000
					End. bal.		1950000
Cost of goods sold
(k)	950000
End. bal.	950000

3. Prepare a schedule of cost of goods manufactured

Froya Fabrikker
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$45000
Add: Purchase of raw materials	275000
Total raw materials available for use	320000
Less: Ending raw materials inventory	-60000
Direct materials used in production		$260000
Direct labor		305000
Manufacturing overhead applied		418000
Total manufacturing costs		983000
Add: Beginning work in process inventory		36000
Total cost of work in process		1019000
Less: Ending work in process inventory		-99000
Cost of goods manufactured		$920000