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 $382,500 of manufacturing overhead for an estimated allocation base of 850 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $300,000. b. Raw materials used in production (all direct materials), $285,000. c. Utility bills incurred on account, $79,000 (80% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (950 hours) Indirect labor Selling and administrative salaries $ 330,000 $ 110,000 $ 210,000 e. Maintenance costs incurred on account in the factory, $74,000 f. Advertising costs incurred on account, $156,000. g. Depreciation was recorded for the year, $92,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $117,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, $_?, j. Cost of goods manufactured for the year, $970,000. k. Sales for the year (all on account) totaled $2,200,000. These goods cost $1,000,000 according to their job cost sheets.

Answer 1

1	Journal Entry		Debit	Credit
	a	Raw Material	$        3,00,000
		Account Payable		$     3,00,000
	b	Cost of production	$        2,85,000
		Raw Material		$     2,85,000
	c	Utility Expenses	$            79,000
		Account Payable		$        79,000
	c	Cost of production	$            63,200
		Selling & admin exp	$            15,800
		Utility Expenses		$        79,000
	d	Salary & wages exp	$        6,50,000
		Salary & wages payable		$     6,50,000
	d	Cost of production	$        4,40,000
		Selling & admin exp	$        2,10,000
		Salary & wages exp		$     6,50,000
	e	Maintenance cost	$            74,000
		Account Payable		$        74,000
	e	Cost of production	$            74,000
		Maintenance cost		$        74,000
	f	Advertisement exp	$        1,56,000
		Account Payable		$     1,56,000
	f	Selling & admin exp	$        1,56,000
		Advertisement exp		$     1,56,000
	g	Depreciation	$            92,000
		Assets		$        92,000
	g	Cost of production	$            73,600
		Selling & admin exp	$            18,400
		Depreciation		$        74,000
	h	Rental Exp	$        1,17,000
		Account Payable		$     1,17,000
	h	Cost of production	$            93,600
		Selling & admin exp	$            23,400
		Rental Exp		$     1,17,000