Question

Froya Fabrik A/S or Bergen, Norway, is a small company that manufactures speciatyheavy equipment for use in North Sea fields. The company uses a job-order costing system that appites manufacturing overead cost to jobs on the basis of director hours. Its predetermined overhead rate was based on a cost formula that estimated $350.000 of manufacturing overhead foran estimated allocation base of 1000 direct labor-hours. The following transactions took place during the year. a. Raw materials purchased on account, $250.000 b. Raw materials used in production (all direct materials). $235,000 c. Utility bills incurred on account, $69,000 (90% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs Direct labor (1,075 hours) Indirect labor Selling and administrative salaries $ 280, eee 100,99 $ 160,000 e. Maintenance costs incurred on account in the factory, $64,000 1. Advertising costs incurred on account, $146,000. g. Depreciation was recorded for the year, 582,000 (75% related to factory equipment, and the remainder related to sing and administrative equipment). n. Rental cost incurred on account, $107.000 (80% related to factory facilities, and the remainder related to selling and administrative facilities). 1 Manufacturing overhead cost was applied to jobs, $_? J. Cost of goods manufactured for the year, $870,000. k. Sales for the year (all on account totaled $1700,000. These goods cost $900,000 according to the job cost sheets The balances in the inventory accounts at the beginning of the year were: Raw Materials Work in Process Finished Goods $ 40,000 $ 31,00 $ 70,000 Required: 1. Prepare journal entries to record the preceding transactions 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 4. Prepare a journal entry to close any balance in the Manufacturing Overhead account to cost of Goods Sold 48. Prepare a schedule of cost of goods sold. 5. Prepare an income statement for the year. Complete this question by entering your answers in the tabs below. Prey 101 Next >

Answer 1

journal entries

S.no	account title particulars	debit ($)	credit ($)
1	RAW MATERIAL INVENTORY	250000
	Accounts payable		250000
2	work in process	235000
	RAW MATERIAL INVENTORY		235000
3	manufacturing overhead	62100
	Utility expenses	6900
	Utilities payable		69000
4	work in process	250000
	Manufacturing overhead	100000
	Selling and administrative salaries	160000
	Wages payable		510000
5	manufacturing overhead	64000
	Accounts payable		64000
6	advertising expenses	146000
	Accounts payable		146000
7	manufacturing overhead	61500
	Depreciation expenses	20500
	Accumulated depreciation		82000
8	manufacturing overhead	85600
	Rental expenses	21400
	Rental payable		107000
9	work in process (note)	376250
	Manufacturing overhead		376250
10	finished goods	870000
	Work in process		870000
11	account receivable	1700000
	Sales		1700000
12	cost of goods sold	900000
	Finished goods		900000

PRE DETERMINED OVERHEAD= 350000/1000= 350 PER DIRECT LABOUR HOUR

   APPILED OVERHEAD= 1075×350= 376250

   RAW MATERIAL INVENTORY

Beginning balance	40000	work in process	235000
Accounts payable	250000
		Balance	55000

  WORK IN PROCESS

Beginning balance	31000	finished goods	870000
Raw material inventory	235000
Wages payable	250000
Manufacturing overhead	376250
		Balance	22250

  Finished goods

Beginning balance	70000	cost of goods sold	900000
Work in process	870000
		Balance	40000

manufacturing overhead

Utilities payable	62100	work in process	376250
Wages payable	100000
Accounts payable	64000
Accumulated depreciation	61500
Rental payable	85600
Balance (overapplied)	3050

3.SCHEDULE OF COST OF GOODS MANUFACTURED

Direct material	235000
Direct labour	250000
Manufacturing overhead	376250
Total manufacturing cost	861250
Add beginning work in process	31000
Less ending work in process	(22250)
COST OF GOODS MANUFACTURED	870000

4A

Manufacturing overhead( overapplied)	3050
Cost of goods sold		3050

4b SCHEDULE OF COST OF GOODS SOLD

Beginning finished goods	70000
Cost of goods manufactured	870000
Cost of goods available for sale	940000
less.ending finished goods	(40000)
Unadjusted cost of goods sold	900000
Less overapplied overhead	(3050)
adjusted cost of goods sold	896950

5. INCOME STATEMENT

Revenue	1700000
Less cost of goods sold	(896950)
Gross margin	803050
Less.expenses
Salaries	(160000)
Advertising	(146000)
Depreciation	(20500)
Rental	(21400)
utilities	(6900)
Operating income	448250

ALL THE BEST

   PLEASE DO SUPPORT US

ANY DOUBT PLEASE COMMENT BELOW