Question

Problem 3-15 Journal Entries; T-Accounts; Financial Statements (LO3-1, LO3-2, LO3-3, LO3-4) Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oll 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 $329,000 of manufacturing overhead for an estimated allocation base of 940 direct labor-hours. The following transactions took place during the year a. Raw materials purchased on account, $205,000 b. Raw materials used in production (all direct materials). $190,000 c. Utility bills incurred on account, $60,000 (90% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs Direct labor (1,015 hours) Indirect labor Selling and administrative salarie $ 235,000 $ 91.ee $ 115,000

Answer 1

	Schedule of Cost of Goods Manufactured
Direct Materials:
Beginning raw materials inventory					31,000
Add:purchase of raw materials					205,000
Total raw materials available					236,000
less:Ending raw materials inventory					46,000
Materials used in production						190,000
Direct Labor						235,000
Manufacturing overhead applied to work in process						355250
total manufacturing costs						780,250
Add:Beginning work in process inventory						22,000
						802,250
less:Ending work in process inventory						22,250
Cost of goods manufactured						780,000
No	TR	General journal			Debit	Credit
1	1	manufacturing overhead			13,250
		cost of goods sold				13,250
Schedule of Cost of goods sold
Beginning finished goods inventory						61,000
Add:Cost of goods manufactured						780,000
Cost of goods available for sale						841,000
less:ending finished goods inventory						31,000
Unadjusted cost of goods sold						810,000
less:overapplied overhead						13,250
Adjusted cost of goods sold						796,750
Income statement
Sales						1,250,000
cost of goods sold						796,750
Gross margin						453,250
Selling and administrative expense
Utilities expense					6000
Advertising expense					137,000
Salaries expense					115,000
Depreciation expense					25,500
rent expense					27500
						311,000
Net operating income						142,250