Question

P3-14 Entries Directly Into T-Accounts; Income Statement Hudson Company's trial balance as of January 1, the beginning of the fiscal year, is given below Accounts Receivable Finished Goods . .. . Plant and Equipment 18,000 9,000 20,000 32,000 4,000 210,000 -Prepaid Insurance Aceulated Depreciation 53,000 38,000 160,000 9,000 -Capital Stock Retained Earnings . Total $300.000 $300.000 Hudson Company is a manufacturing firm and employs a job-order costing system. During the year, the föllowing transactions took place: a. Raw materials purchased on account, $40,000. b. Raw materials were requisitioned for use in production, $38,000 (85% direct and 15% Factory utility costs incurred, $19,100. Depreciation was recorded on plant and equipment, $36,000. Three-fourths of the depreciation related to factory equipment, and the remainder related to selling and administrative equipment. Advertising cxpense incurred, $48,000. Costs for salaries and wages were incurred as follows: c. d. e. f. Indirect labor Administrative salaries 10,000 30,000 Prepaid insurance expired during the year, $3,000 (80% related to factory operations, and 20% related to selling and administrative activities). Miscellaneous selling and administrative expenses incurred, S9,500. Manufacturing overhead was applied to production. The company applies overhead on the basis of $8 per machine-hour; 7,500 machine-hours were recorded for the year. Goods that cost S140,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse. Sales for the year totaled $250,000 and were all on account. The total cost to manufacture these goods according to their job cost shcets was $130,000. Collections from customers during the year totaled $245,000. Payments to suppliers on account during the year, $150,000; payments to employees for salaries and wages, $84,000 g. h. i. j. k. 1 m. Required 1. Prepare a T account for each account in the company's trial balance and enter the opening balances shown above 2. Record the transactions above directly into the T-accounts. Prepare new T-accounts as needed. Key your entries to the letters (a) through (m) above. Find the ending balance in each account Is manufacturing overbead underapplied or overapplied for the year? Make an entry in the T-accounts to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 3. 4. Proparc an income statement for the year. (Do not prepare a schedule of cost of goods raanufactured; alof the information needed for the income statement is available in thc T-aocounts.) 132 Part I: The Foundation Cost Terms, Systems Design, and Cost Behavior Molding Painting 62,000 9,000 $430,000 $680,000 436,000 Manufacturing overhead cost .<.570,000750,000 Direct labor-hours 65,000 Direct materials cost What was the amount of under- or overapplied overhead in each department at the end of the year?

Answer 1

1&2.				Raw material
	Particulars			Ref.	Debit	Particulars			Ref.	Credit
	Beg. Bal.				9000	Work in process		(38000*0.85)	b.	32300
	Accounts payable			a.	40000	Factory overhead		(38000*0.15)	b.	5700
					49000					38000
	End. Bal				11000
				Accounts payable
	Particulars			Ref.	Debit	Particulars			Ref.	Credit
	Cash	(150000+84000)		m.	234000	Beg. Bal.				38000
						Raw material			a.	40000
						Factory overhead			c.	19100
						Advertising expense			e.	48000
						Work in process			f.	45000
						Factory overhead			f.	10000
						Administrative salaries			f.	30000
						Miscellaneous expense			h.	9500
					234000					239600
						End. Bal				5600
				Work in process
	Particulars			Ref.	Debit	Particulars			Ref.	Credit
	Beg. Bal.				20000	Finished goods			j.	140000
	Raw material			b.	32300
	Accounts payable			f.	45000
	Prepaid insurance			g.	2400
	Factory overhead		(7500*8)	i.	60000
					159700					140000
	End. Bal				19700
				Factory overhead
	Particulars			Ref.	Debit	Particulars			Ref.	Credit
	Raw material			b.	5700	Work in process		(7500*8)	i.	60000
	Accounts payable			c.	19100	Cost of goods sold		(Ref. 3)		1800
	Accumulated depreciation
	(36000*3/4)			d.	27000
	Accounts payable			f.	10000
					61800					61800
				Depreciation expense
	Particulars			Ref.	Debit	Particulars			Ref.	Credit
	Accumulated depreciation
	(36000*1/4)			d.	9000
					9000					0
	End. Bal				9000
				Accumulated depreciation
	Particulars			Ref.	Debit	Particulars			Ref.	Credit
						Beg. Bal.				53000
						Factory overhead			d.	27000
						Depreciation expense			d.	9000
					0					89000
						End. Bal				89000
				Advertising expense
	Particulars			Ref.	Debit	Particulars			Ref.	Credit
	Accounts payable			e.	48000
					48000					0
	End. Bal				48000