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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 a fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct lab hours. Its predetermined overhead rate was based on a cost formula that estimated $388,800 of manufacturing overhead for an estimated allocation base of 810 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $295.000 b. Raw materials used in production (all direct materials) $280.000 c Utility bills incurred on account, $78,000 (95% related to factory operations, and the remainder related to selling and administra activities). d. Accrued salary and wage costs: Direct labor (890 hours) Indirect labor Selling and administrative salaries $ 205,000 e Maintenance costs incurred on account in the factory, $73,000 Advertising costs incurred on account, $155,000. g. Depreciation was recorded for the year, $91,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment) Rental cost incurred on account, $105,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities) Manufacturing overhead cost was applied to jobs, $_? Cost of goods manufactured for the year, 5960,000 Sales for the year (all on account) totaled $2,150,000. These goods cost $990,000 according to their job cost sheets The balances in the inventory accounts at the beginning of the year were: $ 49,000 $ 40,000 $29.

Answer 1

1)	Journal Entries
	Events	Particulars			Debit	Credit
	a)	Raw Materials			$     295,000.00
		To Accounts Payable				$     295,000.00
	b)	WIP			$     280,000.00
		To Raw Materials				$     280,000.00
	c)	Manu. OH			$       74,100.00
		Utility Expense			$         3,900.00
		To Bills Payable				$       78,000.00
	d)	WIP			$     325,000.00
		Manu. OH			$     109,000.00
		Salary Expense			$     205,000.00
		To Salaries Payable				$     639,000.00
	e)	Manu. OH			$       73,000.00
		Accounts Payable				$       73,000.00
	f)	Advertising Expense			$     155,000.00
		To Accounts Payable				$     155,000.00
	g)	Manu. OH			$       72,800.00
		Depreciation Expense			$       18,200.00
		To Accumulated Depreciation				$       91,000.00
	h)	Manu. OH			$       89,250.00
		Rent Expense			$       15,750.00
		To Accounts Payable				$     105,000.00
	i)	WIP			$     427,200.00
		To Manu. OH				$     427,200.00
		($ 388800 x 890/810)
	j)	Finished Goods			$     960,000.00
		To WIP				$     960,000.00
	k)	Cost of Goods sold			$     990,000.00
		To Finished Goods				$     990,000.00
		Accounts Receivable			$ 2,150,000.00
		To Sales				$ 2,150,000.00

2)	Raw Materials					WIP					Finished Goods
	Beg. Bal.	49000	b)	$ 280,000.00		Beg. Bal.	40000	j)	$ 960,000.00		Beg. Bal.	79000	k)	$ 990,000.00
	a)	$ 295,000.00	End. Bal.	$   64,000.00		b)	$ 280,000.00				j)	$ 960,000.00	End. Bal	$   49,000.00
						d)	$ 325,000.00
						i)	$ 427,200.00	End. Bal.	$ 112,200.00
	Manu. OH					Cost of Goods sold
	c)	$   74,100.00	i)	$ 427,200.00		k)	$ 990,000.00	Bal.	$ 990,000.00
	d)	$ 109,000.00
	e)	$   73,000.00
	g)	$   72,800.00
	h)	$   89,250.00
	Bal.	$     9,050.00

3)		Schedule of Cost of Goods Manufactured
		Direct materials:
		Beginning R.M inventory			$   49,000.00
	Add:	Purchase of R.M			$ 295,000.00
		Total R.M available			$ 344,000.00
	Less:	Ending R.M inventory			$   64,000.00
		R.M used in production				$     280,000.00
		Direct labor				$     325,000.00
		Manufacturing OH				$     427,200.00
		Total manufacturing costs				$ 1,032,200.00
	Add:	Beginning WIP Inventory				$       40,000.00
						$ 1,072,200.00
	Less:	Ending WIP inventory				$     112,200.00
		Cost of goods manufactured				$     960,000.00

4)	Entry to close manu. OH account
	Particulars			Debit	Credit
	Manufacturing OH			$ 9,050.00
	To Cost of Goods sold				$ 9,050.00

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