Question

Problem 3-15 Journal Entries; T-Accounts; Financial Statements [LO3-1, LO3-2, LO3-3, LO3-4]

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 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 $350,000 of manufacturing overhead for an estimated allocation base of 1,000 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 $ 280,000 $ 100,000 $ 160,000 e. Maintenance costs incurred on account in the factory, $64,000 f. Advertising costs incurred on account, $146,000. g. Depreciation was recorded for the year, $82,000 (75% related to factory equipment, and the remainder related to selling and administrative equipment). h. 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 $1,700,000. These goods cost $900,000 according to their 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 $ 31,000 $ 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. 4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4B. 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. Reg 1 Reg 2 Req3 Req 4A Req 4B Reg 5 Prepare journal entries to record the preceding transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list

Answer 1

Credit Requirement (1) No Transaction General Journal 1 (a) Raw Materials Accounts Payable Debit $ 250,000 $ 250,000 2 (b) $ 235,000 Work in process Raw Materials $ 235,000 3 o Manufacturing overhead Utilities Expense Accounts Payable $ $ 62,100 6,900 $ 69,000 4 (d) Work in process Manufacturing overhead Salaries Expense Salaries and wages payable $ $ $ 280,000 100,000 160,000 $ 540,000 5 (e) $ 64,000 Manufacturing overhead Accounts payable $ 64,000 6 (f) $ 146,000 Advertising Expense Accounts payable $ 146,000 7 (9) Manufacturing overhead Depreciation Expense Accumulated Depreciation $ $ 61,500 20,500 $ 82,000 8 (h) Manufacturing overhead Rent Expense Accounts Payable $ $ 85,600 21,400 $ 107,000 9 (i) $ Work in process Manufacturing overhead 376,250 $ 376,250 10 6) Finished goods Work in process $ 870,000 $ 870,000 11 (ki) Accounts Receivable Sales $ 1,700,000 $1,700,000 12 (k2) $ 900,000 Cost of goods sold Finished goods $ 900,000

Sales Requirement (2) Accounts Receivable Beg Bal. $ 1,700,000 Beg Bal. $ 1,700,000 (k) End Bal. $1,700,000 End Bal. $1,700,000 Raw Materials Beg Bal. $ 40,000 (a) $ 250,000 $235,000 (b) Cost of goods sold Beg Bal. $ (k) $ 900,000 End Bal. 55,000 End Bal. $900,000 Manufacturing Overhead Work In Process Beg Bal. $ 31,000 (b) $ 235,000 $870,000 () (d) $ 280,000 0 $ 376,250 Beg Bal. c) (d) (e) (9) (h) $ 62,100 $ 376,250 0 $100,000 $ 64,000 $ 61,500 $ 85,600 $ 52,250 $ 3,050 Advertising Expense Finished Goods Beg Bal. $ 70,000 6) $ 870,000 $900,000 (k) Beg Bal. () $ 146,000 End Bal. $ 40,000 End Bal. $146,000 Utilities Expense Beg Bal Accumulated Depreciation $ 82,000 (9) Beg Bal $ 6,900 End Bal. $ 82,000 End Bal. $ 6,900 Accounts Payable Salaries Expense Beg Bal. Beg Bal. (d) $ 160,000 $ 250,000 (a) $ 69,000 (C) $ 64,000 (e) $ 146,000 (1) $ 107,000 (h) End Bal. $ 160,000 Salaries and Wages Payable End Bal. $636,000 Beg Bal. $ 540,000 (d) Depreciation Expense Beg Bal. $ 540,000 (9) $ 20,500 Rent Expense End Bal. $ 20,500 Beg Bal. (h) $ 21,400 End Bal $ 21,400

Credit Requrement 4a No Transaction General Journal Debt 1 Manufacturing Overhead $3,050 Cost of goods sold $3,050 Requirement (5) Froya Fabrikker A/S Income Statement For the Year Ended Sales Cost of goods sold Gross Margin Seling and administrative expense Utilities Expense $ 6,900 Advertising Expense $146,000 Salaries Expense $ 160,000 Depreciation Expense $ 20,500 Rent Expense $ 21,400 Total Seling and administrative expense $1,700,000 $ 896,950 $ 803,050 Requirement (3) Froya Fabrikker As Schedule of cost of goods manufactured Direct materials Raw materials inventory,Beginning $ 40,000 Add: Purchase of Raw materials $ 250,000 Materials available for use $ 290,000 Less : Raw materials inventory, Ending $ 55,000 Materials used in production $ 235,000 Direct labour $280,000 Manufacturing overhead applied to work in process $376,250 Total manufacturing overhead $891,250 Add : Work in process,Beginning $ 31,000 $922,250 Less : Work in process, Ending $ 52,250 Cost of goods manufactured $ 870,000 $ 354,800 Net Income 9 448,250 Requirement 4(b) Froya Fabrikker A/S Schedule of cost of goods sold Finished goods inventory,Beginning Add: Cost of goods manufactured Goods available for sale Less : Fnished goods inventory, Ending Unadjusted cost of goods sold Less; Overappled overhead Adjusted Cost of goods sold $ 70,000 $ 870,000 $940,000 $ 40,000 $ 900,000 $ 3,050 $896,950