Question

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 $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $200,000. b. Raw materials used in production (all direct materials). $185,000. c. Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to seling and administrative activities) d. Accrued salary and wage costs: Direct labor (975 hours) Indirect labor Selling and administrative salaries $ 230,000 $ 90,000 $ 110,000 e. Maintenance costs incurred on account in the factory, $54,000. f. Advertising costs incurred on account, $136,000. g. Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities) i. Manufacturing overhead cost was applied to jobs, $_? J. Cost of goods manufactured for the year, $770,000. k. Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 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 $30,000 $ 21,000 $ 60,000

Answer 1

Credit Requirement (1) No Transaction General Journal 1 (a) Raw Materials Accounts Payable Debit $ 200,000 $ 200,000 2 (b) $ Work in process Raw Materials 185,000 $ 185,000 3 o Manufacturing overhead Utilities Expense Accounts Payable $ $ 63,000 7,000 $ 70,000 4 (d) Work in process Manufacturing overhead Salaries Expense Salaries and wages payable $ $ $ 230,000 90,000 110,000 $ 430,000 5 (e) $ Manufacturing overhead Accounts payable 54,000 $ 54,000 6 (f) $ 136,000 Advertising Expense Accounts payable $ 136,000 7 (9) Manufacturing overhead Depreciation Expense Accumulated Depreciation $ $ 76,000 19,000 $ 95,000 8 (h) Manufacturing overhead Rent Expense Accounts Payable $ $ 102,000 18,000 $ 120,000 9 (i) $ Work in process Manufacturing overhead 390,000 $ 390,000 10 6) Finished goods Work in process $ 770,000 $ 770,000 11 (ki) Accounts Receivable Sales $ 1,200,000 $ 1,200,000 12 (k2) $ 800,000 Cost of goods sold Finished goods $ 800,000

Sales Requirement (2) Accounts Receivable Beg Bal. $ 1,200,000 Beg Bal. $ 1,200,000 (k) End Bal. $1,200,000 End Bal. $ 1,200,000 Raw Materials Beg Bal. $ 30,000 (a) $ 200,000 $185,000 (b) Cost of goods sold Beg Bal. $ (k) $800,000 End Bal. 45,000 End Bal. $ 800,000 Manufacturing Overhead Work In Process Beg Bal. $ 21,000 (b) $ 185,000 $770,000 () (d) $ 230,000 0 $ 390,000 Beg Bal. c) (d) (e) (9) (h) $ 63,000 $ 390,000 (0) $ 90,000 $ 54,000 $ 76,000 $ 102,000 $ 56,000 $ 5,000 Advertising Expense Finished Goods Beg Bal. $ 60,000 6) $ 770,000 $800,000 (k) Beg Bal. () $ 136,000 End Bal. $ 30,000 End Bal. $ 136,000 Utilities Expense Accumulated Depreciation $ 95,000 (9) Beg Bal Beg Bal $ 7,000 End Bal. $ 95,000 End Bal. $ 7,000 Accounts Payable Salaries Expense Beg Bal. Beg Bal. (d) $ 110,000 $ 200,000 (a) $ 70,000 (C) $ 54,000 (e) $ 136,000 (0) $ 120,000 (h) End Bal. $110,000 Salaries and Wages Payable End Bal. $ 580,000 Beg Bal. $ 430,000 (d) Depreciation Expense Beg Bal. $ 430,000 (9) $ 19,000 Rent Expense End Bal. $ 19,000 Beg Bal. (h) $ 18,000 End Bal $ 18,000

Credit Requirement 4a NO Transaction General Journal Debt 1 Manufacturing Overhead $5,000 Cost of goods sold $5,000 Requirement (3) Froya Fabriker Ns Schedule of cost of goods manufactured Direct materials Raw materials inventory,Beginning $ 30,000 Add : Purchase of Raw materials $ 200,000 Materials available for use $ 230,000 Less : Raw materials inventory, Ending $ 45,000 Materials used in production Direct labour Manufacturng overhead applied to work in process Total manufacturing overhead Add : Work in process,Beginning Requrement (5) Froya Fabrikker A/S Income Statement For the Year Ended Sales Cost of goods sold Gross Margin Seling and administrative expense Utilities Expense $ 7,000 Advertising Expense $ 136,000 Salaries Expense $ 110,000 Depreciation Expense $ 19,000 Rent Expense $ 18,000 Total Seling and administrative expense $ 1,200,000 $ 795,000 $ 405,000 $ 185,000 $ 230,000 $ 390,000 $ 805,000 $ 21,000 $ 826,000 $ 56,000 $ 770,000 $ 290,000 Less : Work in process, Ending Cost of goods manufactured Net Income $ 115,000 Requirement 4(b) Froya Fabrikker A/S Schedule of cost of goods sold Fnished 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 $ 60,000 $ 770,000 $830,000 $ 30,000 $ 800,000 $ 5,000 $ 795,000