Virtual Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2020:

Virtual Co. uses a normal-costing system and allocates overhead to work in process at a rate of $2.50 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials.

Required

1. Prepare journal entries to record the transactions for 2020, including an entry to close out under- or overallocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary ledger, if any, should be referenced as backup for the entry.
2. Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated Account.

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Costs incurred: Purchases of direct materials (net) on credit Direct manufacturing labor cost Indirect labor Depreciation, factory equipment Depreciation, office equipment Maintenance, factory equipment Miscellaneous factory overhead Rent, factory building Advertising expense Sales commissions Inventories: Direct materials Work in process Finished goods January 1, 2020 $ 9,700 6,200 66,000 $125,000 88,000 54,700 36,000 7,300 26,000 9,600 70,000 92,000 36,000 December 31, 2020 $13,000 24,000 32,000