1. Paul Products, Inc., uses a job-order costing system. The company's inventory

balances on April 1, the start of its fiscal year, were as follows:

Raw materials . . . . . . . . . . . . . . . . . . . . . $42,000

Work in process . . . . . . . . . . . . . . . . . . . . $22,000

Finished goods . . . . . . . . . . . . . . . . . . . . $58,000

During the year, the following transactions were completed:

a) Raw materials were purchased on account, $172,000.

b) Raw materials were issued from the storeroom for use in production, $185,000

(80% direct and 20% indirect).

c) Employee salaries and wages were accrued as follows: direct labor, $200,000;

indirect labor, $82,000; and selling and administrative salaries, $90,000.

d) Utility costs were incurred in the factory, $75,000.

e) Advertising costs were incurred, $100,000.

f) Prepaid insurance expired during the year, $30,000 (90% related to factory

operations, and 10% related to selling and administrative activities).

g) Depreciation was recorded, $200,000 (85% related to factory assets, and 15%

related to selling and administrative assets).

h) Manufacturing overhead was applied to jobs at the rate of 190% of direct labor

cost.

i) Goods that cost $700,000 to manufacture according to their job cost sheets

were transferred to the finished goods warehouse.

j) Sales for the year totaled $1,000,000 and were all on account. The total cost to

manufacture these goods according to their job cost sheets was $720,000.

Required:

1. Prepare journal entries to record the transactions for the year.

2. Prepare T-accounts for Raw Materials, Work in Process, Finished Goods,

Manufacturing Overhead, and Cost of Goods Sold. Post the appropriate parts

of your journal entries to these T-accounts. Compute the ending balance in

each account. (Don't forget to enter the beginning balances in the inventory

accounts.)

3. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare

a journal entry to close this balance to Cost of Goods Sold.

4. Prepare a schedule of cost of goods manufactured & a schedule of cost of

goods sold.

5. Prepare an income statement for the year