ACCT3307/8817 Managerial Cost & Strategic Analysis Tee-Tops Case Spring 2022 Comprehensive product costing and manufacturing cost flow case. (Adapted from Fundamental Managerial Accounting Concepts 3"d edition, Edmonds, Edmonds, Tsay, Olds) The Tee-Tops Company makes women's tee shirts out of nylon material. The company's operations began on January 1, 2020 when it acquired $650,000 cash by issuing common stock. The company uses normal costing and manufacturing overhead is allocated on the basis of direct labor cost. The company uses two overhead accounts (allocated and control) and the adjustment to close the manufacturing overhead accounts at the end of the year is made to Cost of Goods Sold. Assume that all transactions are in cash unless otherwise indicated and ignore income taxes for this assignment Listed below are the accounting transactions for the 2020 and 2021 accounting periods: During 2020: Y. The company was founded on 1/1/20 when it acquired $650,000 cash by issuing 65,000 shares of common stock for a price of $10 per share. The stock has a $10 par value per share. 2 On 1/2/20 the company used cash to purchase sewing equipment for $8,000 that has a useful life of 5 years and no salvage value. The company uses straight line depreciation for all their equipment. 3. The company purchased $300,000 of direct raw materials The company allocates manufacturing overhead to production on the basis of direct labor cost. The total estimated manufacturing overhead costs for 2020, the first year of operations, are $640,000. Tee-Tops estimates they will incur $128,000 of direct labor costs during the year. 5. During the year the company used $200,000 of the raw materials to make the tee shirts. 6. During the year the employees worked 9,600 hours making shirts earning $12.50 per hour. Wages are paid in cash and the rate will be consistent for 2020 & 2021. @ Between January 1 and December 31 the company completed 100,000 tee-shirts and there were no unfinished shirts in work in process inventory at the end of the year. &. / The company recorded depreciation expense on the equipment for the year. The company sold 80,000 shirts for $900,000 during the year. $800,000 was received in cash with the remainder on account. NO. The company paid $60,000 in cash for various administrative expenses. ( Actual manufacturing overhead costs paid in cash during the year were made up of factory utilities of $60,000, miscellaneous production supplies used of $6,000, and other manufacturing overhead of $538,000 (not including depreciation) During 2021: J. The Company acquired $110,000 cash by issuing 10,000 shares of common stock for a price of $1 1 per share. 2. The Company now has a better understanding of the costs that make up manufacturing overhead. They will continue to allocate manufacturing overhead to production on the basis of direct labor cost. They estimate the following costs for manufacturing overhead for the year: they expect the factory utility expense to be approximately $4,500 per month. In the beginning of 2021 they paid cash for $5,000 of miscellaneous production supplies and anticipated that all the supplies would be used during the year. All other general manufacturing overhead costs are estimated to total $436,000 for the year (including deprecation). The Company estimates that direct labor cost will be $90,000 during 2021. The company purchased $100,000 of direct raw materials and used $19,110 of these materials to make shirts in January. 4 Employees worked 840 hours at $12.50 per hour in January.5) In the beginning of January the company purchased sewing equipment for $20,000. The machine has an estimated life of 6 years and $2,000 salvage value. The seller agreed to finance the sale with a one-year loan at 10% annual interest on the outstanding balance with repayments of one half of the principle and the associated interest on the last business days of June and December. 5. The Company completed work on all items started in January and produced 8,400 shirts during the month. 7. The company received the cash from prior year sales on account. 8. The company paid $80,000 in advertising expenses. 9. The company paid the $4,500 utilities expense for the month of January. 10. During February 2021 the company used $13,650 of raw materials and 600 hours of direct labor. 6,000 shirts were started and completed during the month of February. 1 1. The company purchased $120,000 of direct raw materials on account. 12. The company made the first semiannual principal and interest payment on the note payable 13. The company used an additional $139,100 of raw material and 5200 of direct labor hours to produce their product for the remainder of the year.(March 1 to December 31) 14. A cash payment was made for the full amount of the outstanding the accounts payable. 15. During the period between March 1 and December 31 the workshop completed 40,000 shirts at the same cost per shirt as those produced in January and February. 16. The company recorded $49,500 of cash payments for the utilities for the period between February 1 and December 31. 17. On December 1, 2021 the company declared a dividend of $1 per share outstanding. The dividend is payable on December 31, 2021 to shareholders of record on December 15, 2021. 18. The company recorded deprecation on their equipment and also paid $75,000 in cash for various selling and administrative expenses. 19. The company sold 62,000 tee-shirts for $14.00 per shirt. $700,000 was received in cash with the remainder on account. The company uses FIFO inventory cost flow method to determine cost of goods sold. 20. At December 31, 2021, a count of the miscellaneous production supplies showed $1,000 of supplies were still on hand. 21. The company paid the remaining semiannual principal and interest payment on the note payable. 22. The cost of the actual other manufacturing overhead paid in cash during the year was $389,400. (not including depreciation) Required: DUE 3/3/22) - your journal entries and statements should be done in EXCEL and in PROPER Financial Statement FORMAT A. Prepared the journal entries to record the events described above for 2020 & 2021. Give a very brief description of each entry (posting your entries to T-accounts is not required BUT will be helpful when preparing the statements) B. Prepare the journal entries to close: (1) the manufacturing overhead accounts to Cost of goods sold and (2) the revenue and expense accounts at the end of the year. (2020 & 2021) C. Prepare the following statements at the end of each year, 2020 & 2021 Note: your financial statements should be in proper financial statement format. a Schedule of cost of goods manufactured Schedule of cost of goods sold (with adjustment for under/over applied MOH) Income statement Balance sheet e ) Statement of cash flows (use direct or indirect method) D. Where have you shown the acquisition of the equipment in January 2021 on the Statement of Cash flows? Why? Provide an authoritative reference that supports your disclosure position. Please quote the authoritative reference or give the correct siting so that I can find your support. Note: the username and password for the FASB Accounting Standards codification can be found in the FASB module on Canvas