Chapter 16: Extra Credit Problem Directions: Arrange the below accounts in the cost flow order, and determine the unknown numbers and the ending balances for each account. Indicate if overhead is overapplied or underapplied. Close the overapplied or underapplied Factory Overhead to Cost of Goods Sold. Finished Goods Inventory Beginning Balance 85,000 Transferred In Unknown Transferred Out 750,000 Ending Balance Unknown Materials Inventory Beginning Balance 1,250,000 Purchases Unknown Direct materials used Unknown Indirect materials used Unknown Ending Balance 1,185,000 Wages Payable Total Factory Payroll 2,600,000 Direct Labor 850,000 Indirect Labor Unknown Work in Process Inventory Beginning Balance 1,100,000 Direct Materials 990,000 Direct Labor Unknown Factory Overhead Unknown Transferred Out 1,895,000 Ending Balance Unknown Factory Overhead Factory Overhead is applied based on direct labor costs. Estimated factory overhead 1,375,000 Estimated direct labor costs 500,000 Actual Other Factory Overhead 1,600,000 Actual Indirect Materials Used 75,000 Cost of Goods Sold Beginning Balance 25,000 Transferred In Unknown Ending Balance Unknown

1. IMPORTANT: To complete this problem, Factory Overhead Applied has to be calculated. There are two steps for calculating Factory Overhead Applied: Step #1-Calculate the Predetermined Factory Overhead Rate = Estimate Factory Overhead divided by Estimated Direct Labor Costs; Step #2 - Calculate Factory Overhead Applied = Predetermined Factory Overhead Rate multiplied by Direct Labor.
2. Once Factory Overhead Applied is calculated that number goes in the Work in Process T Account and in the Actual side of the Factory Overhead account. If you are confused about this step, please review the Canvas Demonstration Video.
3. Students have two options for completing the Extra Credit Problem: 1) Use T Accounts; or 2) Use Journal Entries.
4. How to use T Accounts? Canvas includes a Demonstration Video using T Accounts. Please review the Demonstration Video. The textbook also demonstrates how to use T Accounts.
5. How to use Journal Entries? Students learned to prepare journal entries in Acctg 1A. Canvas also includes Demonstration Journal Entries. Please review the Demonstration Journal Entries. Likewise, the textbook demonstrates how to use journal entries.