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Directions Using the following information and templates in each workbook, you will complete the following: 1. Prepare journal entries to record the preceding transactions. 2.
Directions | ||||||||
Using the following information and templates in each workbook, you will complete the following: | ||||||||
1. Prepare journal entries to record the preceding transactions. | ||||||||
2. Post the entries prepared in step 1 to their respective T-accounts. | ||||||||
3. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. | ||||||||
4. Prepare and income statement for the year. | ||||||||
Information and Data | ||||||||
White Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: | ||||||||
Raw Materials | $ 20,000 | |||||||
Work in Process | $ 15,000 | |||||||
Finished Goods | $ 30,000 | |||||||
The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year, the company's predetermined overhead rates was based on a cost forumulat that estimated $450,000 of total manufacturing overhead for an estimated activity level of 75,000 machine-hours. The following transactions were recorded for the year: | ||||||||
A. Raw materials were purchased on account, $410,000. | ||||||||
B. Raw materials were used in production, $380,000 ($360,000 direct materials and $20,000 indirect materials). | ||||||||
C. The following costs were accrued for employee services: Direct Labor, $75,000; Indirect Labor, $110,000; Sales Commissions, $90,000; and Administrative Salaries, $200,000. | ||||||||
D. Sales travel costs (on account) were $17,000. | ||||||||
E. Utility costs (on account) in the factory were $43,000. | ||||||||
F. Advertising costs (on account) were $180,000. | ||||||||
G. Depreciation was recorded for the year, $350,000 ($280,000 relates to factory assets and $70,000 relates to selling and administrative assets). | ||||||||
H. Insurance expired during the year, $10,000 ($7,000 relates to factory operations and the remaining relates to sellling and administrative activities. | ||||||||
I. Manufacturing overhead was applied to production. Due to greater than expected demand for its products, the company worked 80,000 machine hours on all jobs during the year. | ||||||||
J. Jobs costing $900,000 to manufacture according to their job cost sheets were completed during the year. | ||||||||
K. Jobs were sold on account to customers during the year for a total of $1,500,000. The jobs cost $870,000 to manufacture according to their job cost sheets. | ||||||||
L. Close out entry to for Underapplied / Overapplied Manufacturing Overhead (as stated in item 3 above). |
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