Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:

Raw materials purchased on account, $200,000.

Raw materials used in production (all direct materials), $185,000.

Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).

Accrued salary and wage costs:

Direct labor (975 hours)	$	230,000
Indirect labor	$	90,000
Selling and administrative salaries	$	110,000

Maintenance costs incurred on account in the factory, $54,000.

Advertising costs incurred on account, $136,000.

Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).

Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).

Manufacturing overhead cost was applied to jobs, $ ? .

Cost of goods manufactured for the year, $770,000.

Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials	$	30,000
Work in Process	$	21,000
Finished Goods	$	60,000

Required:

1. Prepare journal entries to record the preceding transactions.

2. Post your entries to T-accounts. (Dont forget to enter the beginning inventory balances above.)

3. Prepare a schedule of cost of goods manufactured.

4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4B. Prepare a schedule of cost of goods sold.

5. Prepare an income statement for the year.

Q

1-Raw materials were purchased for use in production, $200,000 on account.

2-Raw materials were requisitioned for use in production (all direct materials), $185,000.

3-Utility bills were incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).

4-Salary and wage costs accrued were $230,000 (Direct labor), $90,000 (Indirect labor), $110,000 (Selling and administrative salaries).

5-Maintenance costs were incurred on account in the factory, $54,000.

6-Advertising costs were incurred on account, $136,000.

7-Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).

8-Entry for rental cost incurred on account on buildings, $120,000 (85% related to factory operations, and the remainder related to selling and administrative facilities).

9-Entry for manufacturing overhead cost applied to jobs.

10-Cost of goods manufactured for the year, $770,000.

11-Sales for the year (all on account) totaled $1,200,000.

12-These goods cost $800,000 according to their job cost sheets.

Transaction	General Journal	Debit	Credit
k(2).

2-

Froya Fabrikker A/S
Schedule of Cost of Goods Manufactured
Direct materials:
Total raw materials available
Materials used in production
Total manufacturing cost
Cost of goods manufactured

4A-Record the entry to close any balance in the manufacturing overhead account to cost of goods sold.

Transaction	General Journal	Debit	Credit
1

Froya Fabrikker A/S
Schedule of Cost of Goods Sold

Froya Fabrikker A/S
Income Statement
For the Year Ended
Selling and administrative expenses:
		00000

56,000

Cost of goods manufactured

Accounts Receivable					Sales
Beg. Bal.					Beg. Bal.
End. Bal.					End. Bal.
Raw Materials					Cost of Goods Sold
Beg. Bal.					Beg. Bal.
					End. Bal.
End. Bal.
Work in Process					Manufacturing Overhead
Beg. Bal.					Beg. Bal.
.
End. Bal.
					End. Bal.
Finished Goods					Advertising Expense
Beg. Bal.					Beg. Bal.
					End. Bal.
End. Bal.
Accumulated Depreciation					Utilities Expense
Beg. Bal.					Beg. Bal.
End. Bal.					End. Bal.
Accounts Payable					Salaries Expense
Beg. Bal.					Beg. Bal.
					End. Bal.
End. Bal.
Depreciation Expense					Salaries & Wages Payable
Beg. Bal.					Beg. Bal.
End. Bal.					End. Bal.
Rent Expense
Beg. Bal.
End. Bal.