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 $351,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $265,000 b. Raw materials used in production (all direct materials) $250,000 c. Utility bills incurred on account, $72,000 (85% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs: Direct labor 4980 hours) Indirect labod Selling and administrative salaries $ 295,000 $ 103,000 $ 175,000 e. Maintenance costs incurred on account in the factory, $67,000 f Advertising costs incurred on account, $149,000. g. Depreciation was recorded for the year, $85,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $110,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities) Manufacturing overhead cost was applied to jobs, $_? J. Cost of goods manufactured for the year. $900,000 k. Sales for the year (all on account) totaled $1,850,000. These goods cost $930,000 according to their job cost sheets. e. Maintenance costs incurred on account in the factory $67,000 f. Advertising costs incurred on account, $149,000 9. Depreciation was recorded for the year, $85,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). 1. Rental cost incurred on account, $110,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities) 1. Manufacturing overhead cost was applied to jobs, $_? J. Cost of goods manufactured for the year, $900,000 k. Sales for the year (all on account) totaled $1,850,000. These goods cost $930,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials Work in Process Finished Goode $ 43,000 $ 34,000 $ 73,000 Required: 1. Prepare journal entries to record the preceding transactions. 2. Post your entries to T-accounts (Don't 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. 48. Prepare a schedule of cost of goods sold 5. Prepare an income statement for the year. 12 1 The raw materials were purchased for use in production, $265,000 on account. account 2 The raw materials used in production (all direct materials), $250,000. 3 The utility bills were incurred on account, $72,000 (85% related to factory operations, and the remainder related to selling and administrative activities). Credit 4 The salary and wage costs accrued were $295,000 (Direct labor), $105,000 (Indirect labor), $175,000 (Selling and administrative salaries). 5 The maintenance costs were incurred on account in the factory, $67,000. Note : - Journal entry has been entered Record entry Clear entry View gener 6 The advertising costs were incurred on account, $149,000 The depreciation was recorded for the year, $85,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). 8 The entry for rental cost incurred on account on buildings, $110,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities) 9 The entry for manufacturing overhead cost applied to jobs. Note : = journal entry has been entered Record entry Clear entry Vie 8 The entry for rental cost incurred on account on buildings, $110,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities) 9 The entry for manufacturing overhead cost applied to jobs 10 The cost of goods manufactured for the year, $900,000. 11 The sales for the year (all on account) totaled $1,850,000. 12 The goods cost $930,000 according to their job cost sheets. Note : journal entry has been entered Record entry Clear entry
