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 $399,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $280,000. b. Raw materials used in production (all direct materials), $265,000. c. Utility bills incurred on account, $75,000 (80% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (1,100 hours) Indirect labor Selling and administrative salaries $ 310,000 $ 106,000 $ 190,000 e. Maintenance costs incurred on account in the factory, $70,000 f. Advertising costs incurred on account, $152,000. g. Depreciation was recorded for the year, $88,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $113,000 (90% related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, $_?. j. Cost of goods manufactured for the year, $930,000. k. Sales for the year (all on account) totaled $2,000,000. These goods cost $960,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: as Raw Materials Work in Process Finished Goods $ 46,000 $ 37,000 $ 76,000 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. 4B. Prepare a schedule of cost of goods sold. 5. Prepare an income statement for the year. General Journal Credit No 1 Transaction a. Debit 280,000 Raw materials Accounts payable 280,000 2 b. Work in process 265,000 Raw materials 265,000 C. Manufacturing overhead Rent expense Accounts payable 60,000 113,000 173,000 4 d. Work in process Manufacturing overhead Salaries expense Salaries and wages payable 310,000 106,000 190,000 606,000 5 e. Manufacturing overhead Accounts payable I f. No Transaction Recorded
