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 $342,000 of manufacturing overhead for an estimated allocation base of 950 direct labor-hours. The following transactions took place during the year:

1. Raw materials purchased on account, $210,000.
2. Raw materials used in production (all direct materials), $195,000.
3. Utility bills incurred on account, $61,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
4. Accrued salary and wage costs:

Direct labor (1,025 hours)	$	240,000
Indirect labor	$	92,000
Selling and administrative salaries	$	120,000

1. Maintenance costs incurred on account in the factory, $56,000
2. Advertising costs incurred on account, $138,000.
3. Depreciation was recorded for the year, $86,000 (75% related to factory equipment, and the remainder related to selling and administrative equipment).
4. Rental cost incurred on account, $111,000 (80% related to factory facilities, and the remainder related to selling and administrative facilities).
5. Manufacturing overhead cost was applied to jobs, $?.
6. Cost of goods manufactured for the year, $790,000.
7. Sales for the year (all on account) totaled $1,300,000. These goods cost $820,000 according to their job cost sheets.

Options for blanks:

• No journal entry required
• Accounts payable
• Accounts receivable
• Accumulated depreciation
• Advertising expense
• Commissions
• Cost of goods sold
• Depreciation expense
• Direct materials
• Finished goods
• Indirect materials
• Manufacturing overhead
• Purchases
• Raw materials
• Rent expense
• Salaries and wages payable
• Salaries expense
• Sales
• Utilities expense
• Work in process

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

Raw Materials	$	32,000
Work in Process	$	23,000
Finished Goods	$	62,000

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.

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

options for blanks:

• Adjusted cost of goods sold
• Beginning finished goods inventory
• Beginning raw materials inventory
• Cost of goods available for sale
• Direct labor
• Ending raw materials inventory
• Indirect labor
• Indirect materials
• Manufacturing overhead applied to work in process
• Unadjusted cost of goods sold
• Utilities, factory
• Work in process, beginning

and

• Less: Beginning work in process inventory
• Less: Ending raw materials inventory
• Less: Ending work in process inventory
• Less: Manufacturing overhead cost
• Less: Purchases of raw materials
• Less: Indirect materials included in manufacturing overhead

Options for 4b

• Adjusted cost of goods sold
• Cost of goods available for sale
• Unadjusted cost of goods sold