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Froya Fabrikker A/S of Bergen, Norway, manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that

Froya Fabrikker A/S of Bergen, Norway, 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 based on direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $336,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions occurred during the year:

  1. Raw materials purchased on account, $245,000.
  2. Raw materials used in production (all direct materials), $230,000.
  3. Utility bills incurred on account, $68,000 (85% related to factory operations, and the remainder related to selling and administrative activities).
  4. Accrued salary and wage costs:
Direct labor (1,125 hours)$ 275,000Indirect labor$ 99,000Selling and administrative salaries$ 155,000
  1. Maintenance costs incurred on account in the factory, $63,000
  2. Advertising costs incurred on account, $145,000.
  3. Depreciation recorded for the year, $81,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment).
  4. Rental cost incurred on account, $106,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities).
  5. Manufacturing overhead cost applied to jobs, $?question mark.
  6. Cost of goods manufactured, $860,000.
  7. Sales for the year (all on account) totaled $1,650,000. These goods cost $890,000 according to their job cost sheets.

The beginning balances in the inventory accounts were:

Raw Materials$ 39,000Work in Process$ 30,000Finished Goods$ 69,000

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.

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