Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $330,000 of manufacturing overhead for an estimated activity level of $200.000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: 90 raw materials Work in process Tinished goods $25.000 $10,000 $40,000 During the year, the following transactions were completed: a. Raw materials purchased on account. $275,000 D. Raw materials used in production, $280,000 (materials costing $220,000 were charged directly to jobs, the remaining materials were indirect) c. Costs for employee services were incurred as follows: Direct labos Indirect labor Gales Lone Rainistrativa 5190,000 672.000 0 63.000 $ 90,000 d. Rent for the year was $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $57,000. 1. Advertising costs incurred, $140,000 9. Depreciation recorded on equipment, $100,000. ($88,000 of this amount related to equipment used in factory operations: the remaining $12,000 related to equipment used in seling and administrative activities) h. Record the manufacturing overhead cost applied to jobs. Goods that had cost $675,000 to manufacture according to their job cost sheets were completed J. Sales for the year (oll paid in cash) totaled $1.250,000. The total cost to manufacture these goods according to their job cost sheets was $700,000 Required: 1. Prepare journal entries to record the transactions for the year. 2. Prepare Taccounts for each inventory account Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your Journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts). 3A, is Manufacturing Overhead underapplied or overapplied for the year? 38. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold, 4. Prepare an income statement for the year. (All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.). Raw Materials Work in Process Beg. Bal. Beg. Bal End, Bal End, Bal. Finished Goods Manufacturing Overhead Beg. Bal. Bog. Bal End Bal Cost of Goods Said End Dal Beg Bal End. Bal Reg 1 Reg 2 Req Req 3B Reg 4 Book Is Manufacturing Overhead underapplied or overapplied for the year? Print O Overapplied Underapplied Journal entry worksheet
