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 $85,500 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials Work in process Finished goods $ 10,600 $ 4,600 $ 8,900 During the year, the following transactions were completed: a. Raw materials purchased on account, $162,000. b. Raw materials used in production, $142,000 (materials costing $126,000 were charged directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $ 169,000 $ 251,700 $ 24,000 $ 46,000 d. Rent for the year was $18,500 ($13,300 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $11,000. f. Advertising costs incurred, $10,000. g. Depreciation recorded on equipment, $25,000. ($16,000 of this amount related to equipment used in factory operations; the remaining $9,000 related to equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $?. i. Goods that had cost $229,000 to manufacture according to their job cost sheets were completed. j. Sales for the year (all paid in cash) totaled $506,000. The total cost to manufacture these goods according to their job cost sheets was $216,000. Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.) No 1 Transaction a. Raw materials Accounts payable 2 b. Work in process Manufacturing overhead Raw materials General Journal Debit 162,000 Credit 162,000 126,000 16,000 142,000 3 C. Work in process 169,000 Manufacturing overhead 251,700 Sales commisions expense 24,000 Administrative salaries expense 46,000 Administrative salaries expense 490,700 4 d. Manufacturing overhead Rent expense Accounts payable 13,300 5,200 18,500 5 e. Manufacturing overhead 11,000 Accounts payable 11,000 6 f. Advertising expense Accounts payable 10,000 10,000 7 g. Manufacturing overhead 16,000 Depreciation expense 9,000 Accumulated depreciation 25,000 5 e. Manufacturing overhead 11,000 Accounts payable 11,000 6 f. Advertising expense Accounts payable 10,000 10,000 7 g. Manufacturing overhead Depreciation expense Accumulated depreciation 16,000 9,000 25,000 8 h. Work in process 9 i. 10 j(1). Manufacturing overhead Finished goods Work in process Cash Sales 229,000 229,000 506,000 506,000 11 j(2). Cash 216,000 Cash 216,000 Req 1 Req 2 Req 3A Req 3B Req 4 Prepare T-accounts 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). (Do not round intermediate calculations.) Raw Materials Debit Beginning Balance 10,600 162,000 Ending Balance 172,600 Credit Work in Process Debit Credit Beginning Balance 126,000 Ending Balance Finished Goods Debit Credit Debit Beginning Balance Beginning Balance Ending Balance Cost of Goods Sold Ending Balance Debit Credit Beginning Balance Ending Balance 16,000 142,000 Manufacturing Overhead x Credit Req 1 Req 2 Req 3A Req 3B Req 4 Req 3B Is Manufacturing Overhead underapplied or overapplied for the year? Underapplied Overapplied Req 1 Req 2 Req 3A Req 3B Req 4 Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Transaction General Journal 1 1 Manufacturing overhead Cost of goods sold Debit Credit Req 1 Req 2 Req 3A Req 3B Req 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.) Gold Nest Company Sales Income Statement For the Year Ended Cost of goods sold Gross margin Selling and administrative expenses: Sales commissions 24,000 Administrative salaries expense 46,000 Rent expense 5,200 Advertising expense 10,000 Depreciation expense Net operating income 0 85,200 $ (85,200)