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 $67.500 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 $ 10,500 $4,200 53,000 During the year, the following transactions were completed 3. Raw materials purchased on account, $167.000. b. Raw materials used in production, $150,000 (materials costing $121,000 were charged directly to jobs the remaining materials were c. Costs for employee services were incurred as follows: indirect Direct labor Indirect labor Sales comissions Administrative salaries 155,000 $138.800 527,000 5 41,000 d. Rent for the year was $18,700 ($14,000 of this amount related to factory operations, and the remainder related to selling and administrative activities) e Utility costs incurred in the factory, $19.000 f Advertising costs incurred, $11,000. g.Depreciation recorded on equipment, $24,000. ($17.000 of this amount related to equipment used in factory operations, the remaining $7,000 related to equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $_? Goods that had cost $227.000 to manufacture according to their job cost sheets were completed Sales for the year (all paid in cash) totaled $512,000. The total cost to manufacture these goods according to their job cost sheets was $218.000 Required: 1. Prepare journal entries to record the transactions for the year 2. 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 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 Gold Nest Company Income Statement For the Year Ended $ 512,000 (218,000)| 294,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Sales commissions Administrative salaries expense Rent expense Advertising expense 27,000 41,000 4,700 11,000 Depreciation expense (Net operating income 7.000 90.700 203.300 $ Raw Materials 10,500 Beg Bal Beg Bal b. Work in Process 4,200 121,000 155,000 232,500 C. fa h. 167,000 177,500 End. Bal End. Bal 512,700 Beg Bal Finished Goods 8,000 227,000 Beg. Bal. C 1 d Manufacturing Overhead 29.000 138,000 14,000 19.000 17,000 15,500 e End Bal 235,000 9 th Cost of Goods Sold End. Bal 232,500 Beg Bal 218,000 End Bal 218.000
