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: Raw materials $ 25,000 Work in process $ 10,000 Finished goods $ 40,000 During the year, the following transactions were completed: a. Raw materials purchased on account, $275,000 b. Raw materlals used in production, $280,000 (materials costing $220,000 were charged directly to jobs; the remaining materials c. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $ 180,000 5 72,000 $ 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. f. Advertising costs incurred. $140,000. 9. Depreciation tecorded 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 selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $ 2 Goods that had cost $675,000 to manufacture according to their job cost sheets were completed. Sales for the year (all 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 T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold Post relevant cata 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 overopplied 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.) Req 1 Reg 2 Reg 3A Reg 3B Req 4 Prepare T-accounts for each inventory account, Manufacturing Overhead, and cost of Goods Sold. Post relevant data from your journal er (don't forget to enter the beginning balances in your inventory accounts). Raw Materials Work in Process Debit Credit Debit Credit Beginning Balance 25,000 280,000 Beginning Balance 10,000 6,750,000 a 275,000 220,000 180,000 297,000 Ending Balance 20.000 Ending Balance 6,043,000 b c 0 h Finished Goods Credit Debit Debit Beginning Balance L 700.000 40,000 675,000 Beginning Balance Manufacturing Overhead Credit 60,000 3 297,000 72,000 13,000 57.000 88,000 d e OOO Ending Balance 15,000 9 Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indica 180,000 297,000 h. Ending Balance 20,000 Ending Balance 6,043,000 Finished Goods Credit Debit Debit Beginning Balance 40,000 675,000 700,000 Beginning Balance Manufacturing Overhead Credit 60,000 297,000 72.000 13,000 57,000 88,000 d. 0. ololo Ending Balance 15.000 9 Cost of Goods Sold Ending Balance 7,000 Credit Debit Beginning Balance 700,000 Ending Balance 700,000
