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 $76,500 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 $4,900 8,600 During the year, the following transactions were completed: a. Raw materials purchased on account, $ 167,000. b. Raw materials used in production, $149,000 (materials costing $126,000 were charged directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: $163,000 $ 193,400 Direct labor Indirect labor Sales commissions 25,000 Administrative salaries 45,000 d. Rent for the year was $18,800 ($13,500 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $17,00O. f. Advertising costs incurred, $12,000. g. Depreciation recorded on equipment, $20,000. ($16,000 of this amount related to equipment used in factory operations; the remaining $4,000 related to equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $_? . 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 $518,000. The total cost to manufacture these goods according to their job cost sheets was $216,000. 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? 3B. 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. 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.) View transaction list Journal entry worksheet 7 11 1 2 3 4 5 6 Raw materials purchased on account, $167,000. Note: Enter debits before credits. Transaction General Journal Debit Credit a Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from T-accounts (don't forget to enter the beginning balances in your inventory accounts). (Do not round intermediate calculations.) r journal entries to these Raw Materials Work in Process Beg. Bal Beg. Bal End, Bal End. Bal Finished Goods Manufacturing Overhead Beg. Bal Beg. Bal. End. Bal Cost of Goods Sold |End. Bal Beq. Bal End, Bal 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.) View transaction list Journal entry worksheet Record the entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Note: Enter debits before credits. Credit Transaction General Journal Debit 1 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 Selling and administrative expenses 0 0