HOW TO PREPARE THE JOURNAL ENTRIES ?
The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the predetermined overhead rate for the year: manufacturing overhead cost, $200,000; direct materials cost, $160,000. The following transactions took place during the year (all purchases and services were acquired on account): a. Raw materials purchased, $86,000. b. Raw materials requisitioned for use in production (all direct materials), $98,000. c. Utility costs incurred in the factory, $15,000. d. Salaries and wages incurred as follows: Direct labor, $175,000. Indirect labor, $70,000. Selling and administrative salaries, $125,000. e. Maintenance costs incurred in the factory, $15,000. f. Advertising costs incurred, $89,000. g. Depreciation recorded for the year, $80,000 (80% relates to factory assets and the remainder relates to selling, general, and administrative assets). h. Rental cost incurred on buildings, $70,000, (75% of the space is occupied by the factory, and 25% is occupied by sales and administration). i. Miscellaneous selling, general, and administrative costs incurred, $11,000. j. Manufacturing overhead cost was applied to jobs as per company policy. k. Cost of goods manufactured for the year, $500,000. 1. Sales for the year totaled $1,000,000. These goods cost $600,000 to manufacture. Required: Prepare journal entries for each of the above transactions. a. b. h. Baba Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Raw materials. Work in process..... Finished goods ........... Beginning Balance $22,000 $52,000 $121,000 Ending Balance $25,000 $34,000 $136,000 The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 40,000 machine-hours and incur $200,000 in manufacturing overhead cost. The following transactions were recorded for the year: Raw materials were purchased, $412,000. Raw materials were requisitioned for use in production, $409,000 $(362,000 direct and $47,000 indirect). The following employee costs were incurred: direct labor, $324,000; indirect labor, $57,000; and administrative salaries, $129,000. Selling costs, $135,000. Factory utility costs, $22,000. Depreciation for the year was $102,000 of which $94,000 is related to factory operations and $8,000 is related to selling, general, and administrative activities. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 44,000 machine-hours. Sales for the year totaled $1,198,000. u. Prepare a schedule of cost of goods manufactured in good form. b. Was the overhead underapplied or overapplied? By how much? c. Prepare an income statement for the year in good form. The company closes any underapplied or overapplied overhead to Cost of Goods Sold
