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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	$	10,100
Work in process	$	4,300
Finished goods	$	8,000

During the year, the following transactions were completed:

1. Raw materials purchased on account, $ 167,000.
2. Raw materials used in production, $148,000 (materials costing $129,000 were charged directly to jobs; the remaining materials were indirect).
3. Costs for employee services were incurred as follows:

Direct labor	$	154,000
Indirect labor	$	153,700
Sales commissions	$	20,000
Administrative salaries	$	45,000

1. Rent for the year was $18,700 ($13,200 of this amount related to factory operations, and the remainder related to selling and administrative activities).
2. Utility costs incurred in the factory, $14,000.
3. Advertising costs incurred, $14,000.
4. Depreciation recorded on equipment, $24,000. ($18,000 of this amount related to equipment used in factory operations; the remaining $6,000 related to equipment used in selling and administrative activities.)
5. Record the manufacturing overhead cost applied to jobs.
6. Goods that had cost $225,000 to manufacture according to their job cost sheets were completed.
7. Sales for the year (all paid in cash) totaled $516,000. The total cost to manufacture these goods according to their job cost sheets was $215,000.

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 (dont 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.

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:

No Transaction General Journal Debit Credit 1 a. 167,000 Raw materials Accounts payable 167,000 2 b. Work in process Manufacturing overhead Raw materials 129,000 19,000 148,000 3 C. Work in process Manufacturing overhead Sales commisions expense Administrative salaries expense Salaries and wages payable 154,000 153,700 20,000 45,000 372,700 4 d. Manufacturing overhead Rent expense Accounts payable 13,200 5,500 18,700 5 e. 14,000 Manufacturing overhead Accounts payable 14,000 f. 14,000 Advertising expense Accounts payable 14,000 7 g. Manufacturing overhead Depreciation expense Accumulated depreciation 18,000 6,000 24,000 8 h. 231,000 Work in process Manufacturing overhead 231,000 9 i. 225,000 Finished goods Work in process 225,000 10 j(1). Cash 516,000 Sales 516,000 11 j(2). 215,000 Cost of goods sold Finished goods 215,000 Req1 Req 2 > Complete this question by entering your answers in the tabs below. Reg 1 Reg 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.). Beg. Bal. Beg. Bal. Raw Materials 10,100 167,000 148,000 b. a. b. C. Work in Process 4,300 129,000 154,000 231,000 225,000 293,300 h. End. Bal. 29,100 End. Bal. Manufacturing Overhead Beg. Bal. Beg. Bal. Finished Goods 8,000 225,000 215,000. b. C. d. 19,000 153,700 13,200 14,000 18,000 End. Bal. 18,000 e. 9 231,000 h. 13,100 Cost of Goods Sold End. Bal. Beg. Bal. 215,000 End. Bal. 215,000 Reg 1 Reg 2 Reg 3A Reg 3B Reg 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.) View transaction list View journal entry worksheet No Credit Transaction 1 General Journal Manufacturing overhead Cost of goods sold Debit 13,100 1 13,100 Reg 1 Reg 2 Reg 3A Reg 3B Reg 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.) S 516,000 201,900 314,100 Gold Nest Company Income Statement For the Year Ended Sales Cost of goods sold Gross margin Selling and administrative expenses: Sales commissions Administrative salaries expense Rent expense Advertising expense Depreciation expense 20,000 45,000 5,500 14,000 6,000 90,500 223,600 $