is applied to jobs on the basis of direct labor cost. Its

predetermined overhead rate is based on a cost formula that

estimated $$85,500$ 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:

During the year, the following transactions were completed:

a$.$ Raw materials purchased on account, $$167,000.$

$.$ Raw materials used in production, $$146,000($materials costing

$$121,000$ were charged directly to jobs; the remaining materials

were indirect$).$

c$.$ Costs for employee services were incurred as follows:

d$.$ Rent for the year was $$18,700($ $$13,400$ of this amount related to

factory operations, and the remainder related to selling and

administrative activities$).$

e$.$ Utility costs incurred in the factory, $$13,000.$

f$.$ Advertising costs incurred, $$13,000.$

g$.$ Depreciation recorded on equipment, $$20,000.($ $$17,000$ of this

amount related to equipment used in factory operations; the

remaining $$3,000$ related to equipment used in selling and

administrative activities.$)$

h$.$ Manufacturing overhead cost was applied to jobs, $ $?.$

i$.$ 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 $$506,000.$ The total

cost to manufacture these goods according to their job cost

sheets was $$217,000.$

Required:

Prepare journal entries to record the transactions for the year.

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$\text{'}$t forget to enter the

beginning balances in your inventory accounts$).$

$3$A$.$ Is Manufacturing Overhead underapplied or overapplied for

the year?

$3$B$.$ Prepare a journal entry to close any balance in the

Manufacturing Overhead account to Cost of Goods Sold.

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.