Journal Entries; T-Accounts; Financial Statements: Big Tough Motor Works, is a small company that manufactures custom-ordered heavy equipment. The company uses a job-order costing system that applies to manufacturing overhead costs to jobs on the basis of direct labor hours. Its predetermined overhead rate was based on a cost formula that estimated $374,000 of manufacturing overhead for an estimated allocation base of 1,100 direct labor hours. The following transactions took place during the year:

1. Raw materials were purchased on account, $240,000.
2. Raw materials used in production (all direct materials), $225,000.
3. Utility bills incurred on account, $68,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
4. Accrued salary and wage costs:

Direct labor (1,175 hours)	$ 265,000
Indirect labor	$ 102,000
Selling and administrative salaries	$ 104,000

5. Maintenance costs incurred on account in the factory, $60,000
6. Advertising costs incurred on account, $133,000.
7. Depreciation was recorded for the year, $94,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
8. The rental cost incurred on account, $116,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
9. Manufacturing overhead cost was applied to jobs, $__?__.
10. Cost of goods manufactured for the year, $860,000.
11. Sales for the year (all on account) totaled $1,550,000. These goods cost $870,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials	$ 35,000
Work in Process	$ 26,000
Finished Goods	$ 63,000

Required:

1. Prepare journal entries to record the preceding transactions.

2. Post your entries to T-accounts for raw materials inventory, work in process inventory, finished goods inventory, manufacturing overhead, and cost of goods sold. (Dont forget to enter the beginning inventory balances above.) Calculate the ending balances in the T-accounts.

3. Prepare a schedule of cost of goods manufactured. (Remember your statement headings)

4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4B. Prepare a schedule of cost of goods sold. (Remember your statement headings)

5. Prepare an income statement. (Remember your statement headings)