Managerial Accounting

Stone Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows:

January 1, 2018 December 31, 2018

Raw materials $26,000 $20,000

Work in process $71,000 $53,000

Finished goods $66,000 $81,000

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 44,000 machine-hours and 30,000 direct labor hours. The company estimated to incur $176,000 in manufacturing overhead cost. The following transactions were recorded for the year (Assume the company traded

on credit):

a) Raw materials were purchased, $459,000.

b) Raw materials requisitioned for use in production totaled $465,000, of which $431,000 was

direct material and the rest is indirect.

c) The following employee costs were incurred: direct labor: $296,000; indirect labor: $63,000;

and administrative salaries, $157,000.

d) Selling costs, $134,000.

e) Factory utility costs, $14,000.

f) Advertising costs incurred, $98,000.

g) Depreciation for the year was $119,000 of which 96% is related to factory operations and 4% is

related to selling and administrative activities.

h) Manufacturing overhead was applied to jobs. Due to higher demand of its products, the

company worked more hours than estimated. The actual level of activity for the year was

47,000 machine-hours.

i) Goods produced and trasfered to finished goods inventory equals $933, 000.

j) Revenue generated in the year, $1,150,000. The gross profit rate is 25%.

k) Close the underapplied or overapplied overhead to Cost of goods sold.

Required:

a. Journalize the transactions of the operation of Stone company for the year 2018.

b. Post the journal entries in t-accounts for Raw Materials, Work in Process, Finished Goods,

Manufacturing Overhead & Cost of Goods Sold.

c. Make a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold.