P2-14R Review Problem for Chapters 1 and 2 Lift It, Inc., manufactures chain hoists. The raw materials inventories on hand on October 1 were as follows: Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000 pounds, $24,000 Pulleys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 sets, $20,000 Bolts and taps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 pounds, $5,000 Steel plates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 units, $2,000 The balances in the ledger accounts on October 1 were as follows: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,000 Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000 Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000 Accumulated depreciationmachinery . . . . . . . . . . . . . $ 10,500 Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Accumulated depreciationoffice equipment . . . . . . . 4,800 Office furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Accumulated depreciationoffice furniture . . . . . . . . . 2,500 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,200 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,000 $276,000 $276,000 Transactions during October were as follows: a. Payroll recorded during the month: direct labor, $28,000; indirect labor, $3,000. b. Factory supplies purchased for cash, $1,000. (Use a separate inventory account, Factory Supplies.) c. Materials purchased on account: chain4,000 pounds, $8,800; pulleys2,000 sets, $10,200; steel plates5,000 units, $3,000. d. Sales on account for the month, $126,375. e. Accounts receivable collected, $72,500. f. Materials used during October (FIFO costing): chain, 14,000 pounds; pulleys, 4,400 sets; bolts and taps, 4,000 pounds; steel plates, 3,800 units. g. Payroll paid, $31,000. h. Factory supplies on hand, October 31, $350. i. Factory heat, light, and power costs for October, $3,000 (not yet paid). j. Office salaries paid, $6,000. k. Advertising paid, $2,000. l. Factory superintendence paid, $1,800. m. Expired insuranceon office equipment, $100; on factory machinery, $300. n. Factory rent paid, $2,000. o. Depreciation on office equipment, $400; on office furniture, $180; on machinery, $1,200. p. Factory overhead charged to jobs, $11,950. q. Work in Process, October 31, $31,000. (Hint: The difference between the sum of the beginning balance in Work in Process plus the total charges to it during the period less the ending balance in Work in Process represents the cost of the goods completed during the period.) r. Cost of goods sold during the month, $84,250. s. Accounts payable paid, $33,750. Required: 1. Set up T-accounts and enter the balances as of October 1. 2. Prepare journal entries to record each of the previous transactions. 3. Post the journal entries to the accounts, setting up any new ledger accounts necessary. Only controlling accounts are to be maintained; however, show the calculation for the cost of materials used. 4. Prepare a statement of cost of goods manufactured for October. 5. Prepare an income statement. 6. Prepare a balance sheet showing the classifications of current assets, plant and equipment, current liabilities, and stockholders equity. MINI-CASE 1