Pete's Patriotic Flags: Part 2

CCOUNTING DOCTET PART TWO INSTRUCTIONS MANUFACTURING PROCESS INFORMATION Pete Paydirt, the CEO of Pete's Patriotic Flags, Inc. has begun a small manufacturing process that will manufacture United States and Texas Flags and then sell the flags to merchandising companies. The manufacturing process starts with the cutting and edging of the fabric. Once the fabric is cut, inspected, and approved then it is attached to the flagpole. The flagpole will be attached as the final step in the process. Once the flags are completed, they are then transferred to finished goods. This is a process cost system, and the company elects to use the FIFO method of accounting for product costs. Direct material-fabric is added 100% at the beginning of the process, Direct material-poles are added 100% as the last step in the manufacturing process. Conversion costs are added equally throughout the process. Conversion is 40% complete for the beginning inventory work in process and 60% complete for the ending Inventory work in process. At the beginning of the accounting period, Pete estimates that production will be 160,000 units during the year. The predetermined overhead rate is based on an estimated FOH of $6,552. Overhead is applied to production on the basis of direct labor hours. This information is to be used to determine the application rate for overhead Estimated and actual direct labor costs totaled $9,360 which is calculated at $10.00 per hour. Actual factory overhead costs totaled $1,050,000 Beginning Work-In-Process costs totaled So since this is the first month of production The following information is available concerning direct materials. Direct Materials-Fabric Beginning inventory 0 yards @ $11.00 per yard Purchase of fabric 340,000 yards - @ $11.00 per yard The company starts 160,000 units 2 square yards of fabric makes one flag Direct Material Poles Beginning inventory O poles Purchase of poles 160,000 poles @ $50.00 per pole The Work-in-Process account has the following information: Ending work in process inventory is 100% complete as to fabric Ending work in process contains 10,000 equivalent units Ending work in process is 60% complete to conversion costs The Finished Goods account has the following Information: The finished goods inventory on January 1, 2021, had a balance of flags at a cost of $0 and on December 31, 2021 had an ending balance of 250 flags. The selling price of the flags is $110.00. Selling and Administrative Costs totaled $500,000; tax rate is 30%. 14 Page CCOUNTING SOCIETY Using a spreadsheet and based on the information provided in the next section, complete the following requirements: a 1. Determine the predetermined overhead rate. 2. Determine the total number of flags to account for. 3. Prepare an equivalent unit's schedule. The schedule should follow the format below; you may add additional Information if you would like. Whole Units Equivalent Units (Actual) Direct Materials Direct Material Conversion Fabric Poles Costs Beginning XXX XXX XXX XXX Start/Completed XXX XXX XXX XXX Completed/Transferred Out XXX XXX XXX XXX Ending XXX XXX XXX XXX Total 4. Determine the total cost for the fabric and the unit amount for the fabric for one flag, 5. Determine the total cost for the poles and the unit cost for one pole. 6. Determine the total conversion cost and the conversion cost per flag, 7. Determine the total equivalent cost per flag 8. Prepare a Cost of Production report. This report should show all costs transferred into Work-in-process and the costs transferred to Finished Goods. This process uses FIFO costing. 9. Determine the amounts for the following: a) Ending Work-in-Process Inventory in Units AND Dollars b) Ending Finished Goods Inventory in Units AND Dollars c) Cost of Goods Sold d) Over/Under Applied Manufacturing Overhead e) Gross Margin f) Income from Operations B) Net Income 10. Prepare the necessary Journal Entries related to the manufacturing cycle for this accounting period. Prepare journal entries for the accounting period. Use the account numbers in the chart of accounts, below, instead of the accounts names when writing the journal entries. 15 POL e ACCOUNTING S OCTETY Chart of Accounts 10000 11000 12000 12100 15000 15050 16000 20000 40000 50000 Cash Accounts Receivable DM Fabric DM Poles Work-In-Process WIP Factory Overhead Finished Goods FG Wages Payable Sales COGS poles. a. In the first journal entry record the purchase of the fabric and the poles using cash. b. Record the materials transferred to WIP. Again, use one journal entry to record the transfer of the fabric and the c. Record the direct labor into WIP using wages payable. d. Record the applied FOH. e. Record the actual FOH using cash. f. Record the over or under applied FOH. 8. Record the sale of the goods on account along with the cost of the inventory that was sold. Combine both into one journal entry showing the sale first and inventory second, Blackboard Instructions for Part Two Add information concerning numbers here and enter into Blackboard as specified below 2. When the answer is in units enter the number as is (See example below) 280 b. When the answer is for ratios (ie., %) and it has a decimaltake the decimal out to two spaces (See example below) iii. 280.89 c. When ratios are in days/times take out to two decimal places (See example below) iv. 280.96 days d. When the answer is in dollars ALWAYS include a dollar sign and cents even if the cents is zero, add.00 See example below) v. $280.00 or $3,800.00 e. When there is a single journal entry enter information EXACTLY as is below in the sequence of Dr/Cr, Account Number, and Amount (note the signs, decimals, spaces, and capital letter) Vi Dr 10000 $280.00 Cr 20000 $280.00 t. When there is a journal entry requiring two debits or credits enter information EXACTLY as is below in the sequence of Dr/Cr, Account Number, Amount, and always put the smaller account number FIRST (note the sterk decimals, spaces, capital letters and order of the accounts) Vil. Dr 10000 $280.00 Dr 60000 $40.00 Cr 20000 $300.00 Vill Dr 10000 $300.00 Cr 20000 $280.00 Cr 90000 $40.00 16 Page CCOUNTING SOCIETY ix. Dr 10000 $280.00 Dr 60000 $40.00 Cr 70000 $290.00 Cr 90000 $10.00 & When there is a sale enter the sale first and then add the COGS and the transfer of Inventory Dr 10000 $10,368.00 Cr 40000 $10,000.00 Cr 26833 $268.00 Dr 50000 $70,000.00 Cr 12000 $50,000.00 Cr 12100 $20,000.00 h. Follow examples exactly as arel Do NOT copy and paste from Excel into Blackboard. If your entry is formatted incorrectly, it will be counted wrong. Templates Equivalent Units Schedule 1. Determine the pre-determined overhead rate. 3. Equivalent unit schedule Equivalent Units Whole Units (Actual) Beginning Start/Completed Completed/Transferred Out Ending XXX XXX XXX XXX Direct Materials Fabric XXX XXX XXX XXX Direct Material Poles XXX XXX XXX XXX Conversion Costs XXX XXX XXX XXX 4. Determine the total cost for the fabric and the unit amount for the fabric for one flag 5. Determine the total cost for the poles and the unit cost for each pole. 6. Determine the total conversion cost and the conversion cost per flag, 7. Determine the total equivalent cost per flag. 8. Follows after this 9. Determine the amounts for the following. h) Ending Work-in-Process Inventory in Units AND Dollars 0 Ending Finished Goods Inventory in Units AND Dollars i) Cost of Goods Sold kl Over/Under Applied Manufacturing Overhead 1) Gross Margin m) Income from Operations n) Net Income 17 Pass ACCOUNTING S. OCIETY TEMPLATE FOR COST OF PRODUCTION REPORT Pete's Patriotic Flags, Inc. Cost of Production Report For the year ended December 31, 2021 Poles Conversion Costs Total Fabric Beginning Balance Units XXX Total Beginning Costs Transferred-in XXX XXX XXX XXX Started and Completed XXX XXX XXX XXX Costs Transferred to Finished Goods XXX Ending Costs in Work-In-Process XXX XXX XXX XXX Total Costs XXX Costs to Account For Beginning Work-In-Process Direct Materials Direct Labor Applied Factory Overhead Total Costs Prepare the cost of Production Report by turning the equivalent units schedule into dollars. This should be prepared in Excel and will be uploaded through Blackboard. 18 Page ACCOUNTING SOCIETY Template for journal Entries Cr Dollar Amount Account Number Dollar Amount Dr Account Number a b. C d. e CCOUNTING DOCTET PART TWO INSTRUCTIONS MANUFACTURING PROCESS INFORMATION Pete Paydirt, the CEO of Pete's Patriotic Flags, Inc. has begun a small manufacturing process that will manufacture United States and Texas Flags and then sell the flags to merchandising companies. The manufacturing process starts with the cutting and edging of the fabric. Once the fabric is cut, inspected, and approved then it is attached to the flagpole. The flagpole will be attached as the final step in the process. Once the flags are completed, they are then transferred to finished goods. This is a process cost system, and the company elects to use the FIFO method of accounting for product costs. Direct material-fabric is added 100% at the beginning of the process, Direct material-poles are added 100% as the last step in the manufacturing process. Conversion costs are added equally throughout the process. Conversion is 40% complete for the beginning inventory work in process and 60% complete for the ending Inventory work in process. At the beginning of the accounting period, Pete estimates that production will be 160,000 units during the year. The predetermined overhead rate is based on an estimated FOH of $6,552. Overhead is applied to production on the basis of direct labor hours. This information is to be used to determine the application rate for overhead Estimated and actual direct labor costs totaled $9,360 which is calculated at $10.00 per hour. Actual factory overhead costs totaled $1,050,000 Beginning Work-In-Process costs totaled So since this is the first month of production The following information is available concerning direct materials. Direct Materials-Fabric Beginning inventory 0 yards @ $11.00 per yard Purchase of fabric 340,000 yards - @ $11.00 per yard The company starts 160,000 units 2 square yards of fabric makes one flag Direct Material Poles Beginning inventory O poles Purchase of poles 160,000 poles @ $50.00 per pole The Work-in-Process account has the following information: Ending work in process inventory is 100% complete as to fabric Ending work in process contains 10,000 equivalent units Ending work in process is 60% complete to conversion costs The Finished Goods account has the following Information: The finished goods inventory on January 1, 2021, had a balance of flags at a cost of $0 and on December 31, 2021 had an ending balance of 250 flags. The selling price of the flags is $110.00. Selling and Administrative Costs totaled $500,000; tax rate is 30%. 14 Page CCOUNTING SOCIETY Using a spreadsheet and based on the information provided in the next section, complete the following requirements: a 1. Determine the predetermined overhead rate. 2. Determine the total number of flags to account for. 3. Prepare an equivalent unit's schedule. The schedule should follow the format below; you may add additional Information if you would like. Whole Units Equivalent Units (Actual) Direct Materials Direct Material Conversion Fabric Poles Costs Beginning XXX XXX XXX XXX Start/Completed XXX XXX XXX XXX Completed/Transferred Out XXX XXX XXX XXX Ending XXX XXX XXX XXX Total 4. Determine the total cost for the fabric and the unit amount for the fabric for one flag, 5. Determine the total cost for the poles and the unit cost for one pole. 6. Determine the total conversion cost and the conversion cost per flag, 7. Determine the total equivalent cost per flag 8. Prepare a Cost of Production report. This report should show all costs transferred into Work-in-process and the costs transferred to Finished Goods. This process uses FIFO costing. 9. Determine the amounts for the following: a) Ending Work-in-Process Inventory in Units AND Dollars b) Ending Finished Goods Inventory in Units AND Dollars c) Cost of Goods Sold d) Over/Under Applied Manufacturing Overhead e) Gross Margin f) Income from Operations B) Net Income 10. Prepare the necessary Journal Entries related to the manufacturing cycle for this accounting period. Prepare journal entries for the accounting period. Use the account numbers in the chart of accounts, below, instead of the accounts names when writing the journal entries. 15 POL e ACCOUNTING S OCTETY Chart of Accounts 10000 11000 12000 12100 15000 15050 16000 20000 40000 50000 Cash Accounts Receivable DM Fabric DM Poles Work-In-Process WIP Factory Overhead Finished Goods FG Wages Payable Sales COGS poles. a. In the first journal entry record the purchase of the fabric and the poles using cash. b. Record the materials transferred to WIP. Again, use one journal entry to record the transfer of the fabric and the c. Record the direct labor into WIP using wages payable. d. Record the applied FOH. e. Record the actual FOH using cash. f. Record the over or under applied FOH. 8. Record the sale of the goods on account along with the cost of the inventory that was sold. Combine both into one journal entry showing the sale first and inventory second, Blackboard Instructions for Part Two Add information concerning numbers here and enter into Blackboard as specified below 2. When the answer is in units enter the number as is (See example below) 280 b. When the answer is for ratios (ie., %) and it has a decimaltake the decimal out to two spaces (See example below) iii. 280.89 c. When ratios are in days/times take out to two decimal places (See example below) iv. 280.96 days d. When the answer is in dollars ALWAYS include a dollar sign and cents even if the cents is zero, add.00 See example below) v. $280.00 or $3,800.00 e. When there is a single journal entry enter information EXACTLY as is below in the sequence of Dr/Cr, Account Number, and Amount (note the signs, decimals, spaces, and capital letter) Vi Dr 10000 $280.00 Cr 20000 $280.00 t. When there is a journal entry requiring two debits or credits enter information EXACTLY as is below in the sequence of Dr/Cr, Account Number, Amount, and always put the smaller account number FIRST (note the sterk decimals, spaces, capital letters and order of the accounts) Vil. Dr 10000 $280.00 Dr 60000 $40.00 Cr 20000 $300.00 Vill Dr 10000 $300.00 Cr 20000 $280.00 Cr 90000 $40.00 16 Page CCOUNTING SOCIETY ix. Dr 10000 $280.00 Dr 60000 $40.00 Cr 70000 $290.00 Cr 90000 $10.00 & When there is a sale enter the sale first and then add the COGS and the transfer of Inventory Dr 10000 $10,368.00 Cr 40000 $10,000.00 Cr 26833 $268.00 Dr 50000 $70,000.00 Cr 12000 $50,000.00 Cr 12100 $20,000.00 h. Follow examples exactly as arel Do NOT copy and paste from Excel into Blackboard. If your entry is formatted incorrectly, it will be counted wrong. Templates Equivalent Units Schedule 1. Determine the pre-determined overhead rate. 3. Equivalent unit schedule Equivalent Units Whole Units (Actual) Beginning Start/Completed Completed/Transferred Out Ending XXX XXX XXX XXX Direct Materials Fabric XXX XXX XXX XXX Direct Material Poles XXX XXX XXX XXX Conversion Costs XXX XXX XXX XXX 4. Determine the total cost for the fabric and the unit amount for the fabric for one flag 5. Determine the total cost for the poles and the unit cost for each pole. 6. Determine the total conversion cost and the conversion cost per flag, 7. Determine the total equivalent cost per flag. 8. Follows after this 9. Determine the amounts for the following. h) Ending Work-in-Process Inventory in Units AND Dollars 0 Ending Finished Goods Inventory in Units AND Dollars i) Cost of Goods Sold kl Over/Under Applied Manufacturing Overhead 1) Gross Margin m) Income from Operations n) Net Income 17 Pass ACCOUNTING S. OCIETY TEMPLATE FOR COST OF PRODUCTION REPORT Pete's Patriotic Flags, Inc. Cost of Production Report For the year ended December 31, 2021 Poles Conversion Costs Total Fabric Beginning Balance Units XXX Total Beginning Costs Transferred-in XXX XXX XXX XXX Started and Completed XXX XXX XXX XXX Costs Transferred to Finished Goods XXX Ending Costs in Work-In-Process XXX XXX XXX XXX Total Costs XXX Costs to Account For Beginning Work-In-Process Direct Materials Direct Labor Applied Factory Overhead Total Costs Prepare the cost of Production Report by turning the equivalent units schedule into dollars. This should be prepared in Excel and will be uploaded through Blackboard. 18 Page ACCOUNTING SOCIETY Template for journal Entries Cr Dollar Amount Account Number Dollar Amount Dr Account Number a b. C d. e