Problem 1

Gunsmoke, Inc. was established on January 2, 2015 to manufacture Horse Carriages for use in by Royal Families. Each carriage is custom designed and manufactured based on the specific option preferences of each individual customer. Following are the transactions that occurred during the month of January 2016.

a Matt Dillon capitalizes the corporation by contributing $200,000 in exchange for 20,000 shares of $5 par value common stock. The funds are deposited into the bank in the name of the corporation.

b Materials purchased for cash, $150,000

c Materials requisitioned and factory labor used during the month:

	Materials	Labor
Buckingham Palace	13,800	6,800
Taj Mahal	16,600	7,400
Red Square	22,800	4,300
for general factory use	4,800	13,500
	58,000	32,000

d Factory overhead utilities and insurance incurred on account, 13,800

e Tools and supplies purchased and used during the month, 8,300 on account

f The factory overhead rate is $18 per machine hour. Machine hours used during the month:

Job	Machine Hours
Buckingham Palace	840
Taj Mahal	920
Red Square	540
	2,300

g Jobs completed; Buckingham Palace and Red Square.

h Buckingham Palace was delivered to the customer on January 28th and cash was received for the selling price of $45,000

Instructions:

1 Open T accounts for the following accounts:

General Ledger	Job Ledger
Cash	Buckingham Palace
Raw Materials	Taj Mahal
Work in Process	Red Square
Factory Overhead
Finished Goods
Accounts Payable
Common Stock
Paid in Capital
Trailer Sales
Cost of Goods Sold

2 Record all transactions for the month by posting to the T accounts. Label all transactions with the corresponding reference letter in red pencil.

3 Balance all accounts at the end of the month and prepare a trial balance.

4 Prepare a schedule of components of the job that remains in WIP.

5 Prepare a schedule of costs of the job that remains in Finished Goods

6 Calculate the amount of profit realized on the job sold.