Problem $1$: Journal Entries, Closing Manufacturing Overhead, and Preparing an Income Statement

Mountain Nursery Company grows a variety of plants and sells them to local nurseries. Raw materials consist of such items as seeds and the fertilizer required to grow plants from the seedling stage to a viable, saleable plant. Mountain Nursery uses a job costing system to track revenues and costs associated with customer orders. Because the company uses a perpetual inventory system, the three supporting schedules to the income statemen $($The schedule of raw materials placed in production, the cost of goods manufactured, and the schedule of cost of goods sold are not necessary. Inventory account beginning balances at January $1,2020,$ are as follows:

Raw Materials Inventory $$50,000$

Work in Process Inventory $$60,000$

Finished Goods Inventory $$90,000$

You will be recording the following transactions, which summarize the activities that occurred during the year ended December $31,202.$

$1$ Raw materials were purchased for $$30,000$ on account.

$2$ Raw materials totaling $$41,000$ were placed in production $-$ $$5,000$ for indirect materials and $$36,000$ for direct materials.

$3$ The raw materials purchased in transaction $1$ were paid for.

$4$ A total cost of $$140,000$ for $9,000$ hour of direct labor, shown on the timesheets, were recorded as wages payable.

$5$ Production supervisors and other indirect labor working in the nursery were owed $$134,000,$ recorded as wages payable.

$6$ Wages owed, totaling $$180,000,$ were paid. $($These wages were previously recorded correctly as wages payable$)$

$7$ The costs listed below related to the nursery were incurred during the period. $($Hint: record these items in one entry with one debit to manufacturing overhead and four separate credits$)$

Equipment depreciation $$22,000$

Rent $($prepaid during $2020)$ $$36,000$

Utilities $($on account$)$ $$33,000$

Maintenance $($paid cash$)$ $$19,000$

$8.$ Manufacturing overhead was applied at a rate of $$30$ per direct labor hour $($Hint: no need to calculate the predetermined overhead rate since it$$s already given to you here$)$

$9$; Miscellaneous selling costs totaling $$63,000$ were paid. These costs were recorded in an account called selling expenses.

$10.$ Miscellaneous general and administrative costs totaling $$18\mathrm{.}000$ were paid. These costs were recorded in an account called G&A expenses.

$11.$ Goods costing $$478,000($per the job cost sheets$)$ were completed and transferred out of work in process inventory

$12.$ Goods were sold on account for $$780,000$

$13.$ The goods sold in transaction $12$ had a cost of $$415,000($per the job cost sheets$)$

$14.$ Payments totaling $$380,000$ from customers related to transaction $12$ were received

Required:

a$)$ T$-$accounts have been provided. Enter the beginning balances for the inventory accounts. $($Manufacturing overhead and cost of goods sold are temporary accounts and thus do not have a beginning balance.

b$)$ Prepare a journal entry for each transaction from $1-14,$ using the journal paper provided. Label each entry by the transaction number

c$)$ Based on the balance in the manufacturing overhead account prepared in requirement b$,$ prepare a journal entry to close the manufacturing overhead account to cost of goods sold

d$)$ Prepare an income statement for the year ended December $31,2020.$ Remember to adjust for any underapplied or overapplied overhead from requirement c$.$