PROBLEM $3-9$

Preparing Journal Entries; T$-$Accounts; Cost Flows $[$LO$4-$ CC$8$; LO$6-$ CC$12$; LO$7-$ CC$14$;

L$08-$ CC$18]$

Aponi Products, Inc. uses a job$-$order costing system. The company's inventory balances on August $1,$ the start

of its fiscal year, were as follows:

During the year, the following transactions were completed:

a$.$ Raw materials were purchased on account, $$180,000.$

b$.$ Raw materials were issued from the storeroom for use in production, $$200,000(80\%$ direct and $20\%$

indirect$).$

c$.$ Employee salaries and wages were accrued as follows: direct labour, $$200,000$; indirect labour, $$85,000$;

selling and administrative salaries, $$130,000.$

d$.$ Utility costs were incurred in the factory, $$80,000.$

e$.$ Advertising costs were incurred, $$75,000.$

f$.$ Prepaid insurance expired during the year, $$24,000(75\%$ related to factory operations, and $25\%$ related

to selling and administrative activities$).$g$.$ Depreciation was recorded, $$150,000(80\%$ related to factory assets, and $20\%$ related to selling and

administrative assets$).$

h$.$ Manufacturing overhead was applied to jobs at the rate of $150\%$ of direct labour cost.

i$.$ Goods that cost $$700,000$ to manufacture according to their job cost sheets were transferred to the

finished goods warehouse.

j$.$ Sales for the year totalled $$1,000,000$ and were all on account. The total cost to manufacture these

goods according to their job cost sheets was $$710,000.$

Required:

Prepare journal entries to record the transactions for the year.

Prepare T$-$accounts for raw materials, work in process, finished goods, manufacturing overhead, and cost

of goods sold. Post the appropriate parts of your journal entries to these T$-$accounts. Compute the end$-$

ing balance in each account. $($Do not forget to enter the beginning balances in the inventory accounts.$)$

Is manufacturing overhead underapplied or overapplied for the year? Prepare a journal entry to close this

balance to cost of goods sold.

Prepare an income statement for the year. $($Do not prepare a schedule of cost of goods manufactured; all

of the information needed for the income statement is available in the journal entries and T$-$accounts

you have prepared.$)$