Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 3-16 (Static) Comprehensive Problem [LO3-1, LO3-2, LO3-4] Gold Nest Company of Guandong, China, makes birdcages for the South China market. The company sells its

Problem 3-16 (Static) Comprehensive Problem [LO3-1, LO3-2, LO3-4]

Gold Nest Company of Guandong, China, makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales.

The company uses a job-order costing system that applies overhead to jobs based on direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $330,000 of manufacturing overhead for an estimated activity level of $200,000 direct labor dollars. The beginning inventory balances were as follows:

Raw materials $ 25,000
Work in process $ 10,000
Finished goods $ 40,000

During the year, the following transactions were completed:

  1. Raw materials purchased on account, $275,000.
  2. Raw materials used in production, $280,000 (materials costing $220,000 were charged directly to jobs; the remaining materials were indirect).
  3. Cash paid to employees:
Direct labor $ 180,000
Indirect labor $ 72,000
Sales commissions $ 63,000
Administrative salaries $ 90,000
  1. Rent for the year was $18,000 ($13,000 related to factory operations, and the remainder related to selling and administrative activities).
  2. Utility costs incurred in the factory, $57,000.
  3. Advertising costs incurred, $140,000.
  4. Depreciation on equipment, $100,000 ($88,000 related to equipment used in factory operations; the remaining $12,000 related to equipment used in selling and administrative activities).
  5. Manufacturing overhead cost applied to jobs, $?question mark.
  6. Completed goods cost $675,000 to manufacture.
  7. Sales for the year (all paid in cash) totaled $1,250,000. The manufacturing cost of these goods was $700,000.

Required:

1. Prepare journal entries to record the transactions for the year.

2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (dont forget to enter the beginning balances in your inventory accounts).

3A. Is Manufacturing Overhead underapplied or overapplied?

3B. Prepare a journal entry to close Manufacturing Overhead to Cost of Goods Sold.

4. Prepare an income statement. (All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting What the Numbers Mean

Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,

9th Edition

978-0-07-76261, 0-07-762611-7, 9780078025297, 978-0073527062

More Books

Students also viewed these Accounting questions

Question

Design a TM to decide the language {x E {0.1}* | #(0,x) = #(1,x))

Answered: 1 week ago