PROBLEM 326 Journal Entries; T-Accounts; Financial Statements

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year (all purchases and services were acquired on account): Raw materials were purchased for use in production, $200,000. Raw materials were requisitioned for use in production (all direct materials), $185,000. Utility bills were incurred, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities). Salary and wage costs were incurred: table d (Links to an external site.) Maintenance costs were incurred in the factory, $54,000. Advertising costs were incurred, $136,000. Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). Rental cost incurred on buildings, $120,000 (85% related to factory operations, and the remainder related to selling and administrative facilities). Manufacturing overhead cost was applied to jobs, $?. Cost of goods manufactured for the year, $770,000. Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: table The balances in the inventory accounts at the end of the year were: Raw materials..........................$45,000 Work in Process......................$56,000 Finished Goods.......................$30,000 Required: Prepare journal entries to record the preceding data. Determine the ending balance in the Manufacturing Overhead account by preparing a T account Prepare a schedule of cost of goods manufactured. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Prepare a schedule of cost of goods sold. Prepare an income statement for the year.