PROBLEM 3-26 Journal Entries; T-Accounts; Financial Statements [ LO3-1, L03-2, LO3-3, LO3-4, LO3-5, LO3-6, LO3-7] -Q 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): 1. Raw materials were purchased for use in production, $200,000. 2. Raw materials were requisitioned for use in production (all direct materials), $185,000. 3. Utility bills were incurred, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities). 4. Salary and wage costs were incurred: Direct labor (975 hours) Indirect labor .... Selling and administrative salaries $230,000 $90,000 $110,000 5. Maintenance costs were incurred in the factory, $54,000. 6. Advertising costs were incurred, $136,000. 7. Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). 8. Rental cost incurred on buildings, $120,000 (85% related to factory operations, and the remainder related to selling and administrative facilities). 9. Manufacturing overhead cost was applied to jobs, $_?. 10. Cost of goods manufactured for the year, $770,000. 11. 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: : Raw Materials Work in Process Finished Goods $30,000 $21,000 $60,000 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: 1. Prepare journal entries to record the preceding data. 2. Determine the ending balance in the Manufacturing Overhead account by preparing a T account 3. Prepare a schedule of cost of goods manufactured. 4. 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. 5. Prepare an income statement for the year. The balances in the inventory accounts at the beginning of the year were: Raw Materials Work in Process Finished Goods $30,000 $21,000 $60,000 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: 1. Prepare journal entries to record the preceding data. 2. Determine the ending balance in the Manufacturing Overhead account by preparing a T account 3. Prepare a schedule of cost of goods manufactured. a 4. 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. 5. Prepare an income statement for the year
