Problem 5-17 Comprehensive Problem [LO2, LO3, LO4, LO5, LO7]

Problem 5-17 Comprehensive Problem (LO2, LO3, LO4, LOS, LO7] Gold Nest Company of Hong Kong is a family-owned enterprise that makes souvenirs for the tourist commissions on their sales. Transactions occur in Hong Kong dollars ($). The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labour cost. It budgeted $330,000 of manufacturing overhead and estimated direct labour cost to be $200,000 in total this fiscal year. On July 1, the start of the company's fiscal year, inventory account balances were as follows: Raw materials Work in process Finished goods $25,000 $10,000 $40,000 During the year, the following transactions were completed: a. Raw materials were purchased on account: $275,000. b. Raw materials were requisitioned for use in production: $280,000 (materials costing $220,000 were chargeable directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: Direct labour Indirect labour Sales commissions Administrative salaries $ 72,000 $ 63,000 $ 90,000 d. Rent during the year: $75,000 ($60,000 of this amount related to factory operations, and the remainder related to administrative activities). e. Utility costs were incurred in the factory: $57,000. f. Advertising costs were incurred: $14,000. g. Depreciation was recorded on equipment: $100,000 ($88,000 of this amount was on equipment used in factory operations; the remaining $12,000 was on equipment used in selling and administrative activities). h. Manufacturing overhead cost was applied to jobs: $__? i. Goods that had cost $675,000 to manufacture according to their job cost sheets were completed. j. Sales (all on account) to customers during the year totalled $1,250,000. These goods cost $700,000 to manufacture according to their job cost sheets. Required: 1. Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your Journal entry worksheet Raw materials were purchased on account: $275,000. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal 2. Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these t-accounts (don't forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account. (Round your intermediate calculations to 2 decimal places.) Raw Materials Work in Process Beg. Bal. Beg. Bal. End. Bal. End. Bal. Finished Goods Manufacturing Overhead Finished Goods Manufacturing Overhead Beg. Bal. End. Bal. End. Bal. Cost of Goods Sold End. Bal. 3-a. Is Manufacturing Overhead underapplied or overapplied for the year? Overapplied Underapplied 3-b. Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account. If overhead is overapplied, use the entire cost of manufacturing to allocate the overapplied portion to the appropriate accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.) View transaction list 3-b. Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account. If overhead is overapplied, use the entire cost of manufacturing to allocate the overapplied portion to the appropriate accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.) View transaction list Journal entry worksheet Record the entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal 4. Prepare an income statement for the year. (Round your intermediate calculations to 2 decimal places.) Gold Nest Company Income Statement For the Year Ended June 30 Selling and administrative expenses