PROBLEM 5-24 Journal Entries T-Accounts: Disposition of Underapplied or Oierapplied Overhead; Income Statement ) 103,104,107 Heavenly Displays Inc. put together large-scale fireworks displays-primarily for Canada Day celebrations sponsored by corporations and municipalities. The company assembles and orchestrates complet displays using pyrotechnic components purchased from sopplies throughout the world. The company has built a reputation for safety and for the awesome power and brilliance of its computer controlled shows. Heavenly Displays builds its own launch platforms and its own electronic control. Because of the company's reputation, customers onder shows up to a year in advance. Since each show is different in terms of duration and components used, Heavenly Displays uses a job onder costing system Heavenly Displus trial balance as of January to the beginning of the current year, is given below: Cash Accounts Receivable Raw Materials Work in Process Finished Goods Prepaid Insurance Buildings and Equipment Accumulated Depreciation Accounts Payable Salaries and Wages Payable Capital Stock Retained Earnings Total $ 9.000 10,000 16.000 21.000 38.000 7,000 300.000 $128.000 60.000 3,000 200.000 30.000 14 | $421000 MacBook Pro PA Red S Total 3421.000 52100 The company charges manufacturing overhead costs to jobs on the basis of direct labour hours. (Each customer order for a complete fireworks display is a separate job.) Management estimated that the company would incur $135.000 in manufacturing overhead costs in the fabrication and electronics shops and would work 18.000 direct labour hours during the year. The following transactions occurred during the year 4. Raw materials, consisting mostly of skyrockets, mortar bombs, flares, wiring and electronic components, were purchased on account $820,000 be raw material? were issued to production: $130,000 ($13,000 of this amount was for indirect materials, and the remainder was for direct materials) Fabrication and electronics shop payrolls were accrued: $200,000 (70% direct labour and 30% indirect labor). A total of 20,800 direct labour hours were worked during the year Selling and administrative salaries were accrued: $150.000 2. The company prepaid additional Insurance premiums of $38,000 during the year Prepaid insurance expirin during the year was $40.000 (only $600 relates to selling and administrative, the other $39.400 relates to the fabrication and electronic shops because of the safety hazards involved in handling fireworks) Marketing cost was incurred: $100,000 Depreciation charges for the year totalled $40.000 (90% relates to fabrication and electronics shop awets, and 30 relates to selling and administrative sets) Property taxes were accrued on the shop buildings $12.000 (credit Accounts Pale), Manufacturing overhead cost was applied to jobs Jobs completed during the year had a total production cost of $1,106.000 according to their job cut sheets. A Revenue (all on account) was $1.420,000. Cost of Goods Sold (before any adjustment for underapplied or overupplied overhead) $1.120,000 ERR $40.000 (only $600 relates to selling and administrative the other $39.400 relates to the fabrication and clectronics shops because of the year. Prepaid insurance expiring during the year was the safety hazards involved in handling fireworks). Marketing cost was incurred: $100,000 Depreciation charges for the year totalted $40,000 (70% relates to fabrication and electronics shop assets, and 30% relates to selling and administrative assets) . Property taxe were accrued on the shop buildings: 512,600 (credit Accounts Payable) Manufacturing overhead cost was applied to jobs. Jobs completed during the year had a total production cost of $1.106.000 according to their job cost sheets * Revenue (all on account) was $1,420,000. Cost of Goods Sold (before any adjustment for underapplied or overapplied overhead) was $1,120,000 Cash collections on account from customers totalled $1.415,000. m. Cash payments on accounts payable totalled S970,000. Cash payments to employees for salaries and wages totalled $348,000 Required 1. Prepare journal entries for the year's transactions 2. Prepare a account for each account in the company's trial balance, and enter the opening balances given above. Post your journal entries to the Taccounts. Prepare new accounts as needed. Compute the ending balance in each account, 3. Is manufacturing overhead underapplied or overapplied for the year? Prepare the necessary journal entry to dispose of the balance in the Manufacturing Overhead account. 4. Prepare an income statement for the year. (Do not prepare a statement of cost of goods manufactured all of the information needed for the income statement is available in the Taccounts.) PRORLEML5.25 MacBook Pro PROBLEM 5-24 Journal Entries T-Accounts: Disposition of Underapplied or Oierapplied Overhead; Income Statement ) 103,104,107 Heavenly Displays Inc. put together large-scale fireworks displays-primarily for Canada Day celebrations sponsored by corporations and municipalities. The company assembles and orchestrates complet displays using pyrotechnic components purchased from sopplies throughout the world. The company has built a reputation for safety and for the awesome power and brilliance of its computer controlled shows. Heavenly Displays builds its own launch platforms and its own electronic control. Because of the company's reputation, customers onder shows up to a year in advance. Since each show is different in terms of duration and components used, Heavenly Displays uses a job onder costing system Heavenly Displus trial balance as of January to the beginning of the current year, is given below: Cash Accounts Receivable Raw Materials Work in Process Finished Goods Prepaid Insurance Buildings and Equipment Accumulated Depreciation Accounts Payable Salaries and Wages Payable Capital Stock Retained Earnings Total $ 9.000 10,000 16.000 21.000 38.000 7,000 300.000 $128.000 60.000 3,000 200.000 30.000 14 | $421000 MacBook Pro PA Red S Total 3421.000 52100 The company charges manufacturing overhead costs to jobs on the basis of direct labour hours. (Each customer order for a complete fireworks display is a separate job.) Management estimated that the company would incur $135.000 in manufacturing overhead costs in the fabrication and electronics shops and would work 18.000 direct labour hours during the year. The following transactions occurred during the year 4. Raw materials, consisting mostly of skyrockets, mortar bombs, flares, wiring and electronic components, were purchased on account $820,000 be raw material? were issued to production: $130,000 ($13,000 of this amount was for indirect materials, and the remainder was for direct materials) Fabrication and electronics shop payrolls were accrued: $200,000 (70% direct labour and 30% indirect labor). A total of 20,800 direct labour hours were worked during the year Selling and administrative salaries were accrued: $150.000 2. The company prepaid additional Insurance premiums of $38,000 during the year Prepaid insurance expirin during the year was $40.000 (only $600 relates to selling and administrative, the other $39.400 relates to the fabrication and electronic shops because of the safety hazards involved in handling fireworks) Marketing cost was incurred: $100,000 Depreciation charges for the year totalled $40.000 (90% relates to fabrication and electronics shop awets, and 30 relates to selling and administrative sets) Property taxes were accrued on the shop buildings $12.000 (credit Accounts Pale), Manufacturing overhead cost was applied to jobs Jobs completed during the year had a total production cost of $1,106.000 according to their job cut sheets. A Revenue (all on account) was $1.420,000. Cost of Goods Sold (before any adjustment for underapplied or overupplied overhead) $1.120,000 ERR $40.000 (only $600 relates to selling and administrative the other $39.400 relates to the fabrication and clectronics shops because of the year. Prepaid insurance expiring during the year was the safety hazards involved in handling fireworks). Marketing cost was incurred: $100,000 Depreciation charges for the year totalted $40,000 (70% relates to fabrication and electronics shop assets, and 30% relates to selling and administrative assets) . Property taxe were accrued on the shop buildings: 512,600 (credit Accounts Payable) Manufacturing overhead cost was applied to jobs. Jobs completed during the year had a total production cost of $1.106.000 according to their job cost sheets * Revenue (all on account) was $1,420,000. Cost of Goods Sold (before any adjustment for underapplied or overapplied overhead) was $1,120,000 Cash collections on account from customers totalled $1.415,000. m. Cash payments on accounts payable totalled S970,000. Cash payments to employees for salaries and wages totalled $348,000 Required 1. Prepare journal entries for the year's transactions 2. Prepare a account for each account in the company's trial balance, and enter the opening balances given above. Post your journal entries to the Taccounts. Prepare new accounts as needed. Compute the ending balance in each account, 3. Is manufacturing overhead underapplied or overapplied for the year? Prepare the necessary journal entry to dispose of the balance in the Manufacturing Overhead account. 4. Prepare an income statement for the year. (Do not prepare a statement of cost of goods manufactured all of the information needed for the income statement is available in the Taccounts.) PRORLEML5.25 MacBook Pro