Process costing system

Eminence Corporation makes rocking chairs. The chairs move through two departments during production. Lumber is cut into chair parts in the cutting department, which transfers the parts to the assembly department for completion. The company sells the unfinished chairs to hobby shops. The following transactions apply to Eminence's operations for its first year, 2018. (Assume that all transactions are for cash unless otherwise states.)

1. The company was started when it acquired a $47000 cash contribution from the owners.

2. The company purchased $15000 of direct raw materials and $400 of indirect materials. Indirect materials are capitalized in the Production Supplies account.

3. Direct materials totaling $7000 were issued to the cutting department.

4. Labor cost was $28200. Direct labor for the cutting and assembly departments was $10000 and $13000, respectively. Indirect labor costs were $5200.

5. The predetermined overhead rate was $0.5 per direct labor dollar in each department.

6. Actual overhead costs other than indirect materials and indirect labor were $6400 for the year.

7. The cutting department transferred $12500 of inventory to the assembly department.

8. The assembly department transferred $20500 of inventory to finished goods.

9. The company sold inventory costing $18500 for $30000.

10. The selling and administrative expenses were $3000.

11. A physical count revealed $100 of production supplies on hand at the end of 2018.

12. Assume that over- or underapplied overhead is insignificant.

Required

a. Record the data in T-accounts.

b. Record the closing entry for over- or underapplied manufacturing overhead, assuming that the amount is insignificant.

c. Close the revenue and expense accounts.

d. Prepare a schedule of costs of goods manufactured and sold, an income statement, and a balance sheet for 2018.