Q #04 A Rawalpindi fabricators manufacture golf carts and other recreational equipment. One order from Fawad Corporation for 1,000 carts showed the following costs per unit: Direct material Rs.40 Direct labour Rs.20 Applied factory overhead 140% of direct labour cost if defective work is charged to a specific job and 150% if it is not. Final inspection revealed that wheels were assembled with improper bearings. The wheels were disassembled and the proper bearings inserted. The cost of correcting each defective cart consists of Rs.2 added cost for bearings, Rs.4 for labour and factory overhead at the predetermined rate. When the lot was completed, 200 rejected units, a normal number, were sold for $20.60 each. A separate work in process account is used for each cost element. Required 2. Prepare journal entries to record correction of the defective units If loss is charged to customer specification. 3. Prepare journal entry for spoiled goods if the spoilage is not charged to specific order. 4. Transfer of the work in process to finished goods. Q #04 (B) In the final processing, 100 units of an order a normal number were spoiled. Their estimated sales value is $4 per unit. These units had been charged with $500 of material, $300 of labor and $200 of factory overhead which includes $20 allowance for spoiled units. Record the spoiled goods entry for the following assumptions: 1. Spoilage cost is charged to specific job 2. Spoilage is spread over all production