Q.1 Almeda Products, Inc., uses a job-order costing system. The companys inventory balances on

April 1, the start of its fiscal year, were as follows:

Raw materials . . . . . . . . . . . . . . . . . . . . . $32,000

Work in process . . . . . . . . . . . . . . . . . . . . $20,000

Finished goods . . . . . . . . . . . . . . . . . . . . $48,000

During the year, the following transactions were completed:

a. Raw materials were purchased on account, $170,000.

b. Raw materials were issued from the storeroom for use in production, $180,000 (80% direct and 20% indirect).

c. Employee salaries and wages were accrued as follows: direct labor, $200,000; indirect labor,

d. $82,000; and selling and administrative salaries, $90,000.

e. Utility costs were incurred in the factory, $65,000. e. Advertising costs were incurred, $100,000.

f. Prepaid insurance expired during the year, $20,000 (90% related to factory operations, and

g. 10% related to selling and administrative activities).

h. Depreciation was recorded, $180,000 (85% related to factory assets, and 15% related to selling and administrative assets).

i. Manufacturing overhead was applied to jobs at the rate of 175% of direct labor cost.

j. Goods that cost $700,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.

k. Sales for the year totaled $1,000,000 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $720,000.

Required:

1. Prepare journal entries to record the transactions for the year.

2. Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, Manufacturing Overhead, and Cost of Goods Sold. Post the appropriate parts of your journal entries to these T-accounts. Compute the ending balance in each account.

3. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close this balance to Cost of Goods Sold.

4. Prepare an income statement for the year.