Question
QUESTION 1 Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The
QUESTION 1
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $395,600 of manufacturing overhead for an estimated allocation base of 920 direct labor-hours. The following transactions took place during the year:
a. Raw materials purchased on account, $290,000.
b. Raw materials used in production (all direct materials), $275,000.
c. Utility bills incurred on account, $77,000(90% related to factory operations, and the remainder related to selling and administrative activities).
d. Accrued salary and wage costs:
Direct labor (970 hours) $320,000
Indirect labor $108,000
Selling and administrative salaries $200,000
e. Maintenance costs incurred on account in the factory, $72,000
f. Advertising costs incurred on account, $154,000.
g. Depreciation was recorded for the year, $90,000(75% related to factory equipment, and the remainder related to selling and administrative equipment).
h. Rental cost incurred on account, $115,000(80% related to factory facilities, and the remainder related to selling and administrative facilities).
i. Manufacturing overhead cost was applied to jobs, $?.
j. Cost of goods manufactured for the year, $950,000.
k. Sales for the year (all on account) totaled $2,100,000. These goods cost $980,000according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
Raw Materials $48,000
Work in Process $39,000
Finished Goods $78,000
Required:
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don't forget to enter the beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
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