Raven Companys trial balance as of January 1, the beginning of its fiscal year, is given below:
Question:
- Raven Companys trial balance as of January 1, the beginning of its fiscal year, is given below:
Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Raven Company uses a job-order costing system. During the year, the following transactions took place:
a. Raw materials purchased on account, $45,000.
b. Raw materials were requisitioned for use in production, $38,000 (85% direct and 15% indirect).
c. Factory utility costs incurred $22,100.
d. Depreciation was recorded on plant and equipment, $36,000. Three-fourths of the depreciation related to factory equipment, and the remainder related to selling and administrative equipment.
e. Advertising expense incurred $48,000.
f. Costs for salaries and wages were incurred as follows:
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . $50,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . $20,000
Administrative salaries . . . . . . . . . . . . . . . $22,000
g. Prepaid insurance expired during the year, $3,000 (80% related to factory operations, and 20% related to selling and administrative activities).
h. Miscellaneous selling and administrative expenses incurred $19,500.
i. Manufacturing overhead was applied to production. The company applies overhead on the basis of $8 per machine-hour; 7,500 machine-hours were recorded for the year.
j. Goods that cost $140,000 to manufacture according to their job cost sheets were transferred to the fi nished goods warehouse.
k. Sales for the year totaled $250,000 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $130,000.
l. Collections from customers during the year totaled $245,000.
m. Payments to suppliers on account during the year, $150,000; payments to employees for salaries and wages, $84,000.
Required: (7+4+2+2)
- Prepare journal entries to record the transactions for the year.
- Prepare a T-account for each account in the companys trial balance and enter the opening balances shown on the prior page.
- Is manufacturing overhead under applied or over applied for the year? Make an entry in the T-accounts to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
- Prepare an income statement for the year, prepare a schedule of cost of goods manufactured.