Ravsten Company uses a job order costing system On January 1, the beginning of the current year, the companys inventory balances were as follows Raw materials $ 18,500 Work in process $ 9,920 Finished goods $ 29,760 The company applies overhead cost to jobs on the basis of machine hours For the current year, the company estimated that it would work 36,500 machine hours and incur $159,140 in manufacturing overhead cost The following transactions were recorded for the year a Raw materials were purchased on account $210,000 b Raw materials were requisitioned for use in production $195,000 (80 direct and 20 indirect) c The following costs were incurred for employee services Direct labour $ 165,000 Indirect labour $ 28,000 Sales commissions $ 37,500 Administrative salaries $ 82,000 d Heat, power, and water costs were incurred in the factory $44,250 e Prepaid insurance expired during the year $12,500 (85 relates to factory operations, and 15 relates to selling and administrative activities) f Advertising costs were incurred, $52,500 g Depreciation was recorded for the year $63,000 (90 relates to factory operations, and 10 relates to selling and administrative activities) h Manufacturing overhead cost was applied to production The company recorded 41,000 machine hours for the year i Goods that cost $498,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse j Sales for the year totalled $723,000 and were all on account The total cost to manufacture these goods according to their job cost sheets was $496,000 Required 1 Prepare journal entries to record the transactions given above (Do not round intermediate calculations If no entry is required for a transaction event, select No journal entry required in the first account field ) 2 Prepare T accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold Post relevant data from your journal entries to these T accounts (dont forget to enter the opening balances in your inventory accounts) Compute an ending balance in each account 3 a Is manufacturing overhead underapplied or overapplied for the year Overapplied overhead Underapplied overhead 3 b Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account (Do not round intermediate calculations If no entry is required for a transaction event, select No journal entry required in the first account field ) 4 Prepare an income statement for the year

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 22, 2024

Ravsten Company uses a job-order costing system. On January 1, the beginning of the current year, the companys inventory balances were as follows: Raw materials

Ravsten Company uses a job-order costing system. On January 1, the beginning of the current year, the companys inventory balances were as follows:


Raw materials	$	18,500
Work in process	$	9,920
Finished goods	$	29,760

The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 36,500 machine-hours and incur $159,140 in manufacturing overhead cost. The following transactions were recorded for the year:

a.	Raw materials were purchased on account: $210,000.
b.	Raw materials were requisitioned for use in production: $195,000 (80% direct and 20% indirect).
c.	The following costs were incurred for employee services:


Direct labour	$	165,000
Indirect labour	$	28,000
Sales commissions	$	37,500
Administrative salaries	$	82,000

d.	Heat, power, and water costs were incurred in the factory: $44,250.
e.	Prepaid insurance expired during the year: $12,500 (85% relates to factory operations, and 15% relates to selling and administrative activities).
f.	Advertising costs were incurred, $52,500.
g.	Depreciation was recorded for the year: $63,000 (90% relates to factory operations, and 10% relates to selling and administrative activities).
h.	Manufacturing overhead cost was applied to production. The company recorded 41,000 machine-hours for the year.
i.	Goods that cost $498,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
j.	Sales for the year totalled $723,000 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $496,000.

Required:

1.	Prepare journal entries to record the transactions given above.(Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2.	Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (dont forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account.

3-a.

Is manufacturing overhead underapplied or overapplied for the year?

Overapplied overhead

Underapplied overhead

3-b.	Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account.(Do not round intermediate calculations.If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)