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

Raw materials $16,000

Work in process $10,000

Finished goods $30,000

The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 36,000 machine-hours and incur $153,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a.Raw materials were purchased on account: $200,000.

b.Raw materials were requisitioned for use in production: $190,000 (80% direct and 20% indirect).

c.The following costs were incurred for employee services:

Direct labour $160,000

Indirect labour $27,000

Sales commissions $36,000

Administrative salaries $80,000

d.Heat, power, and water costs were incurred in the factory: $42,000

.e.Prepaid insurance expired during the year: $10,000 (90% relates to factory operations, and 10% relates to selling and administrative activities).

f.Advertising costs were incurred, $50,000.

g.Depreciation was recorded for the year: $60,000 (85% relates to factory operations, and 15% relates to selling and administrative activities).

h.Manufacturing overhead cost was applied to production. The company recorded 40,000 machine-hours for the year.

i.Goods that cost $480,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.

j.Sales for the year totalled $700,000 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $475,000.

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 (don't 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?

3-b. Make 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 Make an income statement for the year.