Sampson Company uses a job order cost system with overhead applied to products based on direct labor hours. Based on previous history, the company estimated its total overhead for the coming year (2016) to be $720,000 and its total direct labor hours to be 24,000.

On January 1, 2016, the general ledger of Sampson Company revealed that it had one job in process (Job 102) for which it had incurred a total cost of $15,000. Job 101 had been finished the previous month for a total cost of $30,000 but was not yet sold. The company had a contract for Job 103 but had not started working on it yet. Other balances in Raw Materials Inventory and other assets, liabilities, and stockholders equity accounts are summarized on the next page.

Required:

1. Compute and interpret the predetermined overhead rate.

2. How much overhead would be applied to jobs during the period?

3. Compute the total cost of Jobs 102 and 103 at the end of the period. Where would the cost of each of these jobs appear on the year-end balance sheet?

4. Prepare journal entries to record the January transactions and post the entries to the general ledger T-accounts given earlier in the problem.

5. Calculate the amount of over- or underapplied overhead.

6. Prepare the journal entry to dispose of the overhead balance assuming that it had been a year-end balance instead of a month-end balance. Post the effect to the general ledger T-accounts.

7. Prepare a statement of cost of goods manufactured report including the adjustment for over- or underapplied overhead.

8. Prepare a brief income statement for Sampson Company.

SAMPSON COMPANY General Ledger Accounts Raw Materials Inven tory Man ufacturing Overhead V1 Balano 10,000 Work in Process Inventory (WIP) Finished Goods Inventory /1 Balance V1 Balano 15,000 30,000 Individual Job Cost Sheets (subsdiary ledgers to WIP) Cost of Goods Sold Job 102 Job 103 Beg. Balance +Direct Maerials 15,000 +Direct Labor +AppliedOH Total Mfg.Cost Sales Revenue Selling. General, and Administrative Expenses Cash and Other Assets Payables and Other Liabilities V1 Balance 100,000 85,000 V1 Balance Stockholders' Equity 70,000 V1 Balanoe During January, the company had the following transactions a. Purchased $10,000 worth of raw materials on account. b. Issued the following materials into production Item Cost Explanation $7,000 Job 102, $2,000; Job 103, $5,000 Direct materials Indirect materials 2,000 Used on both jobs $9,000 Total materials issued C. Recorded salaries and wages payable as follows Item Cost Explanation $10,000 Job 102, $6,000; Job 103, $4,000 For factory supervislon Direct labor Indirect labor 4,000 Salaries 5,000 For administrative staff $19,000 Total payroll cost d. Applied overhead to jobs based on the number of direct labor hours required Job Number DIrect Labor Hours 300 hours Job 102 200 hours Job 103 Tota 500 hours e. Recorded the following actual manufacturing costs e. Recorded the following actual manufacturing costs Item Cost Explanatlon $6,000 Rent Pald factory rent in cash Factory equipment Had one month of factory Insurance policy explre Recelved factory utility bill but did not pay It Depreclatlon 5,000 Insurance 3,000 Utilites 2,000 $16,000 Total cost f Recorded the following general and administrative costs Item Cost Explanation $2,000 Advertising Depreclation Other expenses Advertising pald in cash Office equipment Micellaneous expenses Incurred but not pald 3,000 1,000 $6,000 Total cost g. Sold Job 101, which is recorded in Finished Goods Inventory at a cost of $30,000, for $55,000 h. Completed Job 102 but did not sell it, Job 103 is still in process at year-end