Question
The following data relate to the activities of Nana Company during the year: 1. Raw materials used to produce $100,000 (all direct materials). 2. Salaries
The following data relate to the activities of Nana Company during the year: 1. Raw materials used to produce $100,000 (all direct materials). 2. Salaries costs incurred on account: direct labour $200,000 (40,000 hours); indirect labour $60,000; selling and administrative $130,000. 3. Utilities cost incurred for the factory $40,000 on credit. 4. Advertising cost incurred for the year $50,000 on credit. 5. Depreciation recorded for the year $30,000, of which 60% related to the factory and 40% related to selling and administrative activities. 6. Other factory overhead costs incurred for the year $40,000 on account. 7. Prepaid rent of $50,000 expired during the year; all of this is related to the factory. 8. The company applied overhead on the basis of direct labour-hours at $6.50 per hour. 9. The cost of goods manufactured for the year was $600,000. 10. Goods that cost $600,000 according to the job cost sheets were sold on account, cost is two-third of the sales.
Required: a) Prepare journal entries for the company. Write your entries with the numbers 1-10. (29 marks) b) Is overhead underapplied or overapplied for the year? Prepare the closing entry which close the balance to Cost of goods sold. (6 marks)
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