UOT Corp provides Just in Time printing and kitting services to many different clients. The kitting operations consisted of building COVID kits, containing personal protective equipment, to be sent out to hospitals and doctor's offices throughout the country.

Furthermore in 2019 all Kitting department employees were required to obtain forklift licenses and as a result of the new certification, all kitting employees received a $5 per hour pay raise at the beginning of 2020. Luckily given that UOT applies overhead based on direct labour dollars the controller did update the predetermined overhead rate based on the expected increase in wages for 2020. Throughout 2020 UOT won very few new kitting contracts and seems to be winning 70% more print contracts than 2019. The manufacturing manager is convinced that the pay raise given to the kitting employees has caused UOT to be unsuccessful at winning new bids for kitting but cannot understand why they were winning more print contracts when labour costs remained the same. UOT bids on jobs using cost-plus therefore a Job cost of $5.00 at cost-plus 40%, the selling price would be $7.00 with $2.00 as profits to UOT. This has been the standard method of job pricing for all new jobs. It is normal for the industry to award bids to those companies with the lower selling price. UOT costing on labour and materials have typically been spot on.

Alyssa Shah, CPA was brought in as the new controller and has been asked to correct the books after the bookkeeper left. After reviewing through everything Alyssa figured out where the problems were and while there were no errors in recording amounts, she did notice that some of the accounts were incorrect. She noted that while direct labour and direct materials were all recorded correctly, manufacturing overhead had no debits recorded in the account and resulted in a very large credit balance at year end. Since UOT operates in a Just In Time environment and the plant shuts down during the last two weeks of December, there is usually no work in process and no finished goods inventory at the start and end the year. Raw materials inventory accounted for $300,000 of ending inventory in 2020.

1)Prepare the journal entries to correct the manufacturing overhead account for 2020. You do not need to create journal entries for direct labour, direct material or manufacturing overhead applied to the jobs throughout the year, as they were all performed correctly. (Hint: your entry should start with a debit to manufacturing overhead)

*attached is the income statement if needed.

Exhibit #2 Income Statement for UOT for the combined performance of Buildings A and B prepared by the book keeper. UOT Printing Income Statement For the year ended December 31, 2020 Sales 5 4,900,000 COGS 3,500,000 Gross Prot 1,400,000 Expenses Notes Executive Sales and Admin Salaries 400,000 Landscaping and Snow Removal 1 10,000 Insurance Costs 1 18,000 Property Tax 1 50,000 Other Expenses 2 90,000 Depreciation 2 30,000 Utilities 2 50,000 Maintenance Staff 2 300,000 Manufacturing Manager Salary 200,000 Shipping Department 3 250,000 Total Expenses 1,398,000 Net Income 5 2,000 Notes 1 50% of costs belongs to building A and 50% of Building B 2 80% of costs belongs to building A and 20% of Building B 3 Costs includes labour and supplies for shipping in Building B