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Problem 3-16 Comprehensive Problem [LO3-1, LO3-2, LO3-4] Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $84,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows Raw materials Work in process Finished goods $10,900 $ 4,800 $ 8,500 During the year, the following transactions were completed a. Raw materials purchased for cash, $ 164,000 b. Raw materials used in production, $149,000 (materials costing $123,000 were charged directly to jobs; the remaining materials were indirect) c. Cash paid to employees as follows Direct labor Indirect labor Sales commissions Administrative salaries $175,000 $287,500 $ 24,000 $ 40,000 d. Cash paid for rent during the year was $18,500 ($13,400 of this amount related to factory operations, and the remainder related to selling and administrative activities) e. Cash paid for utility costs in the factory, $10,000 f. Cash paid for advertising, $15,000 g. Depreciation recorded on equipment, $21,000. ($16,000 of this amount related to equipment used in factory operations; the remaining $5,000 related to equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $? i. Goods that had cost $226,000 to manufacture according to their job cost sheets were completed j. Sales for the year (all paid in cash) totaled $510,000. The total cost to manufacture these goods according to their job cost sheets was $219,000 Requirec 1. Prepare journal entries to record the transactions for the year 2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts) 3A. Is Manufacturing Overhead underapplied or overapplied for the year? 3B. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold 4. Prepare an income statement for the year. All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared Required 1. Prepare journal entries to record the transactions for the year. 2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts) 3A. Is Manufacturing Overhead underapplied or overapplied for the year? 3B. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold 4. Prepare an income statement for the year. All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below Req 1 Req 2 Req 3A Req 3B Req 4 Prepare an income statement for the year. (All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.) Gold Nest Company Income Statement For the Year Ended Sales Cost of goods sold Gross margin Selling and administrative expenses $ 510,000 219,000 291,000 40,000 Administrative salaries expense Advertising expense Depreciation expense Sales commissions Rent expense 5,000 24,000 5,100 89,100 $ 201,900 Net operating income K Req 3B Req 4