Problem 3-15 Journal Entries; T-Accounts; Financial Statements [Lo3-1, LO3.2, LO

Question

Problem 3-15 Journal Entries; T-Accounts; Financial Statements [Lo3-1, LO3.2, LO3-3, Lo3-4] A/S of Bergen, Norway,is a small company that manufactures specialty heavy equipment for use in North Sea oll e company uses a job-order costing system that applies manufacturing overhead cost to jotes on the basis of direct labor- Froya Fabrikker hours. Its predetermined overhead rate was based on a cost formula that estimated $336,000 of estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the ye ma ufacturing overhead for an a. Raw materials purchased on account,$245,000 b. Raw materials used in production (all direct materials), $230,000. c. Utility bills incurred on account, $68,000(85% related to factory ope rations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs: Direct labor (1.125 hours) Indirect labor Selling and administrative salaries S 275, 000 $ 99,000 s 155,000 e. Maintenance costs incurred on account in the factory, $63.000 t Advertising costs incurred on account, $145,000o. g Depreciation was recorded for the year. S81,000 (70% related to factory equipment, and the remainder related to s 1 of 1 Bli Score answer >

Explanation / Answer

Accounting titles & Explanations Debit Credit a) Raw materials inventory 245,000 Accounts payable 245,000 b) work in process inventory 230,000 Raw materials inventory 230,000 c) manufacturing overhead 57800 utility expense 10200 Accounts payable 68,000 d) work in process inventory 275,000 Manufacturing overhead 99,000 Salary expense 155,000 Salary & wages payable 529,000 e) Manufacturing overhead 63,000 Accounts payable 63,000 f) Advertising expense 145,000 Accounts payable 145,000 g) Manufacturing overhead 56700 Depreciation expense 24300 Accumulated depreciation 81,000 h) Manufacturing overhead 79500 Rent expense 26500 Accounts payable 106,000 i) Work in process inventory 360,000 Manufacturing overhead 360,000 j) finished goods inventory 860,000 Work in process inventory 860,000 k) Accounts receivable 1,650,000 sales 1,650,000 cost of goods sold 890,000 finished goods inventory 890,000 Accounts receivable Sales Beg.bal Beg.bal k. 1,650,000 1,650,000 k. end bal 1,650,000 1,650,000 end bal Raw Materials cost of goods sold Beg.Bal 39,000 Beg.Bal a. 245,000 230,000 b. k. 890,000 End bal 54,000 End bal 890,000 Work in process Manufacturing overhead Beg Bal 30,000 Beg.Bal b. 230,000 860,000 j c. 57800 360,000 i d. 275,000 d. 99,000 i. 360,000 e. 63,000 g. 56700 end bal 35,000 h. 79500 4,000 End bal finished goods Advertising expense Beg bal 69,000 Beg.bal j 860,000 890,000 k f. 145,000 End bal 39,000 end bal 145,000 Accumulated Depreciation Utilities expense beg.bal Beg bal g. 81,000 g. c. 10200 End bal 81,000 end bal 10,200 Accounts payable Salaries expense Beg.bal Beg.Bal 245,000 a. d. 155,000 68,000 c. 63,000 e. 145,000 f. 106,000 h. End bal 627,000 end bal 155,000 Depreciation expense Salaries & wages payable Beg.bal Beg.bal g. 24300 529,000 d. End bal 24,300 end bal 529,000 rent expense beg bal h. 26500 End bal 26,500 overhead applied = (336,000/1050)*1125 = 360000 Schedule of Cost of Goods Manufactured Direct Materials: Beginning raw materials inventory 39,000 Add:purchase of raw materials 245,000 Total raw materials available 284,000 less:Ending raw materials inventory 54,000 Materials used in production 230,000 Direct Labor 275,000 Manufacturing overhead applied to work in process 360000 total manufacturing costs 865,000 Add:Beginning work in process inventory 30,000 895,000 less:Ending work in process inventory 35,000 Cost of goods manufactured 860,000     Schedule of Cost of goods sold Beginning finished goods inventory 69,000 Add:Cost of goods manufactured 860,000 Cost of goods available for sale 929,000 less:ending finished goods inventory 39,000 Unadjusted cost of goods sold 890,000 less:overapplied overhead 4,000 Adjusted cost of goods sold 886,000 Income statement Sales 1,650,000 cost of goods sold 886,000 Gross margin 764,000 Selling and administrative expense Utilities expense 10200 Advertising expense 145,000 Salaries expense 155,000 Depreciation expense 24,300 rent expense 26500 361,000 Net operating income 403,000

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