Gold Nest Company of Guandong, China, is a family-owned enterprise that makes bi

Question

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 recelve 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 $95,000 of manufacturing overhead for an estimated activity level of $50,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Rav materials Work in process Pinished goods $10,400 S 4,500 $ 8,500 During the year, the following transactions were completed a. Raw materials purchased for cash, $161,000. b. Raw materials used in production, $144,000 (materials costing $128,000 were charged directly to jobs; the remaining materials were indirect) c Cash paid to employees as follows: Direct labor Indirect labor Sales commiesions Administrative salaries 153,000 214,700 $ 23, 000 $ 45,000 d Cash paid for rent during the year was $18,800 ($13,200 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, $16,000 t Cash paid for advertising, $12,000 g Depreciation recorded on equipment, $22,00O.($16,000 of this amount related to equipment used in factory operations; the remaining $6,000 related to equipment used in selling and administrative activities.) h Manufacturing overhead cost was applied to jobs, $ L Goods that had cost $227,000 to manufacture according to their job cost sheets were completed. Sales for the year (all paid in cash) totaled $515,000. The total cost to manufacture these goods according to their job cost sheets was $216,000

Explanation / Answer

Following are the journal entries :-

1. Raw material control A/c . Dr . 161,000

To cost control A/c . 161000

2. WIP control A/c. Dr . 128000

To Raw material control A/c . 12800

3 Manufacturing overhead control A/c Dr . 16000

To Raw material control A/c . 16000

4. Wages control A/c. Dr . 367700

To cost control A/c . 367700

5 WIP Cost control A/c. Dr 153000

To Wages control A/c . 153000

6 . Manufacturing overhead control A/c.Dr . 214700

To Wages control A/c . 214700

7 .Manufacturing overhead A/c. Dr. 45200

To cost control A/c . 45200

8. WIP Cost control A/c . Dr . 290700

To Manufacturing overhead control . 290700

9 .Finished goods control A/c . Dr 227000

To WIP Cost control A/c. 227000

10 .COGS Control A/c . Dr . 216000

To finished goods control A/c . 216000

11 .COGS Control A/c . Dr 23600

To cost control A/c . 23600

12 cost control A/c . Dr . 515000

To COGS control A/c. 515000

(Being sales of 515000 recorded)

13 .Costing P & L A/c . Dr. 275400

To COGS Control A/c . 275400

2 Raw material control A/c

Manufacturing overhead

Wip control a/c

Finished goods control

COGS Control

3 (a) Manufacturing overhead in the present case is overapplied

3(b) closing entry for transferring the Bal. Of manufacturing overhead will be :-

Manufacturing overhead . Dr. 14800

To cost of goods sold. 14800

4. Preparation of financial statements

To opening stock

Raw material. 10400

WIP. 4500

Finished goods . 8500

By closing stock

Raw material . 27400

WIP . 349200

Finished goods . 19500

To bal b/d 10400 By WIP Control 128000 To cost control a/c 161000 By Manufacturing overhead 16000 By bal c/d 27400 171400 171400

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.