Custom Chrome Inc. manufactures special chromed parts made to the order and spec
ID: 2451835 • Letter: C
Question
Custom Chrome Inc. manufactures special chromed parts made to the order and specifications of the customer. It has two production departments, Stamping and Plating, and two service departments, Power and Maintenance. In any production department, the job in process is wholly completed before the next job is started.
The company operates on a fiscal year, which ends September 30. Following is the post-closing trial balance as of September 30:
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Additional information:
1. The balance of the materials account represents the following:
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The company uses the FIFO method of accounting for all inventories. Material A is used in the Stamping Department, and materials B and C are used in the Plating Department.
2. The balance of the work in process account represents the following costs that are applicable to Job 905. (The customer's order is for 1,000 units of the finished product.)
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3. The finished goods account reflects the cost of Job 803, which was finished at the end of the preceding month and is awaiting delivery orders from the customer.
4. At the beginning of the year, factory overhead application rates were based on the following data:
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In October, the following transactions were recorded:
a. Purchased the following materials and supplies on account:
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b. The following materials were issued to the factory:
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Customers orders covered by Jobs 1001 and 1002 are for 1,000 and 500 units of finished product, respectively.
c. Factory wages and office, sales, and administrative salaries are paid at the end of each month. The following data, provided from an analysis of labor-time records and salary schedules, will be sufficient for the preparation of the entries to record the payroll. (Assume FICA and federal income tax rates of 8% and 10%, respectively.) Record the company's liability for state and federal unemployment taxes. (Assume rates of 4% and 1%, respectively.) Record the payroll distribution for October.
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Wages of the supervisors, custodial personnel, etc., totaled $9,500; administrative salaries were $18,300.
d. Miscellaneous factory overhead incurred during October totaled $4,230. Miscellaneous selling and administrative expenses were $1,500. These items as well as the FICA tax and federal income tax withheld for September were paid. (See account balances on the post-closing trial balance for September 30.)
e. Annual depreciation on plant assets is calculated using the following rates:
Factory buildings5%
Machinery and equipment20%
Office equipment20%
f. The balance of the prepaid insurance account represents a three-year premium for a fire insurance policy covering the factory building and machinery. It was paid on the last day of the preceding month and became effective on October 1.
g. The summary of factory overhead prepared from the factory overhead ledger is reproduced here:
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h. The total expenses of the Maintenance Department are distributed on the basis of floor space occupied by the Power Department (8,820 sq ft), Stamping Department (19,500 sq ft), and Plating Department (7,875 sq ft). The power department expenses are then allocated equally to the Stamping and Plating departments.
i. After the actual factory overhead expenses have been distributed to the departmental accounts and the applied factory overhead has been recorded and posted, any
balances in the departmental accounts are transferred to Under- and Overapplied Overhead.
j. Jobs 905 and 1001 were finished during the month. Job 1002 is still in process at the end of the month.
k. During the month, Jobs 803 and 905 were sold at a markup of 50% on cost.
l. Received $55,500 from customers in payment of their accounts.
m. Checks were issued in the amount of $43,706 for payment of the payroll
1) Set up the begining trial balance in T-accounts
2) Prepare materials inventory ledger cards and enter October 1 balances
3) Set up job cost sheets as needed
4) Record all Transactions and related entries in general journal entry form for the month of October and post to T-Accounts
5) Prepare a service department expense distribution work sheet for October
6) At the end of the month:
a) Analyze the balance in the materials account, the work in process account, and the finished goods account.
b) Prepare the statement of cost of goods manufactured, income statement, and balance sheet for June 30
Stamping Dept. Plating Dept. Estimated factory overhead for the year. . . . . . . . . $145,000 $115,000 Estimated direct labor hours for the year. . . . . . . . . 29,000 6,000Explanation / Answer
Transactions a) Materials 69,500 Accounts Payable 69,500 Materials Purchases b) Work in Process 52,600 Factory Overhead 2,450 Materials 55,050 Materials requisitioned c) Payroll 53,300 FICA Tax Payable 4,264 Employees Income Tax Payable 5,330 Wages Payable 43,706 Recording wages payable Work in Process 25,500 Factory Overhead 9,500 Salaries 18,300 Payroll 53,300 Payroll distribution to work in process and overhead Factory Overhead 4,550 Payroll Tax Expense - Salaries 2,379 FICA Tax Payable 4,264 Federal Unemployment Tax Payable 533 State Unemployment Tax Payable 2,132 Record employer payroll taxes d) Factory Overhead 4,230 Misc. Selling & Admin. Expense 1,500 FICA Tax Payable 3,120 Employees Income Tax Payable 5,200 Cash 14,050 Paid expenses e) Factory overhead 900 Depreciation Expense - Office Equipment 175 Accum. Deprec. - Factory Building 267 Accum. Deprec. - Machinery & Equipment 633 Accum. Deprec. - Office Equipment 175 To record depreciation f) Factory Overhead 120 Prepaid insurance 120 To record expired insurance g) Factory Overhead - Stamping 9,768.40 Factory Overhead - Plating 6,559.80 Factory Overhead - Power 2,214.10 Factory Overhead - Maintenance 3,207.70 Factory Overhead 21,750.00 To distribute factory overhead to departments h) Factory Overhead - Stamping 1,728.14 Factory Overhead - Plating 697.91 Factory Overhead - Power 781.65 Factory Overhead - Maintenance 3,207.70 To distribute maintenance overhead to other departments Factory Overhead - Stamping 1,497.88 Factory Overhead - Plating 1,497.87 Factory Overhead - Power 2,995.75 To distribute power overhead to producing departments i) Work in process 22,000.00 Applied Factory Overhead - Stamping 10,500.00 Applied Factory Overhead - Plating 11,500.00 To apply overhead work in process Stamping - 2,100 DLH x $5.00 = $10,500 Plating - 600 DLH x $19.1667 = $11,500 Applied Factory Overhead - Stamping 10,500.00 Applied Factory Overhead - Plating 11,500.00 Factory Overhead - Stamping 10,500.00 Factory Overhead - Plating 11,500.00 To transfer applied overhead to actual overhead Factory Overhead - Plating 2,744.42 Factory Overhead - Stamping 2,494.42 Under & Overapplied overhead 250.00 To transfer under & overapplied overhead to under & overapplied account j) Finished Goods 78,700.00 Work in process 78,700.00 To record goods finished during October k) Accounts Receivable 43,140.00 Sales 43,140.00 Cost of Goods Sold 28,760.00 Finished Goods 28,760.00 To record October sales and cost of goods sold l) Cash 55,500.00 Accounts Receivable 55,500.00 To record October cash receipts m) Wages Payable 43,706.00 Cash 43,706.00 Paid payroll
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