Module 10 Conversion Cycle Homework Use complete sentences. Show and label all w

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Module 10 Conversion Cycle Homework Use complete sentences. Show and label all work to receive any credit for the homework 3. Chris P. Critters Manufacturing produces custom barbeque grills. Prepare t-accounts for Cash Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Cost of Goods Sold, Manufacturing Overhead, Sales, Selling and Administrative Expenses and Owner's Equity Record the effects of the events in the t-accounts. Show the event letter next to each entry (to help you follow the events). Prepare an income statement and balance sheet for Chris's company. You must complete all parts to receive credit for the problem a. Chris began the year with $3,450 worth of raw materials, $8,400 worth of work in process, $9,500 worth of finished goods, $18,320 cash and $39,670 in Owner's Equity b. Chris purchases steel for $3,500 cash, and welding supplies for $600 cash (included were both direct materials and indirect materials) c. Chris issued $2,000 of steel from the storeroom to be used in producing grills d. Chris issued $140 of welding supply (indirect) from the storeroom to be used in producing grills e. Chris paid their welders $1,800 cash for work performed in the current period f. Chris paid their janitor $200 cash for work performed in the current period g. Chris paid cash for rent on welding equipment related to manufacturing grills in the sum of $400 h. Chris paid cash for advertising expenses of $700. i. Chris estimated that $800 worth of overhead cost should be applied to the grills in work-in- process j. Chris completed grills that had cost $9,400 to produce. These grills were not sold immediately. k. Chris sold $16,000 worth of grills for $21,400 Cash 4. Over and Under applied Overhead a. Assume that in ?. above, only $700 worth of overhead cost was applied to the grills in work-in process. What is the amount of over or under applied overhead? What journal entry will be used to dispose of the over/under applied overhead at the end of the year? b. Assume that in i. above, $900 worth of overhead cost was applied to the grills in work-in process. What is the amount of over or under applied overhead? What journal entry will be used to dispose of the over/under applied overhead at the end of the year?

Explanation / Answer

T-Accounts CASH Ref Description Debit Credit a Beginning Balance $18,320 b Raw material inventory $4,100 (3500+600) e Work in process $1,800 (Direct Labor) f Manufacturing overhead $200 (indirect labor) g Manufacturing overhead $400 h Selling and Admin expense $700 k Sales $21,400 Ending Balance $32,520 RAW MATERIALS INVENTORY Ref Description Debit Credit a Beginning Balance $3,450 b Cash $4,100 c Work in process $2,000 d Manufacturing overhead $140 Ending Balance $5,410 WORK IN PROCESS INVENTORY Ref Description Debit Credit a Beginning Balance $8,400 c Raw material inventory $2,000 (Direct material) e Cash $1,800 (Direct labor ) i Manufacturing overhead applied $800 j Finished goods inventory $9,400 Ending Balance $3,600 FINISHED GOODS INVENTORY Ref Description Debit Credit a Beginning Balance $9,500 j Work in process $9,400 k Cost of goods sold $16,000 Ending Balance $2,900 COST OF GOODS SOLD Ref Description Debit Credit k Finished goods inventory $16,000 Ending Balance $16,000 MANUFACTURING OVERHEAD Ref Description Debit Credit d Raw material inventory $140 (Indirect material) f Cash $200 (indirect labor) g Cash $400 (Rent for welding machine) i Work in process $800 (Applied Overhead) Ending Balance $60 SALES Ref Description Debit Credit k Cash $21,400 Ending Balance $21,400 SELLING and ADMINISTRATIVE EXPENSE Ref Description Debit Credit h Cash $700 (Advertisement expense) Ending Balance $700 OWNER'S EQUITY Ref Description Debit Credit a Beginning Balance $39,670 Ending Balance $39,670 INCOME STATEMENT A Sales $21,400 B Cost of Goods Slod $16,000 C Under/(Over )apllied manufacturing overhead ($60) D=A-B-C Gross Profit $5,460 E Selling and Administrative overhead $700 F=D-E Net Profit $4,760 BALANCE SHEET ASSETS A Cash $32,520 B Raw Materials Inventory $5,410 C Work in process Inventory $3,600 D Finished goods Inventory $2,900 E=A+B+C+D Total Assets $44,430 LIABILITIES $0 OWNER's EQUITY Owner's equity $39,670 Retained Income $4,760 Total Liabilities and Owner's equity $44,430 4a If $700 worth of overhead cost was applied Amount of underapplied overhead $40 (740-40) Journal Entry Account Debit Credit Cost of goods sold $40 Manufacturing overhead $40 4b If $900 worth of overhead cost was applied Amount of Overapplied overhead $160 (900-740) Journal Entry Account Debit Credit Manufacturing overhead $160 Cost of goods sold $160

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