Brinkerhoff, Inc., designs and fabricates display units for use at conventions.
ID: 2532689 • Letter: B
Question
Brinkerhoff, Inc., designs and fabricates display units for use at conventions. The company’s balance sheet as of January 1, the beginning of the current year, appears below:
Because each display unit is a unique design and may require anything from a few hours to a month or more to complete, Brinkerhoff, Inc. uses a job-order costing system. Overhead in the fabrication shop is charged to display units on the basis of direct labor cost. The company’s predetermined overhead rate for the year is based on a cost formula that estimated $111,600 in manufacturing overhead for an estimated allocation base of $124,000 direct labor dollars. The following transactions were recorded during the year (Assume all purchases and services were acquired on account):
Raw materials, such as wood, paints, and metal sheeting, were purchased on account, $96,000.
Raw materials were issued to production, $107,000; $7,000 of this amount was for indirect materials.
Payroll costs incurred and paid: direct labor, $139,000; indirect labor, $50,900; and selling and administrative salaries, $85,000.
Fabrication shop utilities costs incurred, $15,400.
Depreciation recorded for the year, $25,800 ($5,600 on selling and administrative assets; $20,200 on fabrication shop assets).
Prepaid insurance expired, $7,400 ($4,800 related to fabrication shop operations, and $2,600 related to selling and administrative activities).
Shipping expenses incurred, $48,000.
Manufacturing overhead was applied to production. Overhead is applied on the basis of direct labor cost.
Display units that cost $351,000 to produce according to their job cost sheets were completed.
Sales for the year totaled $670,000 and were all on account. The total cost to produce these display units was $348,000 according to their job cost sheets.
Prepare a T-account for each account on the company’s balance sheet, and enter the beginning balances. Make an entry directly into the T-accounts for transactions (a) through (m). Determine an ending balance for each T-account.
Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Brinkerhoff, Inc., designs and fabricates display units for use at conventions. The company’s balance sheet as of January 1, the beginning of the current year, appears below:
Explanation / Answer
Answer 1 & 2. Cash Accounts Receivable Raw Materials Beg. Bal. 20,000.00 169,000.00 m. Beg. Bal. 59,000.00 485,000.00 l. Beg. Bal. 52,000.00 114,000.00 b. l. 485,000.00 k-1. 670,000.00 a. 96,000.00 End. Bal. 336,000.00 End. Bal. 244,000.00 End. Bal. 34,000.00 Work In Process Finished Goods Prepaid Insurnace Beg. Bal. 44,000.00 351,000.00 j. Beg. Bal. 59,000.00 348,000.00 k-2 Beg. Bal. 8,800.00 7,400.00 f. b. 107,000.00 j. 351,000.00 c. 139,000.00 i. 125,100.00 End. Bal. 64,100.00 End. Bal. 62,000.00 End. Bal. 1,400.00 Building & Equipment Accumulated Depreciation Accounts Payable Beg. Bal. 650,000.00 Beg. Bal. 280,000.00 Beg. Bal. 62,500.00 25,800.00 e. m. 169,000.00 96,000.00 a. 15,400.00 d. 48,000.00 g. 19,200.00 h. End. Bal. 650,000.00 End. Bal. 305,800.00 End. Bal. 72,100.00 Common Stock Retained Earnings Manufacturing Overhead Beg. Bal. 370,000.00 Beg. Bal. 180,300.00 Beg. Bal. - 125,100.00 i. b. 7,000.00 c. 50,900.00 d. 15,400.00 e. 20,200.00 f. 4,800.00 h. 19,200.00 End. Bal. 370,000.00 End. Bal. 180,300.00 End. Bal. 7,600.00 Salaries & Wages payable Salaries Expense - Selling & Admn. Depreciation Expense - Equipment 274,900.00 c. c. 85,000.00 e. 5,600.00 End. Bal. 274,900.00 End. Bal. 85,000.00 End. Bal. 5,600.00 Insurance Expense Shipping Expense Sales f. 2,600.00 g. 48,000.00 670,000.00 k-1. End. Bal. 2,600.00 End. Bal. 48,000.00 End. Bal. 670,000.00 Cost of Goods Sold k-2 348,000.00 End. Bal. 348,000.00 Answer 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Manuacturing Overhead 7,600.00 Cost of Goods Sold 7,600.00 (To record the overapplied overhead) Manufacturing Overhead - Applied 125,100.00 Manufacturing Overhead - Actual 117,500.00 Ovreapplied Overhead 7,600.00 Answer 4. Income Statement Sales 670,000.00 Cost of Goods Sold - adjusted 340,400.00 Gross Margin 329,600.00 Selling & Administrative Expenses Salaries Expense - Selling & Admn. 85,000.00 Depreciation Expense - Equipment 5,600.00 Insurance Expense 2,600.00 Shipping Expense 48,000.00 141,200.00 Net Operating Income 188,400.00
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