ezto.mheducation Problem 3-26 Journal Entries: T-Accounts; Financial Statements

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ezto.mheducation Problem 3-26 Journal Entries: T-Accounts; Financial Statements [LO3-1, LO3-2, LO3-3, LO3-4, LO3-5, LO3-6, LO3-7 Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $399,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year (all purchases and services were acquired on account) a. Raw maberials purchased for use in production, $280,000 b. Raw maberia's requisitioned for use in production (all direct materials), $265,000 c. Utlity bills were incurred·$75,000 (80% related to f ctory operations, and the remainder reated to selling and administrative activities) d. Salary and wage costs were incurred: Direct labor (1,100 hours) Indirect labor Seling and administrative salaries $310,000 $ 106,000 $190,000 e Mainenance costs were incurred in the factory, $70,000. t Advertising costs were incurred, $152,000 g. Deprecation was recorded for the year. S88.000 (85% re d to factory equipment and the remainder related to selling and administrative equipment h. Rental cost ncurred on buildings, $113,000 (90% related to factory operations, and the remainder L Manufacturing overhead cost was applied to jobs, $7 nelated to selling and administrative facilities) Cost of goods manufactured for the year, $930,000 Sales for the year (all on account) totaled $2,000,000. These goods cost $960,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw materials Work in process Finished Goods $ 46,000 $37,000 $ 76,000 1 Prepare journal entries to record the above data. (If no entry is required for a transaction/event, select No journal entry required" in the first account Field.)

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FROYA FABRKKER A/S General journal Ref Account Debit Credit a Raw materials 280000 Accounts payable 280000 (Raw materials purchased ) b Work in process 265000 Raw materials 265000 (Raw materials issued for production) c Manufacturing overhead 60000 Utilities expense 15000 Accounts payable 75000 (Utilities expense incurred - 85% of $68,000 for factory balance selling) d Work in process 310000 Manufacturing overhead 106000 Salaries and wages expense 190000 Salaries and wages payable 606000 e Manufacturing overhead 70000 Accounts payable 70000 (Maintenance expenses for factory) f Advertising expenses 152000 Accounts payable 152000 (Advertising expenses incurred) g Manufacturing overhead 74800 Depreciation expense 13200 Accumulated depreciation 88000 (Depreciation expense recorded - Total $81,000 , 75% for factory) h Manufacturing overhead 101700 Rental expense 11300 Accounts payable 113000 (Rental expense recorded) i Work in process * 418000 Manufacturing overhead * 418000 (Manufacturing overhead applied to production - 1,100 hours @$380 per hr) j Finished goods 930000 Work in process 930000 (Cost of finished goods manufactured transferred to finished goods a/c) k Cost of goods sold 960000 Finished goods 960000 (Cost of finished goods sold recorded) k Accounts receivable 2000000 Sales revenue 2000000 (Sale of goods recorded) l Cost of goods sold Manufacturing overhead (Transfer of underapplied overhead to cost og goods sold) * Predetermnied overhead rate = Estimated overhead cost / Estimated direct labor hours                                                                = 399,000 / 1050 = $380 per direct labor hour

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