The information below has been taken from the cost records of T Co. for the past
ID: 2547321 • Letter: T
Question
The information below has been taken from the cost records of T Co. for the past year: Direct materials used in production $326 Direct labor 225 OH allocated at 40% ofDL$ 125 826 1000 Actual OH Cost of goods available for sale Sales revenue Selling & administrative expenses Tax rate 10% Inventories: Beginning $75 Ending Direct materials Work in process Finished goods 85 30 110 80 Prepare a statement of cost of goods manufactured & sold for T Co. Prepare the closing entry for OH using COGS Prepare the Income Statement. Prepare the closing entry for OH using Proration (show computationsExplanation / Answer
Req 1: COST OF GOODS MANUFACTURED: Direct material cost 326 Direct labouor cost 225 OH applied 90 Total manufacturing cost 641 Add: Beginning WIP 80 Less: Ending Wip 30 COST OF GOODS MANUFACTURED: 691 COST OF GOODS SOLD Cost of manufactured goods 691 Add: Beginning Inventory of Finished Goods 135 Cost of goods avilable for sale 826 Less: ending Inventory of Finished Goods 110 Cost of goods sold 716 Note: Beginning inventory of FG = Cost of Goods available for sale - cost of goods manufactured Req 2 Under-applied Overheads Overheads incurred 125 Less: Overheadds applied 90 Under-applied Overheads 35 Journal entry: Cost of Goods sold Dr. 35 Manufacturing OH 35 Req 3: INCOME STATEMENT: Sales revenue 1000 Less: Adjusted Cost of Goods sold (716+35) 751 Gross margin 249 Less: Selling and admin expense 25 Net income before tax 224 Less: tax @ 10% 22.4 Net income after tax 201.6 Req 4: OH under applied prorated among Inventories as follows: Balance % of Total OH prorated WIP 30 3.50% 1.2 Finished Goods 110 12.85% 4.5 Cost of Goods sold 716 83.65% 29.3 856 35 Journal entry: Work in process Dr. 1.2 Finished Goods Dr. 4.5 Cost of goods Sold Dr. 29.3 Manufacturing OH 35
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