Gold Nest Company of Guandong, China, is a family-owned enterprise that makes bi
ID: 2566826 • Letter: G
Question
Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the company’s transactions with customers, employees, and suppliers are conducted in cash; there is no credit.
The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $76,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:
Raw materials requisitioned for use in production, $147,000 (materials costing $124,000 were charged directly to jobs; the remaining materials were indirect).
Rent for the year was $18,800 ($13,100 of this amount related to factory operations, and the remainder related to selling and administrative activities).
Depreciation recorded on equipment, $23,000. ($16,000 of this amount was on equipment used in factory operations; the remaining $7,000 was on equipment used in selling and administrative activities.)
Manufacturing overhead cost was applied to jobs, $?
Sales for the year totaled $517,000. The total cost to manufacture these goods according to their job cost sheets was $216,000.
Q 1.)
Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)
Q 2.)
Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these t-accounts (don’t forget to enter the beginning balances in your inventory accounts). (Round your intermediate calculations to 2 decimal places.)
Q 3a.)
Is Manufacturing Overhead underapplied or overapplied for the year?
Q 3b.)
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. Round your intermediate calculations to 2 decimal places.)
Q 4.)
Prepare an income statement for the year. (Round your intermediate calculations to 2 decimal places.)
Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the company’s transactions with customers, employees, and suppliers are conducted in cash; there is no credit.
Explanation / Answer
a) Journal Entries Date Account Titles and Explanation Debit Credit a) Raw materials $165,000 Cash $165,000 b) Work in progress $124,000 Manufacturing overhead $23,000 Raw Material $147,000 c) Work in progress $169,000 Manufacturing overhead $242,500 Sales commissions Expense $23,000 Salaries Expense $49,000 Cash $483,500 d) Manufacturing overhead $13,100 Rent Expenses $5,700 Cash $18,800 e) Manufacturing overhead $12,000 Cash $12,000 f) Advertisement Expenses $13,000 Cash $13,000 g) Manufacturing overhead $16,000 Depreciation Expenses $7,000 Cash $23,000 h) Work in progress (190% x $169,000) Actual direct labour $321,100 Manufacturing overhead $321,100 Predetermined Rate = $76,000/$40000 Direct labour cost 190.00% Direct labour cost i) Finished goods $226,000 Work in Progress $226,000 j) Cash $517,000 Sales $517,000 Cost of Goods Sold $216,000 Finished Goods $216,000
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