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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 that 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:

Raw materials purchased on account $200,000.
Raw materials used in production (all direct materials) $185,000.
Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
Accrued salary and wage costs:

Direct labor (975 hours) $230,000
Indirect labor $90,000
Selling and administrative salaries $110,000
Maintenance costs incurred on account in the factory, $54,000.

Advertising costs incurred on account, $136,000.
Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
Manufacturing overhead cost was applied to jobs, $__________? .
Cost of goods manufactured for the year, $770,000.
Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials $30,000
Work in Process $21,000
Finished Goods $60,000

Required:
a. Prepare journal entries to record the preceding transactions.
b. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)
c. Prepare a schedule of cost of goods manufactured.
d. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
e. Prepare a schedule of cost of goods sold.
f. Prepare an income statement for the year.

Respuesta :

anthougo

a. The preparation of the journal entries to record the preceding transactions for Froya Fabrikker A/S of Bergen, Norway is as follows:

Journal Entries:

Debit Raw materials $200,000

Credit Accounts Payable $200,000

Debit Work in Process $185,000

Credit Raw materials $185,000

Debit Manufacturing overhead $63,000

Debit Selling and Admin. $7,000

Credit Utilities Payable $70,000

Debit Work in Process $230,000

Debit Manufacturing overhead $90,000

Debit Selling and administrative salaries $110,000

Credit Payroll Payable $430,000

Debit Manufacturing overhead $54,000

Credit Maintenance Expenses Payable $54,000

Debit Selling and Admin. Expenses $136,000

Credit Advertising costs Payable $136,000

Debit Manufacturing overhead $76,000

Debit Selling and Admin. Expense $19,000

Credit Depreciation Expenses $95,000

Debit Manufacturing overhead $102,000

Debit Selling and Admin. Expense $8,000

Credit Rental Expense Payable $120,000

Debit Work in process $370,500

Credit Manufacturing overhead applied $370,500

Debit Finished goods $770,000

Credit Work in Process $770,000

Debit Accounts Receivable $1,200,000

Credit Sales Revenue $1,200,000

Debit Cost of goods sold $800,000

Credit Finished goods $800,000

b. T-accounts:

Raw Materials

Account Titles               Debit           Credit

Beginning Balances    $30,000

Accounts Payable     $200,000

Work in Process                             $185,000

Balance                                            $45,000

Work in Process

Account Titles               Debit           Credit

Beginning Balances     $21,000

Raw materials               185,000

Payroll Payable           230,000

Manufacturing

 overhead applied     370,500

Finished Goods                            $770,000

Balance                                           $36,500

Finished Goods

Account Titles               Debit           Credit

Beginning Balances  $60,000

Work in Process         770,000

Cost of goods sold                      $800,000

Balance                                          $30,000

Cost of goods sold

Account Titles               Debit           Credit

Finished goods      $800,000

Under-applied o/h       14,500

Income Summary                        $814,500

Accounts Payable

Account Titles               Debit           Credit

Raw materials                                $200,000

Manufacturing overhead

Account Titles               Debit           Credit

Utilities Payable      $63,000

Payroll Payable         90,000

Maintenance

 Expenses Payable 54,000

Depreciation Exp.    76,000

Rental Payable       102,000

Work in Process                       $370,500

Cost of goods sold                       14,500

Selling and Admin. Expenses

Account Titles               Debit           Credit

Utilities Payable           $7,000

Payroll Payable           110,000

Advertising Payable  136,000

Depreciation Exp.       19,000

Rental Payable             8,000

Income Summary                      $280,000

Utilities Payable

Account Titles               Debit           Credit

Manufacturing overhead             $63,000

Selling and Admin. expenses          7,000

Payroll Payable

Account Titles              Debit           Credit

Work in process                           $230,000

Manufacturing overhead                 90,000

Selling and Admin. expense          110,000

Maintenance Expenses Payable

Account Titles            Debit           Credit

Manufacturing overhead            $54,000

Advertising costs Payable

Account Titles           Debit           Credit

Manufacturing overhead          $136,000

Depreciation Expenses

Account Titles          Debit           Credit

Accumulated Depr. $95,000

Manufacturing overhead          $76,000

Selling and Admin. Expense       19,000

Rental Expense Payable

Account Titles       Debit           Credit

Manufacturing overhead       $102,000

Selling and Admin. Expense       8,000

c. The preparation of a schedule of cost of goods manufactured is as follows:

Schedule of Cost of Goods Manufactured

Beginning Work in Process           $21,000

Raw materials used                        185,000

Direct labor                                    230,000

Manufacturing overhead applied 370,500

Ending Work in Process              ($36,500)

Cost of goods manufactured   $770,000

d. The preparation of a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold is as follows:

Debit Cost of goods sold $14,500

Credit Manufacturing overhead $14,500

  • To close manufacturing overhead to Cost of Goods Sold.

e. The preparation of a schedule of cost of goods sold is as follows:

Schedule of Cost of Goods Sold:

Beginning Finished Goods    $60,000

Cost of manufactured goods 770,000

Under-applied overhead           14,500

Ending Finished Goods         ($30,000)

Cost of goods sold               $814,500

f. The preparation of an income statement for the year is as follows:

Froya Fabrikker A/S of Bergen, Norway

Income Statement

For the year ended December 31,

Sales Revenue            $1,200,000

Cost of goods sold           814,500

Gross profit                   $385,500

Selling and admin. exp. 280,000

Net income                  $105,500

Data and Calculations:

Estimated manufactured overhead = $399,000

Estimated direct labor-hours = 1,050

Predetermined overhead rate = $380 ($399,000/1,050)

Direct labor (975 hours) $230,000

Applied overhead = $370,500 ($380 x 975)

Learn more about preparing work in process accounts at https://brainly.com/question/24516871

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