FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question

12

Froya Fabrikker A/S of Bergen, Norway, 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 based on direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $378,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions occurred during the year: a. Raw materials purchased on account, $285,000. b. Raw materials used in production (all direct materials), $270,000. c. Utility bills incurred on account, $76,000 (85% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (950 hours) Indirect labor Selling and administrative salaries. e. Maintenance costs incurred on account in the factory, $71,000 f. Advertising costs incurred on account, $153,000. g. Depreciation recorded for the year, $89,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). $ 315,000 $ 107,000 $ 195,000 h. Rental cost incurred on account, $114,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost applied to jobs, $?. j. Cost of goods manufactured, $940,000. k. Sales for the year (all on account) totaled $2,050,000. These goods cost $970,000 according to their job cost sheets. The beginning balances in the inventory accounts were: Raw Materials. Work in Process Finished Goods $ 47,000 $ 38,000 $ 77,000 Required: 1. Prepare journal entries to record the preceding transactions. 2. Post your entries to T-accounts. (Don't forget to enter the beginning inventory balances above.) 3. Prepare a schedule of cost of goods manufactured. 4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4B. Prepare a schedule of cost of goods sold. 5. Prepare an income statement.
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Transcribed Image Text:Froya Fabrikker A/S of Bergen, Norway, 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 based on direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $378,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions occurred during the year: a. Raw materials purchased on account, $285,000. b. Raw materials used in production (all direct materials), $270,000. c. Utility bills incurred on account, $76,000 (85% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (950 hours) Indirect labor Selling and administrative salaries. e. Maintenance costs incurred on account in the factory, $71,000 f. Advertising costs incurred on account, $153,000. g. Depreciation recorded for the year, $89,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). $ 315,000 $ 107,000 $ 195,000 h. Rental cost incurred on account, $114,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost applied to jobs, $?. j. Cost of goods manufactured, $940,000. k. Sales for the year (all on account) totaled $2,050,000. These goods cost $970,000 according to their job cost sheets. The beginning balances in the inventory accounts were: Raw Materials. Work in Process Finished Goods $ 47,000 $ 38,000 $ 77,000 Required: 1. Prepare journal entries to record the preceding transactions. 2. Post your entries to T-accounts. (Don't forget to enter the beginning inventory balances above.) 3. Prepare a schedule of cost of goods manufactured. 4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4B. Prepare a schedule of cost of goods sold. 5. Prepare an income statement.
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Step 1: Prepare Journal Entries in the books of Froya Fabrikker A/S
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Step 2: Posting entries to T - Accounts
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Step 3: Prepare schedule of Cost of Goods Manufactured
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Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

 

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