Bergo Bay's accounting system generated the following account balances on December 31. The company’s manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory, and the accrued factory payroll (Factory Wages Payable) has not been recorded. DebitCreditCash$ 70,000 Accounts receivable39,000 Raw materials inventory24,500 Work in process inventory0 Finished goods inventory15,000 Prepaid rent5,000 Accounts payable $ 11,800Notes payable 14,800Common stock 50,000Retained earnings (prior year) 94,000Sales 158,900Cost of goods sold112,000 Factory overhead28,000 General and administrative expenses36,000 Totals$ 329,500$ 329,500 These six documents must be processed to bring the accounting records up to date. Materials requisition 10:$ 4,400direct materials to Job 402Materials requisition 11:$ 7,800direct materials to Job 404Materials requisition 12:$ 2,400indirect materialsLabor time ticket 52:$ 7,000direct labor to Job 402Labor time ticket 53:$ 13,000direct labor to Job 404Labor time ticket 54:$ 5,000indirect labor Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 150% of direct labor cost. 2-a. In Factory Overhead T-account, enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead.2-b. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold. ### Factory Overhead T-Account Analysis**Instruction:** In the Factory Overhead T-account, enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead.**Table: Factory Overhead**| Description | Amount ($) | Overhead Applied ($) ||---------------------------|-------------|----------------------|| Actual overhead (given) | 28,000 | || Indirect materials | 2,400 | || Indirect labor | 5,000 | || | 0 | 0 || Underapplied overhead | | |**Explanation of the Table:**- **Actual Overhead (given):** This is the total actual cost incurred for factory overhead, which is $28,000.- **Indirect Materials:** This cost totals $2,400, representing materials used in production that are not directly traceable to a specific product.- **Indirect Labor:** This cost totals $5,000, representing the labor costs not directly tied to specific units of production.- **Underapplied Overhead:** This row is intended for calculating the difference if the total applied overhead is less than the actual overhead. The current entries suggest there's no calculated amount for over- or underapplied overhead yet.**Note:** Highlighted sections indicate areas needing additional data or verification regarding overhead applied and whether there is an underapplied overhead situation. ### Allocating Overapplied or Underapplied Overhead**Instruction:**Record the entry to allocate any overapplied or underapplied overhead.**Note:** Enter debits before credits.#### Journal Entry Template- **Date:** December 31| Date | General Journal | Debit | Credit ||------------|-----------------|-------|--------|| December 31| | | || | | | || | | | || | | | || | | | || | | | |This table is a format for recording the necessary adjustments to align applied overhead with actual overhead costs, ensuring accurate financial reporting.

2-a. Factory Overhead Actual overhead (given) $28,000 Overhead applied (150% of direct labor cost) $30,000 Indirect materials $2,400 Indirect labor $5,000 Underapplied overhead $5,400 *Actual overheads= Actual overhead + Indirect materials + Indirect labor = $28,000+$2,400+$5,000= $35,400 "Applied overheads= $30,000 *When actual overhead is less than applied overhead= Under-applied overhead.2-b. Date Particulars Debit Credit xxx Cost of goods sold $5,400 Factory overhead $5,400 (To record close of under-applied overhead)

Bergo Bay's accounting system generated the following account balances on December 31. The company’s manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory, and the accrued factory payroll (Factory Wages Payable) has not been recorded. Debit Credit Cash $ 70,000 Accounts receivable 39,000 Raw materials inventory 24,500 Work in process inventory 0 Finished goods inventory 15,000 Prepaid rent 5,000 Accounts payable $ 11,800 Notes payable 14,800 Common stock 50,000 Retained earnings (prior year) 94,000 Sales 158,900 Cost of goods sold 112,000 Factory overhead 28,000 General and administrative expenses 36,000 Totals $ 329,500 $ 329,500 These six documents must be processed to bring the accounting records up to date. Materials requisition 10: $ 4,400 direct materials to Job 402 Materials requisition 11: $ 7,800 direct materials to Job 404 Materials requisition 12: $ 2,400 indirect materials Labor time ticket 52: $ 7,000 direct labor to Job 402 Labor time ticket 53: $ 13,000 direct labor to Job 404 Labor time ticket 54: $ 5,000 indirect labor Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 150% of direct labor cost. 2-a. In Factory Overhead T-account, enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead. 2-b. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Bergo Bay's accounting system generated the following account balances on December 31. The company’s manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory, and the accrued factory payroll (Factory Wages Payable) has not been recorded.

	Debit	Credit
Cash	$ 70,000
Accounts receivable	39,000
Raw materials inventory	24,500
Work in process inventory	0
Finished goods inventory	15,000
Prepaid rent	5,000
Accounts payable		$ 11,800
Notes payable		14,800
Common stock		50,000
Retained earnings (prior year)		94,000
Sales		158,900
Cost of goods sold	112,000
Factory overhead	28,000
General and administrative expenses	36,000
Totals	$ 329,500	$ 329,500

These six documents must be processed to bring the accounting records up to date.

Materials requisition 10:	$ 4,400	direct materials to Job 402
Materials requisition 11:	$ 7,800	direct materials to Job 404
Materials requisition 12:	$ 2,400	indirect materials
Labor time ticket 52:	$ 7,000	direct labor to Job 402
Labor time ticket 53:	$ 13,000	direct labor to Job 404
Labor time ticket 54:	$ 5,000	indirect labor

Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 150% of direct labor cost.

2-a. In Factory Overhead T-account, enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead.
2-b. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.

### Factory Overhead T-Account Analysis

**Instruction:**
In the Factory Overhead T-account, enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead.

**Table: Factory Overhead**

| Description | Amount ($) | Overhead Applied ($) |
|---------------------------|-------------|----------------------|
| Actual overhead (given) | 28,000 | |
| Indirect materials | 2,400 | |
| Indirect labor | 5,000 | |
| | 0 | 0 |
| Underapplied overhead | | |

**Explanation of the Table:**

- **Actual Overhead (given):** This is the total actual cost incurred for factory overhead, which is $28,000.
- **Indirect Materials:** This cost totals $2,400, representing materials used in production that are not directly traceable to a specific product.
- **Indirect Labor:** This cost totals $5,000, representing the labor costs not directly tied to specific units of production.
- **Underapplied Overhead:** This row is intended for calculating the difference if the total applied overhead is less than the actual overhead. The current entries suggest there's no calculated amount for over- or underapplied overhead yet.

**Note:** Highlighted sections indicate areas needing additional data or verification regarding overhead applied and whether there is an underapplied overhead situation.

### Allocating Overapplied or Underapplied Overhead

**Instruction:**
Record the entry to allocate any overapplied or underapplied overhead.

**Note:** Enter debits before credits.

#### Journal Entry Template

- **Date:** December 31

| Date | General Journal | Debit | Credit |
|------------|-----------------|-------|--------|
| December 31| | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |

This table is a format for recording the necessary adjustments to align applied overhead with actual overhead costs, ensuring accurate financial reporting.

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