Company ISLA DE PASCUA is engaged in production of only one type of trampolines. As at 30 September 2021 inventory balance consisted of the following: Raw material inventory: $0 Work in process inventory: $0 Finished goods inventory: $13,860,000 (corresponding to 18 trampolines). To start production process of a trampoline, 70% of Raw Material must be incorporated. Rest is fully incorporated at the end. For each finished trampoline unit, $320,000 of Raw Material is needed. Direct labor corresponds to wages of machine operators, who are paid a variable wage according to production. Cost of each finished trampoline bed for company in machine operators is $150,000 and they are paid according to degree of progress in production. Indirect labor corresponds to salary of supervisors. Supervisors' monthly salary is $6,000,000 in total. All salaries are paid on last day of corresponding month. In addition, other indirect manufacturing overheads such as electricity, machine depreciation, insurance, leases, etc. are incurred during process. All indirect manufacturing overheads are incorporated uniformly throughout production process. Information for October 2021 is as follows: - On 1 October, raw materials were purchased in cash for $20,000,000 + VAT. - On 1 October, production of 50 beds was started. - On 31 October, production of 40 beds was completed. - Beds that were not finished were left at 60% of their production process. - On the last day of October, 25 trampolines were sold for cash at $900,000 + VAT each. - During October company incurred other indirect manufacturing overheads of $4,000,000 + VAT. All will be paid in November. Company uses an indirect or absorption costing system and a flow of cost assumption (FIFO). Assume that only tax is VAT at 19%. YOU ARE ASKED TO: (a) Make Accounting Entries for October 2021. (b) Determine inventory account balances as at 31 October 2021. (c) If at 30 September 2021 business had VAT CF of $200,000, make VAT adjusting entry for business at 30 October. (d) Present VAT Credit and VAT Debit "T" accounts for October.
Company ISLA DE PASCUA is engaged in production of only one type of trampolines. As at 30 September 2021 inventory balance consisted of the following:
Raw material inventory: $0
Work in process inventory: $0
Finished goods inventory: $13,860,000 (corresponding to 18 trampolines).
To start production process of a trampoline, 70% of Raw Material must be incorporated. Rest is fully incorporated at the end. For each finished trampoline unit, $320,000 of Raw Material is needed.
Direct labor corresponds to wages of machine operators, who are paid a variable wage according to production. Cost of each finished trampoline bed for company in machine operators is $150,000 and they are paid according to degree of progress in production.
Indirect labor corresponds to salary of supervisors. Supervisors' monthly salary is $6,000,000 in total. All salaries are paid on last day of corresponding month. In addition, other indirect manufacturing
Information for October 2021 is as follows:
- On 1 October, raw materials were purchased in cash for $20,000,000 + VAT.
- On 1 October, production of 50 beds was started.
- On 31 October, production of 40 beds was completed.
- Beds that were not finished were left at 60% of their production process.
- On the last day of October, 25 trampolines were sold for cash at $900,000 + VAT each.
- During October company incurred other indirect manufacturing overheads of $4,000,000 + VAT. All will be paid in November.
Company uses an indirect or absorption costing system and a flow of cost assumption (FIFO). Assume that only tax is VAT at 19%.
YOU ARE ASKED TO:
(a) Make Accounting Entries for October 2021.
(b) Determine inventory account balances as at 31 October 2021.
(c) If at 30 September 2021 business had VAT CF of $200,000, make VAT
(d) Present VAT Credit and VAT Debit "T" accounts for October.
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