Elite Home Decor manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labor-intensive production process, so it assigns manufacturing overhead based on direct labor costs. Elite expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labor costs of $3,150,000 during 2020. At the end of December 2019, Elite reported work in process inventory (Job 551) of $93,000 The following events occurred during January - March 2020. Purchased materials on account, $392,000 Incurred manufacturing wages of $400,000 Requisitioned direct materials and used direct labor in manufacturing 4. Issued indirect materials to production, $30,000 5.Charged indirect manufacturing wages to production, $60,000 6.Depreciation of production machinery, $85,000 7. Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000 8.Allocated overheads to jobs at the predetermined rate 9. Units completed: 551, 552 & 554 10. Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales) Direct Materials Direct Labour Job 551 Job 552 Job 553 Job 554 $70,200 97,500 105,300 117,000 $61,200 115,600 78,200 85,000 Required: (a) Compute Elite’s predetermined manufacturing overhead rate for 2020. (b) Calculate the total manufacturing costs for each job. (c) Using the total figures, record the above transactions in the general journal. (d) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the journal entries necessary to dispose of the variance. Assume that the manufacturing overhead variance is immaterial. (e) What is the balance in the Cost of Goods Sold account after the adjustment? (f) Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance (g) Post the appropriate entries to the Work in Process Inventory account & determine the account balance on March 31, the end of the quarte
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
provide working notes
Elite Home Decor manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labor-intensive production process, so it assigns manufacturing overhead based on direct labor costs. Elite expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labor costs of $3,150,000 during 2020.
At the end of December 2019, Elite reported work in process inventory (Job 551) of $93,000
The following events occurred during January - March 2020.
- Purchased materials on account, $392,000
- Incurred manufacturing wages of $400,000
- Requisitioned direct materials and used direct labor in manufacturing
4. Issued indirect materials to production, $30,000
5.Charged indirect manufacturing wages to production, $60,000
6.Depreciation of production machinery, $85,000
7. Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000
8.Allocated
9. Units completed: 551, 552 & 554
10. Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales)
| Direct Materials | Direct Labour | |
|
Job 551 Job 552 Job 553 Job 554 |
$70,200 97,500 105,300 117,000 |
$61,200 115,600 78,200 85,000
|
Required:
(a) Compute Elite’s predetermined manufacturing overhead rate for 2020.
(b) Calculate the total
(c) Using the total figures, record the above transactions in the general journal.
(d) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the
(e) What is the balance in the Cost of Goods Sold account after the adjustment?
(f) Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance
(g)
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