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 $388,800 of manufacturing overhead for an estimated allocation base of 810 direct labor-hours. The following transactions took place during the year:   Raw materials purchased on account, $295,000. Raw materials used in production (all direct materials), $280,000. Utility bills incurred on account, $78,000 (95% related to factory operations, and the remainder related to selling and administrative activities). Accrued salary and wage costs:   Direct labor (890 hours) $ 325,000 Indirect labor $ 109,000 Selling and administrative salaries $ 205,000   Maintenance costs incurred on account in the factory, $73,000 Advertising costs incurred on account, $155,000. Depreciation was recorded for the year, $91,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). Rental cost incurred on account, $105,000 (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, $960,000. Sales for the year (all on account) totaled $2,150,000. These goods cost $990,000 according to their job cost sheets.   The balances in the inventory accounts at the beginning of the year were:   Raw Materials $ 49,000 Work in Process $ 40,000 Finished Goods $ 79,000   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.) See picture for what t-accounts should look like.

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Problem 3-15 (Algo) Journal Entries; T-Accounts; Financial Statements [LO3-1, LO3-2, LO3-3, LO3-4]

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 $388,800 of manufacturing overhead for an estimated allocation base of 810 direct labor-hours. The following transactions took place during the year:

 

  1. Raw materials purchased on account, $295,000.
  2. Raw materials used in production (all direct materials), $280,000.
  3. Utility bills incurred on account, $78,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
  4. Accrued salary and wage costs:

 

Direct labor (890 hours) $ 325,000
Indirect labor $ 109,000
Selling and administrative salaries $ 205,000

 

  1. Maintenance costs incurred on account in the factory, $73,000
  2. Advertising costs incurred on account, $155,000.
  3. Depreciation was recorded for the year, $91,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
  4. Rental cost incurred on account, $105,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
  5. Manufacturing overhead cost was applied to jobs, $ ? .
  6. Cost of goods manufactured for the year, $960,000.
  7. Sales for the year (all on account) totaled $2,150,000. These goods cost $990,000 according to their job cost sheets.

 

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

 

Raw Materials $ 49,000
Work in Process $ 40,000
Finished Goods $ 79,000

 

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.)

See picture for what t-accounts should look like.

Beginning Balance
Ending Balance
Debit
Ending Balance
Beginning Balance
Debit
Ending Balance
Debit
Beginning Balance
Debit
Beginning Balance
Accounts Receivable
Raw Materials
Work in Process
Finished Goods
Credit
Credit
Credit
Credit
Beginning Balance
Ending Balance
Debit
Ending Balance
Beginning Balance
Debit
Ending Balance
Debit
Beginning Balance
Debit
Beginning Balance
Sales
Cost of Goods Sold
Manufacturing Overhead
Advertising Expense
Credit
Credit
Credit
Credit
Transcribed Image Text:Beginning Balance Ending Balance Debit Ending Balance Beginning Balance Debit Ending Balance Debit Beginning Balance Debit Beginning Balance Accounts Receivable Raw Materials Work in Process Finished Goods Credit Credit Credit Credit Beginning Balance Ending Balance Debit Ending Balance Beginning Balance Debit Ending Balance Debit Beginning Balance Debit Beginning Balance Sales Cost of Goods Sold Manufacturing Overhead Advertising Expense Credit Credit Credit Credit
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