Gold Nest Company of Guandong, China, makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job-order costing system that applies overhead to jobs based on direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $85,500 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars. The beginning inventory balances were as follows: Raw materials. Work in process Finished goods During the year, the following transactions were completed: a. Raw materials purchased on account, $169,000. b. Raw materials used in production, $141,000 (materials costing $124,000 were charged directly to jobs; the remaining materials were indirect). c. Cash paid to employees: Direct labor Indirect labor Sales commissions Administrative salaries $ 10,900 $4,200 $ 8,500 $ 157,000 $ 219,300 $ 28,000 $ 49,000 d. Rent for the year was $18,100 ($13,600 related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $19,000. f. Advertising costs incurred, $12,000. g. Depreciation on equipment, $25,000 ($16,000 related to equipment used in factory operations; the remaining $9,000 related to equipment used in selling and administrative activities). h. Manufacturing overhead cost applied to jobs, $__ ? . i. Completed goods cost $227,000 to manufacture. j. Sales for the year (all paid in cash) totaled $515,000. The manufacturing cost of these goods was $217,000. Required: 1. Prepare journal entries to record the transactions for the year. 2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts).
Gold Nest Company of Guandong, China, makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job-order costing system that applies overhead to jobs based on direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $85,500 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars. The beginning inventory balances were as follows: Raw materials. Work in process Finished goods During the year, the following transactions were completed: a. Raw materials purchased on account, $169,000. b. Raw materials used in production, $141,000 (materials costing $124,000 were charged directly to jobs; the remaining materials were indirect). c. Cash paid to employees: Direct labor Indirect labor Sales commissions Administrative salaries $ 10,900 $4,200 $ 8,500 $ 157,000 $ 219,300 $ 28,000 $ 49,000 d. Rent for the year was $18,100 ($13,600 related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $19,000. f. Advertising costs incurred, $12,000. g. Depreciation on equipment, $25,000 ($16,000 related to equipment used in factory operations; the remaining $9,000 related to equipment used in selling and administrative activities). h. Manufacturing overhead cost applied to jobs, $__ ? . i. Completed goods cost $227,000 to manufacture. j. Sales for the year (all paid in cash) totaled $515,000. The manufacturing cost of these goods was $217,000. Required: 1. Prepare journal entries to record the transactions for the year. 2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
Transcribed Image Text:Raw materials
Work in process
Finished goods
$ 10,900
$4,200
$ 8,500
During the year, the following transactions were completed:
a. Raw materials purchased on account, $169,000.
b. Raw materials used in production, $141,000 (materials costing $124,000 were charged directly to jobs; the remaining materials were
indirect).
c. Cash paid to employees:
Direct labor
Indirect labor
Sales commissions
Administrative salaries
$ 157,000
$ 219,300
$ 28,000
$ 49,000
d. Rent for the year was $18,100 ($13,600 related to factory operations, and the remainder related to selling and administrative
activities).
e. Utility costs incurred in the factory, $19,000.
f. Advertising costs incurred, $12,000.
g. Depreciation on equipment, $25,000 ($16,000 related to equipment used in factory operations; the remaining $9,000 related to
equipment used in selling and administrative activities).
h. Manufacturing overhead cost applied to jobs, $__?___.
i. Completed goods cost $227,000 to manufacture.
j. Sales for the year (all paid in cash) totaled $515,000. The manufacturing cost of these goods was $217,000.
Required:
1. Prepare journal entries to record the transactions for the year.
2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your
journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts).
3A. Is Manufacturing Overhead underapplied or overapplied?
3B. Prepare a journal entry to close Manufacturing Overhead to Cost of Goods Sold.
4. Prepare an income statement. All of the information needed for the income statement is available in the journal entries and T-
accounts you have prepared.
Transcribed Image Text:Gold Nest Company of Guandong, China, makes birdcages for the South China market. The company sells its birdcages through an
extensive network of street vendors who receive commissions on their sales.
The company uses a job-order costing system that applies overhead to jobs based on direct labor cost. Its predetermined overhead
rate is based on a cost formula that estimated $85,500 of manufacturing overhead for an estimated activity level of $45,000 direct
labor dollars. The beginning inventory balances were as follows:
Raw materials
Work in process
Finished goods
$ 10,900
$4,200
$ 8,500
During the year, the following transactions were completed:
a. Raw materials purchased on account, $169,000.
b. Raw materials used in production, $141,000 (materials costing $124,000 were charged directly to jobs; the remaining materials were
indirect).
c. Cash paid to employees:
Direct labor
Indirect labor
Sales commissions
Administrative salaries
$ 157,000
$ 219,300
$ 28,000
49,000
$
d. Rent for the year was $18,100 ($13,600 related to factory operations, and the remainder related to selling and administrative
activities).
e. Utility costs incurred in the factory, $19,000.
f. Advertising costs incurred, $12,000.
g. Depreciation on equipment, $25,000 ($16,000 related to equipment used in factory operations; the remaining $9,000 related to
equipment used in selling and administrative activities).
h. Manufacturing overhead cost applied to jobs, $_ ?.
i. Completed goods cost $227,000 to manufacture.
j. Sales for the year (all paid in cash) totaled $515,000. The manufacturing cost of these goods was $217,000.
Required:
1. Prepare journal entries to record the transactions for the year.
2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your
journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts).
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