Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Chapter 19, Problem 2APSA
To determine

Concept Introduction:

Journal entries-

The business runs with the transactions it makes. Every transaction results in some outcome like the creation of asset, liability, income, loss, gain or expense. The debits and the credits are made on the basis of the rules of the accounting.

To prepare:

To prepare the journam entry.

Expert Solution
Check Mark

Answer to Problem 2APSA

    S.No.Accounts titles and ExplanationDebit ($)Credit ($)
    (a) Work in process inventory28,800
    Raw materials inventory28,800
    (To assign raw material inventory to job)
    (b)Work in process inventory59,800
    Factory wages payable59,800
    (To assign cost of direct labor to job)
    (c) Work in process inventory119,600
    Factory overhead119,600
    (To apply overhead at 200% of direct labor cost)
    (d)Factory overhead5,600
    Raw materials inventory5,600
    (To assign cost of indirect material to job)
    (e)Factory overhead8,200
    Factory wages payable8,200
    (To assign cost of indirect labour to job)

Explanation of Solution

Journal entries are explained as follows-(a) Work in process is a current asset and its increases so it is debited. Raw material inventory is a current asset and its balance decreases, so it is creditd.

Amount is calculated as follows-

Given,

  • Direct materials to Job 402 = $10,200
  • Direct materials to Job 404 = $18,600

      Amount =Direct materials to Job 402+ Direct materials to Job 404Amount =10,200+18,600Amount =28,800

  • (b) Work in process is a current asset and its increases so it is debited. Factory wages are current liabilities and its balance increases to its credited.

    Amount is calculated as follows-

    Given,

  • Direct labor to Job 402 = $36,000
  • Direct labor to Job 404 = $23,800

      Amount =Direct labor to Job 402+ Direct labor to Job 404Amount =36,000+23,800Amount =59,800

(c) Work in process is a current asset and its increases so it is debited. Factory overhead is an expense and its balance decreases, so it is credited.

  Amount = Direct Labor*200%Amount =59,800*200%Amount =119,600

(d) Factory overhead is a cost so it is debited. Raw material inventory is an asset and its balance decreases, so it is credited.

(e) Factory overhead is a cost so it is debited. Factory wages payable is a liability and it is increasing so it is credited.

Conclusion:

Thus, the journal entries are prepared.

To determine

Concept Introduction:

Cost of goods sold -

Cost of goods sold can be defined as the total cost assigned to the goods that are sold during a period of time. It is calculated by summing up all the costs incurred starting from purchases till the process of manufacturing. Adjusting entries-

Adjusting entries are prepared to complete the financial statement of the company and to reflect the accrual method of accounting. Adjusting entries are prepared before issuance of financial statement.

Under or Over applied overhead-

Under or Over applied overhead- It is the difference between the actual and applied overhead.

If the actual overhead incurred is more than the overhead applied during a particular period, then it is a case of under-applied of overhead cost.

If the actual overhead incurred is less than the overhead applied during a particular period, then it is a case of over-applied of overhead cost.

To determine revised balance and to prepare the adjusting entry.

Expert Solution
Check Mark

Answer to Problem 2APSA

    Factory Overhead
    ParticularsAmount ($)ParticularsAmount ($)
    Beginning balance115,000Work in process inventory119,600
    Factory wages payable8,200Under applied overhead9,200
    Raw material inventory5,600
    Balance128,800128,800

Adjusting journal entry-

    S.No.Accounts titles and ExplanationDebit ($)Credit ($)
    A.Cost of goods sold9,200
    Factory overhead9,200
    (To assign cost of indirect labor to job)

Explanation of Solution

Under applied overhead balance is calculated as follows-

  Total balance = Begiining balance+Factory wages payable+Raw material inventoryTotal balance =115,000+8,200+5,600Total balance =128,800   Underapplied overhead= Total balanceWork in process inventory   Underapplied overhead=128,800119,600   Underapplied overhead=9,200

Explanation for journal entry-

When overhead is under applied, the jobs are charged with less overhead than the actual and cost of goods sold will be charged with less overhead. Cost of goods is a cost and its balance increases, so it is debited and factory overhead is credited.

Conclusion:

Thus, overhead is under applied by $9,200.

To determine

Concept Introduction:

Trial balance-

Trial balance is an accounting statement which contains all debit and credit balances of the ledger accounts in which transactions have been posted during a period. It is prepared to check the arithmetical accuracy of transactions.

To prepare:

To prepare trial balance.

Expert Solution
Check Mark

Answer to Problem 2APSA

    Revised trial balance
    ParticularsDebit (Amount $)Credit (Amount $)
    Cash170,000
    Account receivable75,000
    Raw material inventory45,600
    Work in process inventory208,200
    Finished goods inventory15,000
    Prepaid rent3,000
    Factory wages payable68,000
    Accounts payable17,000
    Notes payable25,000
    Common stock50,000
    Retained earnings271,000
    Sales373,000
    Cost of goods sold227,200
    Operating expenses60,000
    Total804,000804,000

Explanation of Solution

Total of debit side is calculated as follows-

   Total of debit side =Cash+Account receivable+ Raw material inventory+ Work in process inventory + Finished goods inventory+ Cost of goods sold+ Operating expenses Total of debit side=170,000+75,000+45,600+208,200+15,000+3,000+227,200+60,000Total of debit side =804,000

Total of credit side is calculated as follows-

  Total of credit side=Factory wages payable+Accounts payable+ Notes payable+ Common stock+ Retained earnings+ SalesTotal of credit side=68,000+17,000+25,000+50,000+271,000+373,000Total of credit side=804,000

Conclusion:

Thus, revised trial balance is prepared.

To determine

Concept Introduction:

Income statement-

Income statement refers to the financial statement that evaluates the financial performance of the company. It shows the expenses, revenues and net income of a firm over specific period of time. Therefore evaluation of financial performance can be undertaken by identifying the revenues and expenses incurred by the business through both non-operating and operating activities.

Balance sheet-

Balance sheet is a statement which shows the financial position of the company at a particular date. The balance sheet explains about the company's assets and also explains how these assets are being financed. Assets are usually financed either through debt or equity. So, balance sheet gives the clear picture of company's assets, liabilities and equity.

To prepare:

To prepare income statement and balance sheet.

Expert Solution
Check Mark

Answer to Problem 2APSA

    Income statement
    For the year ended 2019
    ParticularsAmount ($)
    Sales revenue373,000
    Less: Cost of goods sold(227,200)
    Gross profit145,800
    Less: Operating expense(60,000)
    Net income85,800
    Balance Sheet
    As on December 31, 2019
    DetailsAmount ($)Amount ($)
    Assets
    Current assets:
    Cash170,000
    Accounts receivable75,000
    Raw material inventory45,600
    Work in process inventory208,200
    Finished goods inventory15,000
    Prepaid rent3,000
    Total Assets 516,800
    Liabilities and Stockholder's Equity
    Liabilities:
    Factory wages payable68,000
    Accounts payable17,000
    Notes payable25,000
    Total liabilities 110,000
    Stockholder's Equity:
    Common stock 50,000
    Retained earnings356,800406,800
    Total Liabilities and Stockholder's Equity 516,800

Explanation of Solution

Income Statement

  Gross profit = Net income  Cost of goods soldGross profit =373,000227,200Gross profit =145,800

  Net income = Gross profitOperating expensesNet income =145,80060,000Net income =85,800

Balance sheet

Assets-

   Assets=Cash+Accounts receivable+Raw material inventory+Work in process inventory +Finished goods inventory+Prepaid rent Assets=170,000+75,000+45,600+208,200+15,000+3,000Assets=516,800

Total Liabilities and Stockholder's Equity-

  Total Liabilities and Stockholder's Equity=Liabilities+ Stockholder's EquityTotal Liabilities and Stockholder's Equity= Factory wages payable+ Accounts payable+ Notes payable+ Common stock+ Retained earningsTotal Liabilities and Stockholder's Equity=68,000+17,000+25,000+50,000+356,800Total Liabilities and Stockholder's Equity=110,000+406,800Total Liabilities and Stockholder's Equity=516,800

Conclusion:

Thus, Income statement and balance sheet is prepared.

To determine

Concept Introduction:

Income statement-

Income statement refers to the financial statement that evaluates the financial performance of the company. It shows the expenses, revenues and net income of a firm over specific period of time. Therefore evaluation of financial performance can be undertaken by identifying the revenues and expenses incurred by the business through both non-operating and operating activities.

Balance sheet-

Balance sheet is a statement which shows the financial position of the company at a particular date. The balance sheet explains about the company's assets and also explains how these assets are being financed. Assets are usually financed either through debt or equity. So, balance sheet gives the clear picture of company's assets, liabilities and equity.

To Analyse-

To analyse the impact of errors.

Expert Solution
Check Mark

Answer to Problem 2APSA

Impact on Income statement-

If direct material of $5,600 is treated as indirect materail, cost of goods sold in income statement will increase and income earned by the entity decreases.

Imapct on Balance sheet-

If direct material of $5,600 is treated as indirect material, Retained earnings as per balance sheet decreases.

Explanation of Solution

Answer is explained above.

Conclusion:

Thus, Impact of error on income statement and balance sheet is analysed.

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Chapter 19 Solutions

Fundamental Accounting Principles

Ch. 19 - 11. Why must a company use predetermined overhead...Ch. 19 - How would a hospital apply job order costing?...Ch. 19 - Harley-Davidson manufactures 30 custom-made,...Ch. 19 - Prob. 14DQCh. 19 - Jobs and job lots C1 Determine which of the...Ch. 19 - Job cost sheets C2 Clemens Cars's job cost sheet...Ch. 19 - Documents in job order costing P1 P2 P3 The left...Ch. 19 - Raw materials journal entries P1 During the...Ch. 19 - Prob. 5QSCh. 19 - Prob. 6QSCh. 19 - Prob. 7QSCh. 19 - Prob. 8QSCh. 19 - Prob. 9QSCh. 19 - Prob. 10QSCh. 19 - Prob. 11QSCh. 19 - Prob. 12QSCh. 19 - Jab order costing of services A1 An advertising...Ch. 19 - Job order costing of services A1 An advertising...Ch. 19 - Job cost sheet C2 Eco Skate makes skateboards from...Ch. 19 - Exercise 19-1 Job order production C1 Match each...Ch. 19 - Exercise 19-2 Job cost computation C2 The...Ch. 19 - Exercise 19-3 Analysis of cost flows C2 As of the...Ch. 19 - Exercise 19-4 Recording product costs P1 P2 P3...Ch. 19 - Exercise 19-5 Manufacturing cost flows P1 P2 P3...Ch. 19 - Exercise 19-6 Recording events in job order...Ch. 19 - Exercise 19-7 Cost flows in a jab order costing...Ch. 19 - Exercise 19-8 Journal entries for materials P1 Use...Ch. 19 - Exercise 19-9 Journal entries for labor P2 Use...Ch. 19 - Exercise 19-10 Journal entries for overhead P3 Use...Ch. 19 - Exercise 19-11 Overhead rate; costs assigned to...Ch. 19 - Exercise 19-12 Analyzing costs assigned to work in...Ch. 19 - Exercise 19-13 Adjusting factory overhead P4 Refer...Ch. 19 - Exercise 19-14 Adjusting factory overhead P4...Ch. 19 - Prob. 15ECh. 19 - Prob. 16ECh. 19 - Exercise 19-17 Overhead rate calculation,...Ch. 19 - Exercise 19-18 Job order costing for services A1...Ch. 19 - Exercise 19-19 Job order costing of services A1...Ch. 19 - Exercise 19-20 Direct materials journal entries P1...Ch. 19 - Problem 19-1A Production costs computed and...Ch. 19 - Problem 19-2 A Source documents, journal entries,...Ch. 19 - Prob. 3APSACh. 19 - Prob. 4APSACh. 19 - Problem 19-5A Production transactions, subsidiary...Ch. 19 - Problem 19-1B Production costs computed and...Ch. 19 - Prob. 2BPSBCh. 19 - Prob. 3BPSBCh. 19 - Problem 19-4B Overhead allocation and adjustment...Ch. 19 - Problem 19-5B Production transactions, subsidiary...Ch. 19 - The computer workstation furniture manufacturing...Ch. 19 - The General Ledger tool in Connect automates...Ch. 19 - Manufacturers and merchandisers can apply...Ch. 19 - Prob. 2AACh. 19 - Apple and Samsung compete in the global...Ch. 19 - Assume that your company sells portable housing to...Ch. 19 - Assume that you are preparing for a second...Ch. 19 - Prob. 3BTNCh. 19 - Consider the activities undertaken by a medical...Ch. 19 - Refer to the chapter opener regarding Brennan...Ch. 19 - Prob. 6BTN
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