80.2K

Verified Solution

Link Copied!

1. Fashion Fabrics makes custom handbags and accessories for high-end clothing boutiques. Record summary journal entries for each of the following transactions that took place during the month of January, the first month of the fiscal year.

Requirements:

1. During January, $150,000 of raw materials was purchased on account.
2. During the month, $140,000 of raw materials was requisitioned. Of this amount, $135,000 was traced to specific jobs, while the remaining materials were for general factory use.
3. Manufacturing labor (both direct and indirect) for the month totaled $80,000. It has not yet been paid. Of this amount, $60,000 was traced to specific jobs.
4. The company recorded $9,000 of depreciation on the plant building and machinery. In addition, $3,000 of prepaid property tax expired during the month. The company also received the plant utility bill for $6,000.
5. Manufacturing overhead was allocated to jobs using a predetermined manufacturing overhead rate of 75% of direct labor cost.
6. Several jobs were completed during the month. According to the job cost records, these jobs cost $255,000 to manufacture.
7. Sales (all on credit) for the month totaled $340,000. According to the job cost records, the units sold cost $250,000 to manufacture. Assume the company uses a perpetual inventory system.
8. The company incurred operating expenses of $60,000 during the month. Assume that 80% of these were for marketing and administrative salaries and the other 20% were lease and utility bills related to the corporate headquarters.
9. In order to prepare its January financial statements, the company had to close its Manufacturing Overhead account.
10. Prepare the January income statement for Fashion Fabrics based on the transaction recorded in Requirements 1 through 9.

Answer & Explanation Solved by verified expert

See Answer