Problem 3-15 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 thatmanufactures specialty heavy equipment for use in North Sea oilfields. The company uses a job-order costing system that appliesmanufacturing overhead cost to jobs on the basis of directlabor-hours. Its predetermined overhead rate was based on a costformula that estimated $380,000 of manufacturing overhead for anestimated allocation base of 1,000 direct labor-hours. Thefollowing transactions took place during the year:
A. Raw materials purchased on account, $220,000.
B. Raw materials used in production (all direct materials),$205,000.
C. Utility bills incurred on account, $63,000 (90% related tofactory operations, and the remainder related to selling andadministrative activities).
D. Accrued salary and wage costs: Direct labor (1,075 hours) $250,000 Indirect labor $ 94,000 Selling and administrative salaries$ 130,000
E. Maintenance costs incurred on account in the factory,$58,000
F. Advertising costs incurred on account, $140,000.
G. Depreciation was recorded for the year, $88,000 (85% related tofactory equipment, and the remainder related to selling andadministrative equipment).
H. Rental cost incurred on account, $113,000 (90% related tofactory facilities, and the remainder related to selling andadministrative facilities).
I. Manufacturing overhead cost was applied to jobs, $???.
J. Cost of goods manufactured for the year, $810,000.
K. Sales for the year (all on account) totaled $1,400,000. Thesegoods cost $840,000 according to their job cost sheets. Thebalances in the inventory accounts at the beginning of the yearwere: Raw Materials $ 34,000 Work in Process $ 25,000 FinishedGoods $ 64,000
Required:
1. Prepare journal entries to record the precedingtransactions.
2. Post your entries to T-accounts. (Don’t forget to enter thebeginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in theManufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
