Question

Required information

Exercise 3-31 Manufacturing Cost Flows (LO 3-2, 3-5, 3-6)

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Reimel Furniture Company, Inc. incurred the following costs during 20x2.

Direct material used	$	173,000
Direct labor		321,000
Manufacturing overhead		170,000

During 20x2, products costing $120,000 were finished, and products costing $132,000 were sold on account for $195,000. There were no purchases of raw material during the year. The beginning balances in the firm’s inventory accounts are as follows:

Raw material	$	225,000
Work in process		16,000
Finished goods		28,000

Exercise 3-31 Part 1

Required:

1. Prepare T-accounts to show the flow of costs through the company’s manufacturing accounts during 20x2.

Raw material inventory

work in process inventory

wages payable

manufacturing overehad

finished goods inventory

sales revenue

accounts receivable

Cost of goods sold

2. Prepare a partial balance sheet and a partial income statement to reflect the information given above.

Answer 1

	Raw materials inventory				Work in process inventpry
Beg.Bal	225,000				Beg.Bal	16,000
		173,000	used		DM	173,000
					DL	321,000
end bal	52,000				MOH	170,000
							120,000	finished
					end bal	560,000
	Wages payable				Manufacturing overhead
Beg.bal		0			beg bal		0
		321,000	WIP				170,000	WIP
end bal		321000			end bal		170000
	finished goods inventory				Sales revenue
Beg bal	28,000				Beg.bal		0
WIP	120,000						195,000	A/r
		132,000	COGS
End bal	16,000				End bal		195000
	Account receivable				cost of goods sold
Beg.bal	0				Beg bal	0
sales	195,000				finished	132,000
end bal	195000				End bal	132000
		Partial Balance Sheet
	As of December 31,20X2
Inventory:
Raw material				52,000
Work in process				560,000
Finished goods				16,000
	Partial income statement
Sales revenue				195,000
less: cost of goods sold				132,000
Gross Margin				63,000