Question

Munoz Manufacturing Corporation was started with the issuance of common stock for $70,000. It purchased $7,900 of raw materials and worked on three job orders during 2019 for which data follow. (Assume that all transactions are for cash unless otherwise indicated.)

	Direct Raw Materials Used				Direct Labor
Job 1		$	1,200			$	2,100
Job 2			2,200				3,900
Job 3			3,400				2,100
Total		$	6,800			$	8,100

Factory overhead is applied using a predetermined overhead rate of $0.60 per direct labor dollar. Jobs 2 and 3 were completed during the period and Job 3 was sold for $11,160 cash. Munoz paid $400 for selling and administrative expenses. Actual factory overhead was $5,160.

Required

1. Record the preceding events in a horizontal statements model. The first event for 2019 has been recorded as an example.

2. Reconcile all subsidiary accounts with their respective control accounts.

3. Record the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant.

4. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2019.

Answer 1

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		Cash	Raw Material Inventory	Work in Proces Inventory	Finished Goods Inventory	Factory Overhead control	Common Stock	Retained Earning
a		$          70,000					$            70,000
b		$           -7,900	$                            7,900
c			$                           -6,800	$                               6,800
d		$           -8,100		$                               8,100
e	$0.60*$8,100			$                               4,860		$                              -4,860
f				$                            -15,200	$                             15,200
g1		$          11,160						$               11,160
g2					$                              -6,760			$                -6,760
h		$              -400						$                   -400
i1		$           -5,160				$                                5,160
i2						$                                 -300		$                   -300
Total		$          59,600	$                            1,100	$                               4,560	$                               8,440	$                                      -	$            70,000	$                 3,700
Part d	Cost of Goods Manufactured and sold
	Direct Material Cost		$                            6,800
	Direct Labor Cost		$                            8,100
	Overhead Applied	$8,100*0.60	$                            4,860
	Total Manufacturing Cost		$                          19,760
	Less: Ending work in proces Inventory		$                           -4,560
	Cost of goods manufactured		$                          15,200
	Less: Ending Finished Goods Inventory		$                           -8,440
	Unadjusted Cost of Goods Sold		$                            6,760
	Add: Underapplied overheads		$                                300
	Adjusted Cost of Goods Sold		$                            7,060
	Income Statement
	Sales Revenue		$                          11,160
	Less: Adjusted Cost of Goods Sold		$                           -7,060
	Gross Profit		$                            4,100
	Less: Selling and Admin Expense		$                              -400
	Net Income		$                            3,700
	Balance Sheet
	Cash		$                          59,600
	Raw Material Inventory		$                            1,100
	Work in Proces Inventory		$                            4,560
	Finished Goods Inventory		$                            8,440
	Total Assets		$                          73,700
	Common Stock		$                          70,000
	Retained Earning		$                            3,700
	Total Liabilities and Equity		$                          73,700