Question

Gibson Corporation makes custom-order furniture to meet the needs of persons with disabilities. On January 1, 2018, the company had the following account balances: $88,000 for both cash and common stock. In 2018, Gibson worked on three jobs. The relevant direct operating costs follow: Direct Labor Direct Materials Job 1 $ 4,300 $ 5,300 Job 2 2,100 2,200 Job 3 8,400 3,700 Total $ 14,800 $ 11,200 Gibson’s predetermined manufacturing overhead rate was $.40 per direct labor dollar. Actual manufacturing overhead costs amounted to $5,672. Gibson paid cash for all costs. The company completed and delivered Jobs 1 and 2 to customers during the year. Job 3 was incomplete at the end of the year. The company sold Job 1 for $16,100 cash and Job 2 for $8,100 cash. Gibson also paid $3,300 cash for selling and administrative expenses for the year. Gibson uses a just-in-time inventory management system. Consequently, it does not have raw materials inventory. Raw materials purchases are recorded directly in the Work in Process Inventory account. Required Record the preceding events in a horizontal statements model. The first row shows beginning balances. Record the entry to close the amount of underapplied or overapplied overhead for the year to Cost of Goods Sold (in the expense category) in the horizontal financial statements model. Determine the gross margin for the year.

Assets = Equity Cash + Work in Process + Finished Goods + Manufacturing Overhead = Common Stock + Retained Earnings Revenue - Expense = Net Income 88,000 + + + = 88,000 + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - = + + + = + - =

Answer 1

Answer:-

Cash	+	Work in Process	+	Finished Goods	+	Manufacturing Overhead	+	Common Stock	+	Retained Earnings	+	Revenue	-	Expense	=	Net Income
88000								88000
-4300		4300
-5300		5300
-2100		2100
-2200		2200
-8400		8400
-3700		3700
		1,720				-1,720
		840				-840
		3,360				-3,360
-5,672						5,672
		-11,320		11,320
		-5,140		5,140
16,100										16,100		16,100				16,100
				-11,320						-11,320				11,320		-11,320
8300										8100		8100				8100
				-5,140						-5,140				5,140		-5,140
-3,300										-3,300				3,300		-3,300
						248				248						248
						0
77,428	0	15,460	0	0	0	0	0	88000	0	4,688	0	24,200	0	19,760	0	4,688

	Job 1	Job 2	Job 3
DL	4300	2100	8400
DM	5,300	2,200	3,700
Overhead Applied $.40*DL	1,720	840	3,360
Total Product Cost	11,320	5,140	15,460

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