Question

Question 2:-Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $399,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year:

1. Raw materials purchased on account, $280,000.
2. Raw materials used in production (all direct materials), $265,000.
3. Utility bills incurred on account, $75,000 (80% related to factory operations, and the remainder related to selling and administrative activities).
4. Accrued salary and wage costs:

   Direct labor (1,100 hours)$310,000Indirect labor$106,000Selling and administrative salaries$190,000

1. Maintenance costs incurred on account in the factory, $70,000
2. Advertising costs incurred on account, $152,000.
3. Depreciation was recorded for the year, $88,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment).
4. Rental cost incurred on account, $113,000 (90% related to factory facilities, and the remainder related to selling and administrative facilities).
5. Manufacturing overhead cost was applied to jobs, $ ? .
6. Cost of goods manufactured for the year, $930,000.
7. Sales for the year (all on account) totaled $2,000,000. These goods cost $960,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

   Raw Materials$46,000Work in Process$37,000Finished Goods$76,000.

.1. Make journal entries to record the preceding transactions.

2. Post your entries to T-accounts.

3. Make a schedule of cost of goods manufactured.

4A.make a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4B.Make a schedule of cost of goods sold.

5. make an income statement for the year.

Answer 1

JOURNAL ENTRIES TO rECORD GIVEN TRANSACTIONS.

Raw materials Account To Cash Account	280000
	280000
Direct material Account To Raw materials Account	265000
	265000
Utility Expenses Account To Cash Account	75000
	75000
Manufacturing Overhead account Selling and Distribution Overhead Account To Utility Expense Account	60000
15000
	75000
Salary and Wages Account To Cash Account	606000
	606000
Direct labour Account Factory overhead Account Selling and Distribution Overhead Account To Salary and wages Account	310000
106000
190000	606000
Maintenance Expenses Account To Cash Account	70000
	70000
Factory over Head account To Maintenance Expenses Account	70000
	70000
Advertising Expense Account To Cash Account	152000
	152000
Selling Distribution Overhead Account To Advertising Expense Account	152000
	152000
Depreciation Account To Fixed Assets Account	88000
	88000
Factory Overheads Account Account Selling and Distribution Overhead Account To Depreciation Account	74800
13200
	88000
Rent Expenses Account Cash Account	113000
	113000
Factory Overheads Account Account Selling and Distribution Overhead Account To Rent Expense Account	101700
11300
	113000

RAW MATERIALS ACCOUNT

To balance B/D	46000	By direct materials	265000
To Cash Account	280000	By Closing balance	61000
	326000		326000

CASH ACCOUNT

		By Raw materials	280000

DIRECT MATERIALS ACCOUNT

To Raw materials Account	265000	By Prime Cost Account	265000
	265000		265000

DIRECT LABOUR ACCOUNT

To Wages and salary Account	310000	By Prime Cost	310000

PRIME COST ACCOUNT

To Direct Materials Account To Direct Labour	265000 310000	By Cost of production
	575000		575000

FACTORY OVERHEAD ACCOUNT

To Wages and Salaries Account To utility Account To maintenance Account To Rent Account To Depreciation account	106000 60000 70000 101700 74800	By Cost of ProductionAccount	412500
	412500		412500

SELLING AND DISTRIBUTION OVERHEAD ACCOUNT

To Wages and Salaries Account To utility account To advertisement To Rent Account To depreciation Account	190000 15000 152000 11300 13200	By Cost os Sales	381500
	381500		381500

UTILITY EXPENSE ACCOUNT

To Cash Account	75000	By Factory Overheads By selling and Distribution Overheads	60000 15000
	75000		75000

WAGES AND SALARY ACCOUNT

To Cash account	606000	By Direct labour Account By Factory Overheads By selling and Distribution Overheads	31000 106000 190000
	606000		606000

MAINTENANCE EXPENSE ACCOUNT

To Cash Account	70000	By Factory Overheads	70000
	70000		70000

RENT ACCOUNT

To Cash Account	113000	By Factory Overhead By Selling and Distribution Overheads	101700 11300
	113000		113000

DEPRECIATION ACCOUNT

To Fixed Assets	88000	By Factory Overheads By selling and Distribution Overheads	74800 13200
	88000		88000

Advertisement Account

To Cash Account	152000	By Selling and Distribution overhead	152000
	152000		152000

COST OF PRODUCTION aCCOUNT

To Opening Stock of work in progress To prime cost To Factory overheads	37000 575000 412500	Cost of Goods sold by closing stock of work in progress	930000 64500
	1024500		1024500

COST OF SALES

Opening Stock of finished goods Costof goods sold Selling and Distribution overheads Profit	76000 960000 381500 582500	Sales	2000000
	2000000		2000000