Question

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 $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:

1. Raw materials purchased on account, $200,000.
2. Raw materials used in production (all direct materials), $185,000.
3. Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
4. Accrued salary and wage costs:

Direct labor (975 hours)	$	230,000
Indirect labor	$	90,000
Selling and administrative salaries	$	110,000

1. Maintenance costs incurred on account in the factory, $54,000.
2. Advertising costs incurred on account, $136,000.
3. Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
4. Rental cost incurred on account, $120,000 (85% 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, $770,000.
7. Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.

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

Raw Materials	$	30,000
Work in Process	$	21,000
Finished Goods	$	60,000

Record the following Journal Entries:

A. Raw materials were purchased for use in production, $200,000 on account.

B. Raw materials were requisitioned for use in production (all direct materials), $185,000.

C. Utility bills were incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).

D. Salary and wage costs accrued were $230,000 (Direct labor), $90,000 (Indirect labor), $110,000 (Selling and administrative salaries).

E. Maintenance costs were incurred on account in the factory, $54,000.

F. Advertising costs were incurred on account, $136,000.

G. Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).

H. Entry for rental cost incurred on account on buildings, $120,000 (85% related to factory operations, and the remainder related to selling and administrative facilities).

I. Entry for manufacturing overhead cost applied to jobs.

J. Cost of goods manufactured for the year, $770,000.

K. Sales for the year (all on account) totaled $1,200,000.

L. These goods cost $800,000 according to their job cost sheets.

Answer 1

	General Journal	Debit	Credit
a	Raw material	$200,000
	Accounts payable		$200,000
b	Work in process	$185,000
	Raw material		$185,000
c	Manufacturing overhead ($70,000*90%)	$63,000
	Utility expense (70,000*10%)	7,000
	Accounts payable		$70,000
d	Work in process	$230,000
	Manufacturing overhead	90,000
	Salary expense	110,000
	Salary and wages payable		$430,000
e	Manufacturing overhead	$54,000
	Accounts payable		$54,000
f	Advertising expense	$136,000
	Accounts payable		$136,000
g	Manufacturing overhead ($95,000*80%)	$76,000
	Depreciation expense (95,000*20%)	19,000
	Accumulated depreciation		$95,000
h	Work in process ($120,000*85%)	$102,000
	Rent expense ($120,000*15%)	18,000
	Accounts payable		$120,000
i	Work in process ($360,000/900*975)	$390,000
	Manufacturing overhead		$390,000
j	Finished goods	$770,000
	Work in process		$770,000
k	Accounts receivable	$1,200,000
	Sales		$1,200,000
l	Cost of goods sold	$800,000
	Finished goods		$800,000