Question

J&B Guitars, Inc., a manufacturer of 6-string guitars, had the following activity during the calendar year 2017: make a journal entries for each of the numbered information below and then create a separate balance sheet and income statement based on the journal entries.

1-Based on anticipated demand, the company planned for product sales to approximate $6,000,000 and Product Cost of approximately $2,500,000.

2-The company entered into a Line of Credit agreement with a bank totaling $5,000,000.

3-The company withdrew $4,000,000 from its line of credit and deposited the proceeds in its corporate checking accounting.

4-The company purchased $1,000,000 of raw materials on account.

5-The company requisitioned $500,000 of raw materials for production.

6-The company paid for Direct Labor totaling $750,000

7-The company applied Direct Overhead totaling $500,000

8-The company paid for Actual Overhead totaling $550,000

9-The company paid for the previously purchased $1,000,000 of raw materials (see 4. above).

10-The company paid for Selling and Administrative expenses totaling $1,400,000

11-The company calculated an underapplied overhead variance totaling $50,000 (see 6. and 7. above).

12-The company purchased a computer system for its just-in-time job process totaling $350,000 on the account.

13-The company calculated depreciation expense related to the computer system totaling $70,000.

14-The company paid for Office Furniture for its accounting department totaling $100,000.

15-The company calculated depreciation expense related to the office furniture totaling $10,000.

16-The company completed products with a total cost of 1,750,000.

17-The company sold $1,000,000 of product on account at a 300% markup.

Answer 1

1. In the books of J & B Guitars Inc. :

Transaction / Event	Account Titles	Debit	Credit
		$	$
1.	No JE required	0	0
2.	No JE required	0	0
3.	Cash	4,000,000
	Loan Payable		4,000,000
4.	Raw Materials Inventory	1,000,000
	Accounts Payable		1,000,000
5.	Work in Process Inventory: Direct Materials	500,000
	Raw Materials Inventory		500,000
6.	Work in Process Inventory: Direct Labor	750,000
	Cash		750,000
7.	Work in Process Inventory : Applied Overhead	500,000
	Manufacturing Overhead		500,000
8.	Manufacturing Overhead	550,000
	Cash		550,000
9.	Accounts Payable	1,000,000
	Cash		1,000,000
10.	Selling and Administrative Expenses	1,400,000
	Cash		1,400,000
11.	Cost of Goods Sold	50,000
	Manufacturing Overhead		50,000
12.	Computer Equipment	350,000
	Accounts Payable		350,000
13.	Manufacturing Overhead	70,000
	Accumulated Depreciation : Computer Equipment		70,000
14.	Office Equipment	100,000
	Cash		100,000
15.	Depreciation Expense	10,000
	Accumulated Depreciation : Office Equipment		10,000
16.	Finished Goods Inventory	1,750,000
	Work in Process Inventory		1,750,000
17.	Accounts Receivable	4,000,000
	Sales		4,000,000
17.	Cost of Goods Sold	1,000,000
	Finished Goods Inventory		1,000,000

2.

J & B Guitars Inc.
Income Statement
For the year ended December 31, 2017
Sales		$ 4,000,000
Less: Cost of Goods Sold ( $ 1,000,000 + $,50,000 + $ 70,000)		1,120,000
Gross Margin		2,880,000
Operating Expenses:
Selling and Administrative Expenses	1,400,000
Depreciation Expense	10,000	1,410,000
Net Operating Expense		1,470,000

3.

J & B Guitars Inc.
Balance Sheet
December 31, 2017
Assets	$	$	Liabilities and Equity	$	$
Cash	200,000		Accounts Payable	350,000
Accounts Receivable	4,000,000		Total Current Liabilities		350,000
Finished Goods Inventory	750,000		Long -term Liabilities
Work in Process Inventory	0		Loan Payable		4,000,000
Raw Materials Inventory	500,000		Total Liabilities		4,350,000
Total Current Assets		5,450,000	Equity
Fixed Assets, net			Common Stock	0
Computer Equipment	280,000		Retained Earnings	1,470,000
Office Equipment	90,000	370,000	Total Equity		1,470,000
Total Assets		5,820,000	Total Liabilities and Stockholders Equity		5,820,000