Question

Evelyn Campbell started Campbell Manufacturing Company to make a universal television remote control device that she had invented. The company’s labor force consisted of part-time employees. The following accounting events affected Campbell Manufacturing Company during its first year of operation. (Assume that all transactions are cash transactions unless otherwise stated.)

Transactions for January 2018, First Month of Operation

1 Issued common stock for $9,500.

2 Purchased $410 of direct raw materials and $60 of production supplies.

3 Used $371 of direct raw materials.

4 Used 70 direct labor hours; production workers were paid $9.50 per hour.

5 Expected total overhead costs for the year to be $3,400, and direct labor hours used during the year to be 1,000. Calculate an overhead rate and apply the appropriate amount of overhead costs to Work in Process Inventory.

6 Paid $144 for salaries to administrative and sales staff.

7 Paid $24 for indirect manufacturing labor.

8 Paid $215 for rent and utilities on the manufacturing facilities.

9 Started and completed 100 remote controls during the month; all costs were transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

10 Sold 75 remote controls at a price of $21.2 each.

Transactions for Remainder of 2018

11 Acquired an additional $18,000 by issuing common stock.

12 Purchased $3,940 of direct raw materials and $895 of production supplies.

13 Used $3,010 of direct raw materials.

14 Paid production workers $9.50 per hour for 900 hours of work.

15 Applied the appropriate overhead cost to Work in Process Inventory.

16 Paid $1,558 for salaries of administrative and sales staff.

17 Paid $237 of indirect manufacturing labor cost.

18 Paid $2,390 for rental and utility costs on the manufacturing facilities.

19 Transferred 950 additional remote controls that cost $12.74 each from the Work in Process Inventory account to the Finished Goods Inventory account.

20 Determined that $166 of production supplies was on hand at the end of the accounting period.

21 Sold 850 remote controls for $21.20 each.

22 Determine whether the overhead is over- or underapplied. Close the Manufacturing Overhead account to the Cost of Goods Sold account.

23 Close the revenue and expense accounts.

Required

For each of the above transactions, post the effects to the appropriate T-accounts.

Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2018.

Make sure to include ending balance

Make sure to label each adjustment with its corresponding transaction. 1-23

Answer 1

A	B	C	D	E	F	G
2
3		Effects on T-accounts can be found using the journal entry of the transactions:
4
5		Transaction	Account	Debit	Credit
6		1	Cash	$9,500
7			Common Stock		$9,500
8
9		2	Raw material Inventory	$410
10			Supplies	$60
11			Cash		$470
12
13		3	Work in progress	$371
14			Raw material Inventory		$371
15
16		4	Work in Progress	$665
17			Direct Labor (70*$9.50)		$665
18
19			Expected total overhead cost	$3,400
20			Direct labor hour	1,000
21			Overhead rate	$3.40
22
23			Number of labor hours used	70
24			Overhead applied	$238.00
25
26		5	Work in progress	$238.00
27			Manufaturing Overhead		$238.00
28
29		6	Sales and Administrative Expense	$144
30			Cash		$144
31
32		7	Manufacturing Overhead	$24
33			Indirect Labor Cost		$24
34
35		8	Manufacturing Overhead	$215
36			Rent and Utilities Expense		$215
37
38		9	Finished Goods Inventory	$1,274
39			Work in progress		$1,274
40			(100 remotes transferred to finished goods)
41
42			Cost per remote	$12.74
43
44		10	Cash (75*$21.2)	$1,590
45			Sales Revenue		$1,590
46
47			Cost of goods Sold (75*12.74)	$955.50
48			Finished Goods Inventory		$955.50
49
50		11	Cash	$18,000
51			Common Stock		$18,000
52
53		12	Raw material Inventory	$3,940
54			Supplies	$895
55			Cash		$4,835
56
57		13	Work in progress	$3,010
58			Raw material Inventory		$3,010
59
60		14	Work in Progress	$8,550
61			Direct Labor (70*$9.50)		$8,550
62
63			Expected total overhead cost	$3,400
64			Direct labor hour	1,000
65			Overhead rate	$3.40
66
67			Number of labor hours used	900
68			Overhead applied	$3,060.00
69
70		15	Work in progress	$3,060.00
71			Manufaturing Overhead		$3,060.00
72
73		16	Sales and Administrative Expense	$1,558
74			Cash		$1,558
75
76		17	Manufacturing Overhead	$237
77			Indirect Labor Cost		$237
78
79		18	Manufacturing Overhead	$2,390
80			Rent and Utilities Expense		$2,390
81
82		19	Finished Goods Inventory	$14,620
83			Work in progress		$14,620
84			(950 remotes transferred to finished goods)
85
86			Cost per remote	$12.74
87
88		20	Manufacturing Overhead	$789
89			Supplies Expense		$789
90
91		21	Accounts Receivable (850*$21.2)	$18,020
92			Sales Revenue		$18,020
93
94			Cost of goods Sold (75*12.74)	$10,829.00
95			Finished Goods Inventory		$10,829.00
96
97		22	Cost of Goods Sold	$357.00
98			Manufacturing Overhead		$357.00
99

Formula sheet

A	B	C	D	E	F	G
2
3		Effects on T-accounts can be found using the journal entry of the transactions:
4
5		Transaction	Account	Debit	Credit
6		1	Cash	9500
7			Common Stock		=E6
8
9		2	Raw material Inventory	410
10			Supplies	60
11			Cash		=E9+E10
12
13		3	Work in progress	371
14			Raw material Inventory		=E13
15
16		4	Work in Progress	=F17
17			Direct Labor (70*$9.50)		=70*9.5
18
19			Expected total overhead cost	3400
20			Direct labor hour	1000
21			Overhead rate	=E19/E20
22
23			Number of labor hours used	70
24			Overhead applied	=E23*E21
25
26		5	Work in progress	=E24
27			Manufaturing Overhead		=E26
28
29		6	Sales and Administrative Expense	144
30			Cash		=E29
31
32		7	Manufacturing Overhead	24
33			Indirect Labor Cost		24
34
35		8	Manufacturing Overhead	=F36
36			Rent and Utilities Expense		215
37
38		9	Finished Goods Inventory	=F39
39			Work in progress		=E13+E16+E26
40			(100 remotes transferred to finished goods)
41
42			Cost per remote	=E38/100
43
44		10	Cash (75*$21.2)	=75*21.2
45			Sales Revenue		=E44
46
47			Cost of goods Sold (75*12.74)	=75*E42
48			Finished Goods Inventory		=E47
49
50		11	Cash	18000
51			Common Stock		=E50
52
53		12	Raw material Inventory	3940
54			Supplies	895
55			Cash		=E53+E54
56
57		13	Work in progress	3010
58			Raw material Inventory		=E57
59
60		14	Work in Progress	=F61
61			Direct Labor (70*$9.50)		=900*9.5
62
63			Expected total overhead cost	3400
64			Direct labor hour	1000
65			Overhead rate	=E63/E64
66
67			Number of labor hours used	900
68			Overhead applied	=E67*E65
69
70		15	Work in progress	=E68
71			Manufaturing Overhead		=E70
72
73		16	Sales and Administrative Expense	1558
74			Cash		=E73
75
76		17	Manufacturing Overhead	237
77			Indirect Labor Cost		=E76
78
79		18	Manufacturing Overhead	=F80
80			Rent and Utilities Expense		2390
81
82		19	Finished Goods Inventory	=F83
83			Work in progress		=E57+E60+E70
84			(950 remotes transferred to finished goods)
85
86			Cost per remote	12.74
87
88		20	Manufacturing Overhead	=F89
89			Supplies Expense		=E10+E54-166
90
91		21	Accounts Receivable (850*$21.2)	=850*21.2
92			Sales Revenue		=E91
93
94			Cost of goods Sold (75*12.74)	=850*E86
95			Finished Goods Inventory		=E94
96
97		22	Cost of Goods Sold	=F98
98			Manufacturing Overhead		=E88+E79+E76+E35+E32-(F27+F71)
99