Question

Ravsten Company uses a job-order costing system. On January 1, the beginning of the current year, the company’s inventory balances were as follows:

Raw materials	$	25,500
Work in process	$	13,800
Finished goods	$	31,900

The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 37,900 machine-hours and incur $151,600 in manufacturing overhead cost. The following transactions were recorded for the year:

a.	Raw materials were purchased on account: $238,000.
b.	Raw materials were requisitioned for use in production: $209,000 (90% direct and 10% indirect).
c.	The following costs were incurred for employee services:

Direct labour	$	175,200
Indirect labour	$	30,800
Sales commissions	$	41,700
Administrative salaries	$	87,600

d.	Heat, power, and water costs were incurred in the factory: $50,550.
e.	Prepaid insurance expired during the year: $19,500 (75% relates to factory operations, and 25% relates to selling and administrative activities).
f.	Advertising costs were incurred, $59,500.
g.	Depreciation was recorded for the year: $71,400 (80% relates to factory operations, and 20% relates to selling and administrative activities).
h.	Manufacturing overhead cost was applied to production. The company recorded 43,800 machine-hours for the year.
i.	Goods that cost $534,600 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
j.	Sales for the year totalled $788,400 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $525,800. 1. Prepare journal entries to record the transactions given above. 2.

Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account. 3.

Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account. 4. Prepare an income statement for the year.

Answer 1