Question

Fanning Corporation makes rocking chairs. The chairs move through two departments during production. Lumber is cut into chair parts in the cutting department, which transfers the parts to the assembly department for completion. The company sells the unfinished chairs to hobby shops. The following transactions apply to Fanning’s operations for its first year, 2018. (Assume that all transactions are for cash unless otherwise stated.)

1. The company was started when it acquired a $120,000 cash contribution from the owners.

2. The company purchased $34,000 of direct raw materials and $800 of indirect materials. Indirect materials are capitalized in the Production Supplies account.

3. Direct materials totaling $14,000 were issued to the cutting department.

4. Labor cost was $55,900. Direct labor for the cutting and assembly departments was $20,000 and $26,000, respectively. Indirect labor costs were $9,900.

5. The predetermined overhead rate was $0.50 per direct labor dollar in each department.

6. Actual overhead costs other than indirect materials and indirect labor were $13,200 for the year.

7. The cutting department transferred $25,000 of inventory to the assembly department.

8. The assembly department transferred $41,000 of inventory to finished goods.

9. The company sold inventory costing $37,000 for $67,000.

10. Selling and administrative expenses were $6,000.

11. A physical count revealed $100 of production supplies on hand at the end of 2018.

12. Assume that over- or underapplied overhead is insignificant.

Required:

a. Record the data in T-accounts.

b. Record the closing entry for over- or underapplied manufacturing overhead, assuming that the amount is insignificant.

c. Close the revenue and expense accounts.

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

Req A to C:

Record the data in T-accounts. Record the closing entry for over- or underapplied manufacturing overhead, assuming that the amount is insignificant. Close the revenue and expense accounts.

Cash Common Stock 1. 9. End. bal. End. bal. Raw Materials Retained Earnings 2. Cl End. bal. End. bal. Manufacturing Overhead Revenue Cl End. bal. 0 0 End. bal. 0 0 Work in process Cutting Cost of Goods Sold 3. 9. Cl 4. 12. 5. End. bal. 0 0 End. bal. Work in process Assembly Selling & Administrative Expenses 4. 10. Cl 5. 7. End. bal. 0 0 End. bal. Finished Goods 8. End. bal. Production Supplies 2. End. bal.

Req D CGM Sched:

Prepare a schedule of cost of goods manufactured and sold for 2018.

	FANNING CORPORATION Cost of Goods Manufactured and Sold for 2018 Raw materials available 0 Raw materials used 0 Total manufacturing costs 0 Total work in process inventory 0 Cost of goods manufactured 0 Goods available 0 Cost of goods sold $0

Req D Inc Stmt

Prepare an income statement for 2018.

	FANNING CORPORATION Income Statement for 2018 0 $0

Req D Bal Sheet

Prepare a balance sheet for 2018.

	FANNING CORPORATION Balance Sheet for 2018 Assets Total assets $0 Equity Total equity $0

Answer 1

Formula sheet

A	B	C	D	E	F	G	H	I	J	K	L
2
3		Cash					Common Stock
4		Beg. Bal.	0				Beg. Bal.
5		1	120000				1		120000
6				=34000+800	2
7				55900	4
8							End. Bal.		=-SUM(I4:I7)+SUM(J4:J7)
9
10		End. Bal.
11
12		Raw Materials					Retained Earnings
13		Beg. Bal.					Beg. Bal.
14		2	=34000
15				14000	3
16
17
18		End. Bal.	=SUM(D13:D17)-SUM(E13:E17)				End. Bal.		=-SUM(I13:I17)+SUM(J13:J17)
19
20		Manufacturing Overhead					Revenue
21		Beg. Bal.					Beg. Bal.
22		4	9900						67000	9
23				=(D30+D37)*0.5	5
24		6	13200
25		End. Bal.	=SUM(D22:D24)-SUM(E22:E24)				End. Bal.		=-SUM(I22:I24)+SUM(J22:J24)
26
27		Work in process Cutting					Cost of goods sold
28		Beg. Bal.					Beg. Bal.
29		3	=E15				9	37000
30		4	20000
31		5	=E23
32				25000	7
33		End. Bal.	=SUM(D29:D32)-SUM(E29:E32)				End. Bal.	=SUM(I29:I32)-SUM(J29:J32)
34
35		Work in Process Assembly					Selling & Administrative Expenses
36		Beg. Bal.					Beg. Bal.
37		4	26000				10	6000
38		7	=E32
39				41000	8
40		End. Bal.	=SUM(D37:D39)-SUM(E37:E39)				End. Bal.	=SUM(I37:I39)-SUM(J37:J39)
41
42		Finished Goods
43		Beg. Bal.
44		8	=E39
45				=I29	9
46
47		End. Bal.	=SUM(D44:D46)-SUM(E44:E46)
48
49		Production Supplies
50		Beg. Bal.
51		2	800
52				700	11
53
54		End. Bal.	=SUM(D51:D53)-SUM(E51:E53)
55
56
57		Calculation of cost of goods Manufactured:
58		Direct Material used:
59		Beginning raw material inventory	0
60		Add Raw materials purchased	34000
61		Total Raw materials Available	=SUM(D59:D60)
62		Less: Ending raw material inventory	=D18
63		Total direct Raw materials Used		=D61-D62
64
65		Direct Labour		=D30+D37
66
67		Manufacturing overhead
68		Total Manufacturing overhead		=E23
69
70		Total Manufacturing cost		=E63+E65+E68
71		Add: Beginning work in progress		0
72		Less: Ending work in progress		=D33+D40
73		Cost of goods Manufactured		=E70+E71-E72
74		Beginning Finished Goods		0
75		Total Finished Goods Available		=E73+E74
76		Ending Balance in Finished Goods		=D47
77		Cost of Goods Sold		=E75-E76
78