COST FLOW EXERCISE
Make necessary journal entries for the following transactions in a manufacturing concern.
Jan 1, 2016 Purchased materials for $2,000,000 on account.
Jan 4, Requisitioned for direct materials of $1,400,000 placed into production process.
Jan 4 Depreciation on Factory machinery is $250,000
Jan 6 Depreciation on Office equipment $380,000
Jan 6 Sales commission, $170,000
Jan 7 Requisitioned for indirect materials of $200,000 placed into production process
Jan 10 Paid for direct labor of $600,000.
Jan 15 Paid for indirect labor of $500,000.
Jan 15 Office salaries paid $260,000
Jan 15 Accrued Foreman factory salaries, $70,000
Jan 20 Paid other Factory overhead expenses of $1,260,000.
Jan 30 The company applied $1,600,000 of factory overhead to work in process.
Jan 30 Accrued Office salaries $140,000
Additional information are as follows:
The company had beginning work in process of $800,000 and beginning finished goods inventory of $600,000. The company also had ending work in process of $400,000 and ending inventory of finished goods of $160,000.
Required: Note: You must show very clearly, all necessary presentations to support all your solutions. Note: Do not prepare a manufacturing statement, but identify all your answers in your general ledger except when you have to prepare an income statement.
Make necessary journal entries for the transactions above.
Using “T” account format, post all your journal entries to the ledger.
Determine the current manufacturing cost.
Determine the total manufacturing cost.
Determine the cost of goods manufactured.
Determine the cost of goods available for sale.
Determine the cost of goods sold
What is the under or over-applied factory overhead—show the amount and indicate whether (i) it is over or under-applied and (ii) show whether the factory overhead account has a debit or credit balance after applying overhead to work-in-process.
Assuming the selling price of all the goods sold was 160% of the cost of goods sold and there are no sales returns or sales discount, prepare a partial income statement using all relevant information provided.
2. Assuming that the company applies factory overhead on the basis of direct labor cost and has the following other information available.
Estimated factory overhead for the year is $2,400,000 while the estimated direct labor cost is $800,000. In addition, the actual direct labor cost for the year is $600,000.
Determine the predetermined overhead rate and make necessary entries for the applied factory overhead.
If you could explain how you got your answers that would be great. Thanks.