Question

Evelyn Franklin started Franklin 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 Franklin 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 $11,000.

2) Purchased $420 of direct raw materials and $60 of production supplies.

3) Used $242 of direct raw materials.

4) Used 80 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 $142 for salaries to administrative and sales staff.

7) Paid $25 for indirect manufacturing labor.

8) Paid $205 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 $21.6 each.

Transactions for Remainder of 2018

11) Acquired an additional $18,500 by issuing common stock.

12) Purchased $3,920 of direct raw materials and $920 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 $1,552 for salaries of administrative and sales staff.

17) Paid $238 of indirect manufacturing labor cost.

18) Paid $2,410 for rental and utility costs on the manufacturing facilities.

19) Transferred 850 additional remote controls that cost $12.74 each from the Work in Process Inventory account to the Finished Goods Inventory account.

20) Determined that $169 of production supplies was on hand at the end of the accounting period.

21) Sold 840 remote controls for $21.60 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

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

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

Answer 1

	Given and Calculations:
1	All payments made in Cash only
2	Direct Labor Hours in Jan	80
3	Direct Labor Rate/ Hour in Jan	$9.50
4	Therefore, Direct Labour - Jan(2*3)	$760
5	Direct Labor Hours for rest of 2018	900
6	Direct Labor Rate for rest of 2018	$9.50
7	Therefore, Direct Labour - rest of 2018(5*6)	$8,550
8	Estimated Overhead for Jan	$3,400
9	Direct Labor Hours for Jan	1,000
10	Pre-determined Overhead rate for Jan (8/9)	$3.40
11	Manufacturing Overhead - Jan (2 * 10)	$272.00
12	Manufacturing Overhead - rest of 2018(5 * 10)	3,060.00

a)	Franklyn Manufacturing Company
	T-Accounts
	For the year 2018
	Cash Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan	To..		Jan	By..
	Common Stock	11,000.00		Raw Materials Inventory	420.00
	Sales	1,620.00		Supplies	60.00
				Labor	760.00
				Indirect Labor	25.00
				Rent & Utilities	205.00
				Salaries - Administration	142.00
Feb-Dec			Feb-Dec
	Common Stock	18,500.00		Raw Materials Inventory	3,920.00
	Sales	18,144.00		Supplies	920.00
				Direct Labor	8,550.00
				Indirect Labor	238.00
				Rent & Utilities	2,410.00
				Salaries - Administration	1,552.00
			Dec-31	Balance c/d	30,062.00
		49,264.00			49,264.00

	Common Stock Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan			Jan	Cash	11,000.00
			Feb-Dec
				Cash	18,500.00
Dec-31	Bal c/d	29,500.00
	Total	29,500.00		Total	29,500.00

	Raw Materials Inventory Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan	Cash	420.00	Jan	Work-in-Process Account	242.00
Feb-Dec			Feb-Dec
	Cash	3,920.00		Work-in-Process Account	3,010.00
			Dec-31	Closing Stock of Raw Materials	1,088.00
		4,340.00			4,340.00

	Supplies Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan	Cash	60.00	Jan	Work in Process	60.00
Feb - Dec			Feb-Dec
	Cash	920.00		Work-in-Process	751.00
			Dec-31	Closing Stock of Supplies(Given)	169.00
Total		980.00		Total	980.00

	Manufacturing Overhead Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan	Cash - Indirect labor+ Rent & Util	230.00	Jan	Work-in-Process (Refer "Given - Point 11")	272.00
Feb - Dec			Feb - Dec
	Cash - Indirect labor+ Rent & Util	2,648.00		Work-in-Process (Refer "Given - Point 12")	3,060.00
Dec-31	Cost of Goods Sold (Over-applied)	454.00
	Total	3,332.00		Total	3,332.00

	Work-in-Process Inventory Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan
	Raw Material Inventory A/c	242.00
	Supplies A/c	60.00
	Labor A/c	760.00
	Manufacturing Overhead A/c	272.00	Jan	Finished Goods Inventory A/c	1,334.00
Feb-Dec
	Raw Material Inventory A/c	3,010.00
	Supplies A/c	751.00
	Labor A/c	8,550.00
	Manufacturing Overhead A/c	3,060.00	Feb-Dec	Finished Goods Inventory(850*$12.74)	10,829.00
			Dec 31	Closing Stock - WIP	4,542.00
	Total	16,705.00		Total	16,705.00

	Finished Goods Inventory Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan	Work-in-Process Inventory	1,334.00	Jan	Cost of Goods Sold	1,000.50
				( 1334/ WIP Qty :100 * Sale Qty : 75)
Feb-Dec
	Work-in-Process Inventory	10,829.00	Feb-Dec	Cost of Goods Sold	10,701.60
				(10,829/WIP Qty 850* Sale Qty : 840)
			Dec-31	Closing Stock - Finished Goods	460.90
	Total	12,163.00		Total	12,163.00

	Cost of Goods Sold Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan	Finished Goods Inventory	1,000.50	Jan	Income & Expenditure A/c	1,000.50
Feb-Dec			Dec 31	Manufacturing Overhead	454.00
	Finished Goods Inventory	10,701.60	Feb-Dec	Income & Expenditure A/c	10,247.60
	Total	11,702.10		Total	11,702.10

	Sales Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
			Jan	Cash	1,620.00
Dec 31	Income & Expenditure Account	19,764.00	Feb-Dec	Cash	18,144.00
	Total	19,764.00		Total	19,764.00

	Salaries - Administration Account
Date	Particulars	Debit Amount $	Date	Particulars	Credit Amount $
2018			2018
Jan		142.00
Feb - Dec
	Cash	1,552.00
			Dec-31	Income & Expenditure Account	1,694.00
Total		1,694.00		Total	1,694.00

Q (b)

Q (b)
	Schedule of Cost of Goods Manufactured
S.No	Description	Amount $
1	Direct Material used	3,252.00
2	Supplies consumed	811.00
3	Direct Labor used	9,310.00
4	Manufacturing Overheads assigned	3,332.00
	Manufacturing Costs incurred (1+2+3+4)	16,705.00
Add	Opening Stock of Work-in-Process Stock	-
Less	Closing Stock of Work-in-Process Stock	4,542.00
	Cost of Goods Manufactured	12,163.00

	Franklyn Manufacturing Company
	Income Statement
	For the year 2018
S.No	Description	Amount $
A.	Income:
	Sales	19,764.00
Less
B	Expenditure:
1	Cost of Goods Sold	11,248.10
2	Salaries - Administration	1,694.00
B	Total Expenditure	12,942.10
C	Net Profit (A - B) (Transfer to Retained Earnings)	6,821.90

	Franklyn Manufacturing Company
	Balance Sheet
	As at December 31, 2018
S.No	Description	Amount $
A.	ASSETS
1	Fixed Assets	-
2	Current Assets:
a.	Inventory (Stock)
i.	Closing Stock of Raw Materials & Supplies	1,257.00
ii.	Closing Stock of Work-in-Process	4,542.00
iii	Closing Stock of Finished Goods	460.90
a.	Total Inventory	6,259.90
b.	Cash balance	30,062.00
2	Total Current Assets	36,321.90
A.	TOTAL ASSETS ( 1+2)	36,321.90
B.	LIABILITIES
1	Common Stock issued	29,500.00
2	Retained Earnings	6,821.90
	TOTAL LIABILITIES	36,321.90